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Who's stealing your house?
Simple precautions can slam the door on real estate title fraud.
M
ost people are familiar with how to protect their credit card from fraud by keeping the card secure and only providing it to authorized merchants. In addition, credit card companies have put systems in place to recognize out-of-pattern spending in order to reduce the number of fraudulent charges.
However, many homeowners are unaware of the possibility of fraud against their homes. While it seems highly unlikely that a thief could steal the house out from under you, fraud involving property titles is becoming more common. The Canadian Institute of Mortgage Brokers and Lenders (CIMBL) estimated real estate title fraud at approximately $300 million per year nationally.
While real estate title fraud is growing, people about to purchase a home and those who already own their home can protect their title against fraud by purchasing title insurance. Title insurance provides coverage for, among other things, loss or damage resulting from fraud and forgery pertaining to the insured homeowner’s right of ownership in real estate.
Fraudsters have a number of methods of obtaining bogus mortgages against properties. One target is a higher worth individual with no existing mortgage on the property, so the thief can apply for a larger mortgage amount. They assume the property owner’s identity and secure a mortgage based on the existing owner’s credit rating and property.
The second approach involves fraudulently discharging an existing mortgage before obtaining a new mortgage. This means the title to the property is clear when applying for new financing. In both cases, once the mortgage proceeds are secured from a lending institution the funds are directed to a third party rather than to the registered property owner.
In most cases, homeowners are innocent victims of title fraud. The criminal can often complete the entire transaction without the existing homeowner’s knowledge, through false identification and forged documents. Once a thief commits title fraud, the burden falls on the original homeowner to prove the deception. This can mean extensive legal fees and hassles before the title is restored to the rightful owner. Homeowners in Canada have had to pay tens of thousands of dollars worth of legal fees to restore the title on their property after they were victims of fraud.
“When a fraudulent charge is placed on your credit card, the bank allows you to challenge the amount and suspend payment until there is an investigation,” says Susan Leslie, Vice President, First Canadian Title, a leading title insurance company based in Oakville, Ontario. “There is no similar system for real estate when someone fraudulently charges a mortgage against your property. The onus is on the homeowner to prove the crime and it can be very costly to restore your title.”
Title insurance for people who currently own their home is available for a one-time premium based on the value of the property. For as little as $200., the insurance is effective as long as the homeowner owns the house and protects against fraud as well as other title issues, such as survey defects, loss as a result of a renovation done without a building permit, tax arrears and more.
Until recently, title insurance could only be purchased when buying a home. Now, First Canadian Title offers a title insurance policy for existing homeowners.
“For homeowners, title insurance is peace of mind in case they are a targeted by a criminal,” says Leslie. “Discovering you no longer own your home creates anxiety, frustration, expense and hardship. For a one-time premium, title insurance protects your right of ownership for as long as you own your home.”
For more information about the Existing Home Owner Policy or to obtain coverage, speak to your lawyer.
July 31, 2006 in Home Maintenance Matters | Permalink
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