Real Estate / Title Fraud - Are you at Risk?

I have been receiving calls from my clients wondering whether they are at risk of being victims of title fraud or mortgage fraud, identity theft, etc. First of all, as a consumer you are always at risk of being defrauded. However, in this article I would like to talk about some tips on preventing identity theft, mortgage fraud and title fraud.

Fraud - Title Fraud, Mortgage Fraud, Real Estate scams, etc. These are no longer rare cases. These are happening frequently and the media has taken the lead in publishing various scams. However, when you deal with an honest realtor, the risks are almost eliminated. I say almost eliminated because, sometimes, when the realtor is honest, the ancillary parties involved in the deal, i.e. mortgage "specialists", lawyers, etc. may have an agenda and one has to be very careful. In fact, many of the cases of title fraud that have appeared in the media involve identity theft and false mortgage registration with the involvement of various entities, including the bank, the lawyer and the title registration office. So, the key word is "be alert" and when you deal with an honest licensed realtor you are in safe hands. Let me clarify below.

Let me begin with mortgage fraud. There are real estate agents who would like to make a sale by "hook or by crook". So, they team up with shady mortgage "specialists" who may not even be licensed, but, work on freelance basis, who are able to get mortgages under fraudulent measures. So they tell the real estate agent "Don't worry whether the client qualifies for a mortgage, just find them a home and we will take care of the mortgage". The real estate agent, who is anxious to make the sale, finds a home for the buyer, and hands over the papers to the mortgage "specialist" who through fraudulent means (bogus employment letters, bogus referral, etc.) is able to get the mortgage for the buyer. The buyer buys a home and couple of months/years later realizes he/she cannot afford to pay the mortgage. In fact, sometimes lawyers get involved with "private sales" and prepare offers in collaboration with mortgage "specialists" and are thus able to register properties independent of the involvement of honest licenced real estate agents. So, the key words are "buyer beware" of your rights and privileges.

If you deal with an honest and licensed real estate agent, you do not have to worry about mortgage fraud. This type of an agent will ensure that you are free from any unscrupulous con artists whose only motive is to make money at any costs. Further, be wary about "private sales". You are leaving yourself open to lawsuits when you are not provided with information about your rights and privileges. Sometimes you may get stuck with the seller's taxes if you deal directly with the seller. So, when you deal with an honest agent, you get the following genuine services and information:

o    Homebuying Services Commitment with a performance guarantee.

o    Detailed steps in the home buying process.

o    Supplementary advice on mortgage financing. Remember, your main advisor would be your financial institution. Even if you get a mortgage through a licensed mortgage broker, it would be advisable to establish some contact with the lender and find out before the closing date, more about the options that are offered. Additionally, you need to discuss with your realtor what options the financial institution is offering you so that the facts can be corroborated.

o    Supplementary information on lawsuits between sellers and buyers involved with "private sales", scams from movers, etc.

Title Fraud:

The media has to be commended for bringing to the attention of the public the increasing number of title fraud cases. Better later than never, the government, real estate lawyers and the banks have now started to take proactive measures to avoid title fraud or to protect the honest consumer. Hoever, it is the responsibility of the consumer to take preventive action. I have been following the various articles in the media and have spoken to couple of title insurance representatives and lawyers. There are some lawyers who are not even aware about the procedure to apply for title insurance. They have also informed me that most people are not aware that title fraud is taking place and are reluctant to take preventive measures. I am giving below the preliminary (prevention of identity theft) and secondary steps to avoid or deal with title fraud:

Preliminary tips to avoid Identity Theft (IT):

•·         Do not carry your SIN card with you.
Leave your SIN card in a safe place at home.

•·         Do not give your Social Insurance Number to anybody unless it is absolutely required. If it is demanded from you, find out for what purpose it is being used.
You should not be forced to give your SIN to anybody since that is your    right.

•·         Do not apply/keep more than one or two credit cards.
The more credit cards you carry makes you vulnerable for your information to be widely available. Further, the more credit cards on your name reduces your creditworthiness.

•·        When you affix your "official" signature to mortgage and bank documents, request for a copy of those documents and keep in a safe place.
In the unfortunate event of a fraud investigation or a court case, when "fraudulent" documents are entered as evidence, you will be able to show that none of those are yours since you have kept copies of all documents containing your official signature. This may be a long shot, but, will ultimately prove in your favour.

