Title or Mortgage Fraud

Incidents of real estate title or mortgage fraud are increasing in Canada and homeowners and lenders are proving to be irresistible targets for fraud artists. The role of legal professionals and title insurance companies has become critical in the fight to detect and prevent fraud. Homeowners can protect themselves through independent legal advice, the purchase of title insurance and exercising caution when signing legal documents. The financial loss which a homeowner could sustain as a victim of fraud could be huge.

Real estate title or mortgage fraud take several forms but a common denominator is that fraud artists are extremely sophisticated and are well organized and knowledgeable of the real estate process which enables them to perpetrate the fraud.

A typical example of a fraud is where a fraud artist obtains title to a property via a fraudulent transfer document (Deed). The fraud artist goes to the Bank and obtains a mortgage that is then registered against the property. When the fraud artist does not make any mortgage payments, the lender will serve notice that it intends to sell the property and the scheme is revealed to the legitimate owner when they receive the notice that their lender is trying to sell the property.

Another form of fraud can occur when one spouse mortgages the family home for their own benefit using an accomplice to impersonate their spouse.

Sometimes a fraud can occur by way of a lawyer’s breach of an undertaking to pay off and obtain a discharge of a mortgage at closing. The seller’s lawyer absconds with the funds intended to be used to pay off the pre-existing mortgage. Accordingly, while title to the property has been transferred into the name of the new purchaser the property remains subject to the prior mortgage.

Finally, the use of a Power of Attorney can be open to abuse. In one recent case an elderly client gave an authentic Power of Attorney to her two adult sons who could only act jointly. Without her knowledge someone forged a new Power of Attorney in her name giving power to only one son. The son named in the forged Power of Attorney then used this document to personally sign as her Attorney to Transfer title to himself and to place mortgages on his mother’s home without her knowledge or consent.

What can be done to prevent a loss through title fraud?

  1. Obtain a title insurance policy at the time of closing a purchase transaction or if you own a home obtain an existing owner title policy.
  2. Obtain independent legal advice. A person of any age should never enter into any real estate transaction or sign legal documentation without independent legal advice. Legal advice is not independent if the lawyer acting represents more than one interest in a transaction. Lawyers today are obligated to use due diligence in verifying identity to all parties to a transaction.

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