Owner Beware!
Mortgage Fraud & Identity Theft

The 21st century has become something of a playground for con artists. With so much information floating around online, and so much paperwork obscuring every major transaction, it's all but impossible not to leave yourself vulnerable to some form of fraud. Homeowners are a popular target, but they can work to protect themselves and their property with a little effort and education.

Real estate fraud usually stems from a case of identity theft, which is the most common form of fraud and a rapidly growing problem in Canada and the United States. With a false identity to hide behind, con artists can operate with impunity and move on to more complicated scams with bigger targets like your home. A simple title cheque at the registry office provides them with information on ownership and mortgages – everything they need to forge key documents like discharge letters, loan agreements, property assessments and title transfers. With the right fraudulent paperwork they can refinance your home and take out a second mortgage or even take possession of your title without you knowing until it's much too late.

The courts will do what they can to make matters right, but it is often the case that mortgages acquired by fraud still carry legal weight and must be honoured. Unlucky homeowners can take action against those who defrauded them, but responsibility for the loan frequently remains in their hands. Recognizing this, the government established the Land Titles Assurance Fund: a portion of the provincial coffer set aside to reimburse victims of fraud and land registration errors. The Fund was recently improved to decrease wait times, but getting proper compensation can still mean months of applications and evaluations – hardly comforting in the face of unsympathetic creditors. What's more, it is only available for land registered through the Land Titles system, and most properties are still under the older Registry system.

Protecting Yourself

If all this paints a bit of a bleak picture, it's because fraud is a genuinely scary thing. It's an ill-defined and constantly evolving crime that often manages to evade justice even when it ends up in court, and it can spell financial ruin for the unsuspecting homeowner – but it can also be fought. Never forget that the con in con artist stands for confidence: these criminals operate by taking advantage of people's trust and their sense of security. Paranoia isn't the answer, but vigilance is.

Mortgage fraud starts at the registry office, and so should you. A title check on your home only costs a few dollars and will immediately alert you to anything fishy. If there are any obvious red flags – legal documents you've never seen before or signatures that don't belong to you – it's time to call in your lawyer and get to the bottom of things. Similarly, identify theft usually starts with a credit check, and the best defense is to do one yourself every year or so and look for mysterious inquiries and unauthorized trades. Simple measures like these might not catch every form of fraud, but they will make you a much less tempting target to con artists who can see that you keep a close eye on your affairs.

The Choice to Insure

For absolute peace of mind, concerned homeowners have the option of purchasing title insurance. The necessity of such coverage has been debated for years, but ultimately it boils down to a personal choice: is the added security worth the premiums, and does the risk justify the expense?

The core purpose of title insurance is to protect you in case anything effects the legality or marketability of your property after purchase, but it also extends to cover incidents of fraud that might otherwise leave homeowners out in the cold. If you get defrauded and stuck with a second mortgage or mired in an extended legal battle, title insurance can cover your payments and lawyers' fees. A title insurance provider is also someone you can turn to should your own real estate lawyer make a costly error or even try to commit fraud themselves – sadly not an unheard-of occurrence.

Overall, title insurance is optional but wise. The fact is that title problems are still fairly rare in the grand scheme of things, but when they do occur they tend to be very costly. The premiums are relatively low, so if you value that extra layer of protection and security, title insurance is the answer. With or without it, the most important thing is to be observant and alert in all your major transactions, and to never blindly assume your belongings and your name are safe.