Marijuana grow-ops have become a massive industry in Canada, and the negative effects are wide spread well beyond the realms of crime enforcement. Grow-ops also expose home buyers and lenders to mortgage fraud, said Marie Dyck, senior advisor, fraud, insurance, servicing, CMHC at the second annual CAAMP mortgage summit in Toronto.
It was estimated that in B.C. alone there is some 18,000-20,000 grow-ops, while the police only have the capacity to deal with approximately 250 per year.
The problem for lenders stems from the fact that proprietors of grow-ops often obtain mortgages fraudulently on the properties, and then leave them in an unliveable state, including excess carbon monoxide due to tampering with the furnace, and an overabundance of toxic mould.
In order for a property that was used as a grow-op to be resold, a letter from the city is required stating that after repairs were made the house is now deemed safe to live in.
"We will never give a letter that a building meets code," said Jim Jessop, deputy fire chief of the Niagara Falls fire department. ""I'm not going to have a three-year-old crawl around on the floor, or put her toys somewhere or sleep under ceiling tiles that are dripping with insecticide."
He added that it's not uncommon for a house that has been used as a grow-op to be so toxic that the only solution is to tear it down.
The good news, however, is that steps are being made to prevent such instances.
"We've seen dramatic improvements in fraud prevention and strategies in the last year," said Dyck, which include the ability for cities to put unsafe buildings on title, helping to keep track of them. There is also some movement to help lenders receive pre- and post- property forfeiture relief. The way it works now, for example, is that for lenders to receive post-forfeiture relief they must prove that they exercised all due diligence to make sure no unlawful act was being committed.
But any advances in the situation depend on the amount of discourse between all involved parties, which conferences like CAAMP's fraud summit are perfect examples of.
"Our greatest strength is our relationship with the mortgage profession," said Jessop. "We have a duty to notify all interested parties if an unsafe building notice has been written. Now we just need the mortgage industry exercising its rights under the mortgage act to protect its investments."