•·         Keep a shredder at home and shred all financial statements or any documents that has your name, and other information and doesn't need keeping.
This is one of the root causes of identity theft.

Secondary tips to avoid Title Fraud (TF):

•·         Be aware that title fraud is a fact of life. Do not panic. However, follow the steps below and you can prevent or deal with title fraud more effectively.
As mentioned in the newspaper articles, the first step is that the public needs to be aware that this could happen to anybody. The fact is nobody is immune from the tentacles of fraud artists; unless of course one takes some measures of precaution.

•·         If you are about to buy a home, discuss this with your realtor and request for more information.
In fact, your lawyer will inform you about title insurance. If not, you have to inform your lawyer that you would like to take title insurance. Title insurance is the most effective way of saving yourself if you are subjected to title fraud.

•·         If you are already a homeowner and do not have title insurance, go to the Land Registry Office and get a copy of the most current title deed of your own property and keep it in a safe place (i.e. safety deposit locker).
You can get the address of the LRO in your area from:
http://www.cbs.gov.on.ca/mcbs/english/pdf/57PNYL.pdf

•·         If you already own a home and have a medium to small mortgage on it, speak to your bank account representative and find out if you can convert your mortgage to a line of credit (at prime rate).
If you are a successful negotiator, the bank may offer you or you can convince them to bear the costs of completing the appraisal, doing a title search and converting your mortgage to a line of credit. This will result with the bank taking title insurance and paying the premium for the same.

•·         Once you verify that your title deed is clearly in your name, you should take the steps to obtain title insurance for your property.
Contact a licensed realtor (who should provide you information free of cost) to get more information and then through a lawyer you will be able to apply for title insurance. More information is provided below in the Q&A section. Contact me or send me an email if you need additional details.

The one time premium of title insurance can range from $250 to $400 depending on the coverage. However, it is worth paying this premium and leaving it to the insurance company to deal with the matter if you are subject to title fraud. Remember, you will not loose your home eventually, since the insurance company will deal with the fraudulent action. I am giving below a series of questions and answers relating to title fraud and title insurance. The information below has been provided by First Canadian Title Insurance. In the case of your individual situation, you can call me or email me your question:

Q. What is the range of premiums for homeowners (people who already own homes but have not purchased title insurance) and what do those premiums cover?
A. Depending on the value of the property and the province in which the property exists, the one-time fee for the Existing Home Owner Policy ranges from $250 - $400.      

Q. What is the process for purchasing title insurance for current homeowners?
A. Current homeowners should contact their lawyer or notary or call 1-877-888-1153. More information is also available at http://www.protectyourtitle.com/       

Q. What is the range of premiums for homebuyers (people who are about to buy a home and may need to purchase title insurance) and what do those premiums cover?
A. Premiums vary depending on the province, type of property, the value of the property, and the type of transaction (i.e. purchase or refinance). For example, in Ontario, for a purchase of a re-sale single family home valued between $200,000 and $500,000, the premium is $299.00       

Q. In the unfortunate circumstance that a homeowner (who has purchased title insurance) may be a victim of title fraud, how would title insurance help them?
A. Title insurance is an effective and inexpensive way to ensure title to your property is protected. It covers legal expenses related to restoring title as well as compensation in the unfortunate and rare situation that title is lost.

Q. What steps do homeowners need to take once they are victims of title fraud?
A. If the homeowner is title insured, he should contact the title insurer immediately to begin the investigation process. If the homeowner is not title insured, he should contact his lawyer.   

Q. In all the cases reported in the media of those who were victims of title fraud and who had not purchased title insurance, the first thing is the sheriff evicts them from their home. They then have recourse to contacting a lawyer and fighting for their rights.
In the case of homeowners who have title insurance, what would be the first point of action if they are a victim of title fraud? Will they also be evicted?
A. If the homeowner is title insured, he/she should contact the title insurer immediately to begin the investigation process.

This insured homeowner may be evicted if the title has already been legally transferred to the new owners. In any case, the homeowner should contact their title insurer immediately.

Q. Is there any deductible payable for title insurance?
A. There is no deductible payable when an insured homeowner makes a claim to their title insurer.