Title And Mortgage Fraud In The Real Estate Sector

Sorbara Law


Sorbara Law
In the last couple of years, title and mortgage fraud have plagued the Canadian real estate sphere as technology has continued to advance allowing fraudsters to become increasingly sophisticated...
Canada Real Estate and Construction
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In the last couple of years, title and mortgage fraud have plagued the Canadian real estate sphere as technology has continued to advance allowing fraudsters to become increasingly sophisticated in their ability to replicate identification, which even to the trained eye, is very difficult to decipher.

You may recall that in 2023, Toronto police reported numerous cases of fraud. The first case that comes to mind was when fraudsters gained access to a woman's condo in Toronto and sold it while she was temporarily living in China. The second case that comes to mind is of a couple who temporarily relocated to the U.K., who were notified by their property manager that there were strangers living in their home, unaware that the property was sold by fraudsters. It has been noted that fraud was almost non-existent before the COVID-19 pandemic but in the past few years title and mortgage fraud has been occurring as often as three times a week.

Real estate fraud can cause substantial financial losses for homeowners therefore, this article will focus on title and mortgage fraud and provide some helpful tips to homeowners so that they may protect themselves from such a scheme.

Title v. Mortgage Fraud

Title fraud occurs when a fraudster steals the title to a home. The ownership (i.e. title) of the property is fraudulently changed. The fraudster assumes the identity of an individual homeowner and uses the stolen identification to pose as the homeowner. The fraudster could then refinance the home, sell it to innocent third parties, or apply for a new mortgage.

On the other hand, mortgage fraud is where the fraudster secures a mortgage from a bank against an owner's property under false pretenses. The fraudsters will use a fake ID, job letter, credit report, or reference to secure the mortgage through a bank. If the bank is convinced of an individual's identity, they will advance the funds for the mortgage. The problem lies when the bank discovers that the individual is a fraudster after the funds have already been advanced but no payments towards the mortgage are ever made. When the true owners receive a demand letter from the bank concerning the delinquent payments, only at such time, will the true owners and the bank discover that they have both been victims of mortgage fraud.

Both of the aforesaid types of fraud usually start with identity theft.

Example of Real Estate Fraud

  • A fraudster steals the identity of a homeowner and uses the fraudulent identification to sell the property to an innocent third party.
  • The innocent third party attempts to move into the property.
  • The onus is now on the actual homeowner to prove that title fraud has transpired.
  • The actual owner also has to deal with potentially evicting the innocent third party who purchased the property from the fraudster along with any mortgages that the innocent third party has registered against the title as a result of purchasing the property from the fraudster.

Types of Properties and Individuals Targeted

Fraudsters typically target properties with a low mortgage or those that are mortgage-free in order to maximize their profit when the property is sold. Other popular choices are properties that are unoccupied by the homeowners (i.e. investment properties), properties where owners are away for an extended time, and tenants occupied because the tenant already has physical access to the property.

Experts have noted that the most vulnerable targets of title and mortgage fraud continue to be seniors because they have owned their properties for twenty-plus years and, therefore, are usually mortgage-free. Recently, experts have noted that newcomers to Canada are increasingly targeted by fraudsters as many are faced with language barriers, which makes them an appealing target.

How to protect yourself

One of the best and most cost-effective ways that homeowners can protect themselves from becoming victims of fraud is by obtaining a title insurance policy. Such a policy protects both the homeowners and lenders who might otherwise suffer tremendous financial losses due to title fraud. As indicated above, losses from these types of fraud are substantial, with owners having to spend thousands of dollars in legal fees to defend the title to their home. A title insurance policy can protect both lenders and homeowners from losses resulting from various forms of title fraud. Click here to access more information about title insurance coverage. https://www.protectyourboundaries.ca/blog/post/title-insurance-ontario

Although title insurance is not able to prevent you from becoming a victim of fraud, it can certainly protect you from its ramifications. Many Canadians who have owned their homes for years do not have a title insurance policy in place. I would strongly urge these owners to reconsider and obtain same. The cost of residential title insurance varies based on the value of your property, and the insurance company you choose. Your title insurance policy will protect you as long as you own your property and will cover losses up to the maximum coverage set out in the policy. The cost of a title insurance policy is nominal compared to what it could cost if you become a victim of fraud.

In conjunction with title insurance, below is a non-exhaustive list of ways that homeowners can protect themselves:

  • connect with your real estate lawyer every few years and ask them to conduct a title search of your property to ensure that the home is in your name and to further ensure that there are no suspicious mortgages and liens registered against your property;
  • keep all your personal information in a safe place;
  • check your credit report regularly to ensure that there are no discrepancies. Through this process, you can find out if anyone has opened unauthorized financial accounts in your name;
  • do not give out any personal information through the phone, or email, unless you know who you are dealing with;
  • minimize identification information and the number of cards you carry with you;
  • shred all of your personal information. Do not dispose of it in the garbage as fraudsters will go through your garbage to find any information they could use;
  • before you agree for your personal information to be shared with third parties, find out how it will be used and how it will be shared;
  • leave your SIN card in a secure place;
  • sign bank and/or mortgage documents at the bank when possible. If you are provided with the same via email, confirm with your bank that they sent the documents;
  • if you plan to be away for an extended time, ensure that you leave your vehicle parked in the driveway and have a trusted friend or family member attend your home from time to time. This could assist with keeping your home off the fraudster's radar;
  • ask your realtor or search realtor.ca from time to time, to ensure that your property has not been improperly listed for sale.

Concluding Remarks

The real estate sector is targeted by fraudsters because it is a lucrative payoff. A fraudster may obtain between $5,000.00 to $10,000.00 via a credit card but if they are able to steal identity and sell or mortgage a house, the payoff is substantially larger. As mentioned above, fraudsters are clever and aim at certain properties and individuals. I have recently discovered that newcomers to Canada are also becoming an attractive demographic as many may be vulnerable if faced with language barriers. As wonderful as technology has been, it has provided fraudsters with various avenues to duplicate identities that even a trained eye would have difficulty distinguishing.

As previously mentioned, title insurance is the most cost-effective defence against fraud for a homeowner if they already have a title insurance policy in place. The title insurance premiums are a nominal cost compared to the cost and financial loss that homeowners could incur if they are subjected to a fraudulent scheme. Although title insurance is not able to prevent homeowners from becoming a victim of fraud, it can certainly protect them from many of its after-effects.

Lawyers, lenders, and title insurance companies have become more vigilant and have taken proactive steps in their methods of identifying clients by implementing digital ID verification which goes beyond the physical review of documents. For example, in 2024, the Law Society introduced mandatory digital identity verification. Canadian firms are now required to subscribe to such a verification of their clients. My firm uses a digital program called Vaultie. Once clients complete the ID process through Vaultie, the program provides me with a report that confirms if the client has passed the ID process or failed. In addition to this, I also ask my clients to provide coloured copies of their IDs to me and present the same during Zoom meetings so that I may compare them with the report from Vaultie.

By being aware and mindful of how you share your information with third parties, you will be able to better protect yourself from becoming a victim of fraud in general but also a victim of title and/or mortgage fraud.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Title And Mortgage Fraud In The Real Estate Sector

Canada Real Estate and Construction


Sorbara Law
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