Title and Mortgage Fraud

Protect your home, protect yourself

From 2000 to 2005 the amount of money paid out by Canadian title insurance companies for title fraud claims increased from 6% to over 33%. Title fraud is a growing threat facing Canadian homeowners.

What is Title Fraud?
Title fraud is a criminal act through which the ownership of a house is literally stolen from the rightful owners. While the steps to commit title fraud may sound complicated, the process is actually quite simple and, unfortunately, not easily detected.

What Typically Happens:
The title thief, posing as the purchaser of a property, prepares a phony deed, registers it at the Registry Office and pays the Land Transfer Tax. The thief forges the true owner’s signature and submits a Land Transfer Tax affidavit – naming one law firm as the preparer of the Transfer and another as the firm who prepared the affidavit and who will act on the purchase.

The thief then goes to a bank and applies for a low-ratio mortgage on the property. Typically, a low-ratio mortgage will not require a full appraisal of the property, so the rightful owners remain unaware of the fraud.

The bank appoints a lawyer to conduct a title search and register the mortgage. In the title search, the thief appears to be the registered owner who has just purchased the property. The lawyer prepares the usual mortgage documents and the thief goes on to sign the papers. Of course, the thief provides proper photo identification.

The deal is done - the thief receives the funds and moves on to the next property. It is not until the new mortgage goes into arrears that the rightful owners of the house and the bank holding the mortgage discover the fraud.

Staggering Consequences
The homeowner is then faced with significant mental and emotional stress as well as sizeable legal bills in order to have the ownership of the house properly restored and have the fraudulent mortgage discharged. While some of the related expenses may be covered by some title insurance policies, it is best to take steps to prevent, or at least deter, title thieves from targeting you.

How to Protect Yourself
There are a number of things that you can do to minimize the risk, or act as a “barking dog” to make title thieves think twice.

1.  Protect your information:

• Do not give out personal information to anyone whose identity is not clearly known.
• Minimize the identification information and number of cards you carry with you.
• Never carry your Social Insurance card.
• Keep personal information in a safe place.
• Shred all papers containing any personal information (such as credit card or account numbers or signatures).

2. Obtain your credit report from credit reporting agencies (this is a free service) and check it for discrepancies on a regular basis. Early detection is often the key to minimizing damage and apprehending the perpetrator.

3. Conduct regular property searches at your local land registry office.

4. Special Title Insurance is now available which is designed to protect homeowners against title fraud. Basic Title Insurance only provides protection at the time of purchase, while this special insurance also provides fraud and forgery coverage.

Consider a Secured Line of Credit
If your home is mortgage-free, consider a secured line of credit or collateral mortgage. You do not actually have to incur debt or carry a balance. Simply having a registered mortgage in place is a significant deterrent for title thieves, who would have to have this mortgage discharged in order to carry out the fraud.

In addition to acting as a deterrent against title fraud, a secured line of credit can be a low-interest source of emergency funds, if or when they are needed.

Government Action
Bill 152 has recently been introduced by the Canadian government to amend the Land Titles Act. Its goal is to protect homeowners by ensuring that ownership of a property cannot be lost as a result of title fraud.

A Lucrative Industry for Thieves
Title fraud has been a lucrative industry for thieves. It is estimated at $1.5 billion per year in Canada, and growing. Homeowners must understand this unfortunate reality and act to protect their homes and families.

For more information on title fraud and what you can do to protect your home and yourself, talk to your Bick Financial advisor.