The Hamilton Spectator

Experts urge homeowners and realtors to protect against title, mortgage fraud


It’s been years since you finished paying off your mortgage, so the letter in the mail from a bank saying you’re in default and now owe money comes as a shock.

Not only did you not take out another mortgage on your property, you’ve never even dealt with that bank before. Yet the documents you’re presented with say otherwise.

At this point, you realize you may have been the victim of fraud.

The chances of that scenario playing out may seem far-fetched, but experts say title and mortgage fraud are fast growing in Canada and homeowners should take steps to protect their properties — and their identities.

Title fraud refers to when the ownership or title of a property is fraudulent­ly changed or documents are forged to allow a fraudster to illegally sell or refinance the property.

The issue gained prominence last year amid two Toronto police investigat­ions in which homes were allegedly listed for sale without the owners’ knowledge, including one where the home was sold. While those were “extreme” cases, more common is mortgage fraud, where fraudsters obtain a mortgage from a lender under false pretences, said Daniel La Gamba, a real estate lawyer and partner at LD Law LLP.

La Gamba said a typical case of such fraud involves the perpetrato­r stealing the identity of a legitimate homeowner — using a fake ID, job letter, credit report or references — to obtain a mortgage through a bank.

If the bank is convinced of the person’s identity, it will advance them the funds for the mortgage, only to find the false owner hasn’t made any payments on it months later.

“Even with all the safeguards in place ... fraudsters are getting quite sophistica­ted in their ability to replicate ID, steal identity,” La Gamba said.

When the true owner receives the bank’s letter demanding that payment, setting off alarms they’ve been defrauded, it can be a “stressful and very costly burden” of proving they’ve been the victim of fraud and shouldn’t be required to pay that mortgage, La Gamba said.

He said the most cost-effective defence for the homeowner is if they already have title insurance — the premium for which typically costs around $900 for a $1 million property, and which covers the entire period of ownership.

“If you have title insurance, they basically step into your shoes and take whatever steps are required to rectify the matter,” he said. “If you don’t have title insurance, that’s when you’re on your own ... and it will be a very costly and time-intensive endeavour.”

Title insurance company FCT estimates at least one attempted title or mortgage fraud takes place every four business days. In the past two to three years, the company has refused to insure $539 million worth of mortgages and transfers “on the basis that they were too suspicious for us,” said John Tracy, senior legal counsel at FCT Canada.

He said the reason the real estate sector is such a growing area of focus for fraudsters is simple: “The payoff is huge.”

“Compared to getting a credit card in my name — you might get $10,000 worth of stereo stuff or gift cards. But if you can steal my ID and mortgage my house, the payoff is a magnitude of times bigger.” Experts say the most common targets of title or mortgage fraud attempts include newcomers to Canada, who are particular­ly vulnerable if they face language barriers, as well as seniors.

“Generally speaking, fraudsters really like to target homes that are mortgage-free,” La Gamba said. “The elderly tend to be targeted quite frequently in this scenario. They’ve had the home for 20, 30plus years, their mortgages are paid off in full.”

Daniela DeTommaso, president at FCT Canada, said the company began tracking attempts at title fraud in 2010, seeing a 70 per cent increase in the first 10 years. She said that rate likely accelerate­d during the pandemic as reliance on remote technology and digital verificati­ons increased.

“Technology is a fabulous thing, but it’s also created the ability for fraudsters to duplicate identity in a way that, to even a trained eye, is almost impossible to catch,” she said.

Title fraud refers to when the ownership or title of a property is fraudulent­ly changed or documents are forged to allow a fraudster to illegally sell or refinance the property

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