Mortgage and Title Fraud

Be Aware: Mortgage and Title Fraud is Climbing

Canadian news was abuzz over the past few weeks over the case of a Toronto couple whose home was sold without their knowledge. See the news on CBC.  Are you afraid Mortgage Fraud or Title Fraud could happen to you? Would you like to understand how to prevent it?

Unfortunately, real estate fraud in Canada is becoming steadily more common in recent years. Few people have heard of this because it’s a new phenomenon. You owe it to yourself to understand how it happens and how to  protect yourself.

The two most common types of real estate fraud are:

1. Mortgage Fraud. Mortgage fraud occurs when the fraudster impersonates the true owner of a property in order to get a mortgage. They use fake ID – of high enough quality to fool bank personnel and lawyers. The homeowner finds out when the bank reaches out because mortgage payments aren’t being made, but by then the fraudster is long gone with the cash.
2. Title Fraud. Title fraud occurs when the fraudster uses fake ID to impersonate the homeowner in order to list and sell a home. If the fake ID is accepted by the Realtor and lawyer handling the conveyancing, title to the home will be transferred to a new owner. Again, by the time the original owner realizes what has happened, the fraudster is long gone with the cash, and a huge legal mess is created. The law holds that the innocent buyer will retain title to the home. Generally, an Assurance Fund operated by the Land Title and Survey Authority will compensate the original owner financially, but the fact remains – they have lost their home.

Are you mortgage free? If so, there are a few ways to protect yourself:

1. Get a Home Equity Line of Credit (HELOC). Getting a line of credit requires you to pass financial inspection by your bank and having a charge registered against your property. You don’t have to borrow money from the line of credit, or use it in any way. The simple existence of a charge on title makes it much more difficult for a fraudster to take a second mortgage or attempt to sell the home because the bank will be notified – and they will ask many questions!
2. Get Title Insurance. Title insurance helps make sure you will be compensated in the event you are a victim of fraud. Unfortunately, however, it does absolutely nothing to prevent the fraud from occurring in the first place.
3. Pull and secure the Duplicate Indefeasible Certificate of Title (DIT). A DIT is a duplicate hardcopy version of the certificate of title, which may be physically ‘taken out’ and securely stored. Once the DIT has been pulled from the Land Titles office, title is effectively frozen – no one, not even the homeowner, can make any changes to title. Do not lose the DIT! Replacing it can take many months and cost thousands of dollars in legal fees. You have been warned!

Getting a legal opinion is the mandatory first step in protecting your clear-title home. Start by reading the FAQ produced by the legal firm Spagnuolo & Company.

May you never run afoul of this type of fraud!

Check our other blogs under Real Estate 101 – that might give you answers about buying or selling a home.

The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.