Most people don’t even consider real estate fraud when they buy a new home so I wanted to take a moment and talk about how real estate fraud can impact homeowners.

There are many different types of real estate fraud, but the two that consumers should be aware of are mortgage fraud and title fraud.

Mortgage fraud occurs when an individual intentionally provides inaccurate, fraudulent or incomplete information to a lender in order to secure a mortgage that they might not otherwise be granted. This could include anything from an individual claiming to have a higher income than they actually have to providing falsified proof of identification or a falsified appraisal of the property.

In Canada, mortgage fraud is a crime that the banking industry, including mortgage brokers, police, governments and other organizations involved in real estate transactions take very seriously. Although there is no central organization that collects statistics nationally the number of incidents is increasing dramatically.

Title fraud, on the other hand, occurs when a fraudster assumes the identity of an individual homeowner and then uses that false identity to pose as the homeowner. They could then assume the title on the home, sell the property or obtain a mortgage on that property or other properties in the homeowner’s name.

Incidents of  title fraud are increasing in Canada and homeowners and lenders are proving to be irresistible targets for fraud artists. The role of legal professionals and title insurance companies has become even more critical in the fight to detect and prevent title fraud.

How can you protect yourself against real estate fraud? Protecting your personal information from identity thieves is the first step to protecting your biggest asset:

  • Do not give out personal information on the phone, through mail or over the Internet unless you have initiated the contact or know with whom you’re dealing
  • If it sounds too good to be true, it probably is – before you reveal any personal information, find out how it will be used and if it will be shared
  • Pay attention to your billing cycles. If you still receive mailed statements, follow up with creditors if your bills don’t arrive on time
  • Guard your mail. Deposit outgoing mail in post office collection boxes or at your local post office. Promptly remove mail from your mailbox after delivery. Ensure mail is forwarded or re-routed if you move or change your mailing address
  • Minimize the identification information and number of cards you carry
  • Keep items with personal information in a safe place. An identity thief will pick through your garbage or recycling bins. Be sure to tear or shred anything that has your name or address on it including copies of credit applications, insurance forms, physician statements and credit offers as well as any receipts you get in the mail
  • Give your Social Insurance Number (SIN) only when absolutely necessary. Ask to use other types of identification when possible.  Don’t carry your SIN card with you – leave it in a secure place
  • Check your credit report regularly to ensure there are no discrepancies.  We recommend every 6-12 months and because you are not interested in your score, just the trade lines that are reporting, this can be done for free at both Canadian credit reporting agencies – Equifax and Transunion.  Reviewing your credit report can help you find out if someone has opened unauthorized financial accounts in your name.

To protect yourself against title fraud, homeowners can obtaining a title insurance policy.  Lenders are now routinely asking for title insurance, at the cost of the home owner, upon the purchase of a new home.  This insurance policy protects the lender only and has a one time cost of about $250.  For a small incremental premium (approx. $50), the home owner can take out a policy to protect themselves as well.  This will protect the financial investment in the home should their identity be compromised.

The coverage provided in residential title insurance policies helps protect both innocent homeowners and lenders who might otherwise face huge financial losses resulting from title fraud. Generally, the losses from these types of frauds are catastrophic with homeowners paying thousands of dollars in legal fees to defend their title, and lenders often losing the full amount of their mortgage. Title insurance can protect both homeowners and lenders against losses resulting from most forms of real estate title fraud.
It is Important to note that thieves often target properties that are mortgage free and where owners have a good credit rating. This allows them to apply for a significant mortgage.

You can also conduct a property search at your province land registry office to ensure that the title to your home is in your name.

For all of you that are saying to yourself – “this will never happen to me” – here’s an example of a typical fraudulent transaction:

A fraud artist steals the identity of the legitimate owner of the property. The fraud artist sells the property to an unsuspecting purchaser who also obtains mortgage financing. The unsuspecting purchaser either moves in or attempts to move into the property. The legitimate owner is faced with defending his/her interest in the property, including evicting the unsuspecting purchaser, and having their title subject to any mortgages the unsuspecting purchaser has put on the title.

This is the largest investment you will ever make, protect it and your future.