Mortgage fraud: we’ve all heard of it. What is it? The term is often used casually when people are in fact talking about all sorts of frauds related to real estate. Some fraudsters will forge transfers or deeds of land, pretending to be you – impersonating you; they will transfer the property to real people (accomplices) who will then enter into a mortgage with a financial institution. At some point they will stop making payments on the mortgage (if they ever make any) and the institution will take steps to seize and sell the house in which you are still living.
In other circumstances, fraudsters will forge powers of attorney for property from you, and then, using those documents, the real people apparently named by you to act for you, in the powers of attorney, will either complete a transaction as set out above or will purport to mortgage the property on your behalf. Again, they will keep the proceeds and at some point stop making any payments.
In yet other situations, fraudsters will simply pretend to be you, and will refinance your property in your name and take the proceeds.
The problem has become far more prevalent since financial institutions stopped insisting some years ago on prospective borrowers visiting a loans officer in person at the institution; as you are probably aware, mortgages are now available through on-line applications, without meeting anybody before you attend at the office of the lawyer instructed by the institution to complete the documentation. With apparently legitimate identification to give to the lawyer to photocopy, a fraudster can continue to impersonate you even then. It is also now quite common for people to work with different lawyers at different times, so even the fact that the borrower was a new client for a particular lawyer would not raise alarm bells for the lawyer or the financial institution.
The problem has also become more common since the province moved to the privately-owned electronic land registration system that now manages almost all of the land registrations in the province. All that a person needs is a computer key with its passwords and he or she has substantial access to the system. Fraudsters are skilled at impersonation: lawyers can also be impersonated and improper access to the system can be obtained.
What can you do to prevent a fraudster harming your ownership or your equity in your house? Nothing. Just as we can’t prevent a flood or a fire or a tornado damaging our house; just as we can’t prevent a tractor-trailer crossing the median and hitting our car; just as we can’t guarantee we won’t fall on a sidewalk and break an ankle; we can’t stop a fraudster from selecting us or our real estate to attack.
However, we can purchase title insurance to provide a fund of someone else’s money to assist in repairing the fraudster’s financial damage, just as we can buy house insurance or car insurance to assist in repairing the financial damage caused by certain types of accidents. Although I am reluctant to recommend that any one buy a product or service to protect themselves against a problem that rarely occurred even twenty years ago, we must all accept the Achilles’ heel of the advantages of electronic commerce and communication – the enhanced opportunities for fraudsters to wreak chaos upon us.
Title insurance is available in this province through several reputable insurance companies. It is now routinely purchased in Ontario for both refinancing a home and home purchases since it reduces the costs the borrower or purchaser must otherwise incur to complete a variety of searches relating to various matters affecting the house and the land. Title insurance is available to existing home buyers, through your lawyer. Any lawyer in Ontario who practices in the real estate field will be able to answer your questions about title insurance, about the items it covers, and those it doesn’t.
Like all insurance, however, title insurance only covers the statistically extremely unlikely possibility that certain things might happen, or might have already happened in the past, with respect to your property: things which few people would either be able to afford to pay for themselves or would want to have to pay for from their own resources. Like all insurance, title insurance hopefully will be a “wasted” investment because it (hopefully) will never actually be needed. However, if it is, our experience to date in Ontario is that the title insurers operating here have responded well and quickly to the various claims that are made under their policies.
At SMM Law, we can help you obtain Title Insurance on your new or existing home. To obtain more information about title insurance visit http://www.stewart.ca/Residential.html.