Title and Mortgage Fraud Investigations
As early as 2005 the Federal Bureau of Investigation identified Mortgage Fraud as one of the fastest growing White-Collar Crimes in the United States(1), so it is no surprise to see its presence here in Canada. There are several factors which give rise to this type of fraud, including the volume of property owned by senior citizens, an oncoming recession, amount of foreign ownership, and real estate market conditions. A 2004 Canadian Mortgage and Housing Corporation Report stated that “…mortgage lending business and the legal practice of land conveyancing are very cost competitive, the costs of preventing or reducing fraud are ultimately borne by people who buy, sell and mortgage their land. This means that the goal is not complete prevention or insurance, but a cost-effective combination of prevention and insurance.”
These types of fraud are usually subject to the property – it’s ownership, it’s value, or how it is leveraged. In all fraud cases of this nature the old adage “An ounce of prevention is worth a pound of cure” applies. Identity theft and forgery are the initial crimes which pave the way for Title Fraud. Reliance on Government issued identification is proving to be insufficient in establishing the seller’s identity, as savvy white-collar criminals are able to obtain forged identification and documents. Real Estate professionals and Lawyers can protect themselves from becoming embroiled in Title and Mortgage Frauds by retaining Titan Investigations to conduct a Background Investigation on the seller of the property prior to the sale.
Background Investigations related to Title Fraud include verifying the seller’s identity through multiple sources including but not limited to:
- Databases
- Neighbourhood / employment inquiries
- Identity verification
- Verification of mortgage discharges
- Verification of previous property transfers
Titan Investigations works with Real Estate Professionals and Lawyers to develop and customize the consent/release form for an investigation and determine the scope of the background investigation to be conducted.
Property owners can protect themselves by ensuring that their property is managed if they are away for lengths of time, do not reside in Canada, or are Out-of-Province. They should ensure that a reputable property management company is responsible for the premises (renting, maintenance, and/or routinely checks the property). If the property is going to be left vacant for weeks and/or months at a time, the owners should (as is required by their home/property insurance policy) to ensure the property is checked on at regular intervals.
Mortgage Frauds are typically perpetrated against Financial Institutions and other regulated lenders. These can involve:
- Fraudulently registering a forged discharge of a mortgage in order to obtain a new primary and/or even a secondary mortgage.
- Inflating the value of the property by fraudulent transfers among involved parties to obtaining inflated mortgages in excess of the actual value of the property.
- Borrowing a private down payment without disclosure and registering it as a second mortgage after the property is acquired, in contradiction to the terms of the primary mortgage holder.
There is a growing risk to individuals, especially in the current economic conditions. With rising interest rates and increase threshold criteria for regulated lenders, there is an increasing risk of individuals to seek out private lenders. Private lenders can be a viable solution to self – employed individuals, individuals who are employed in situations where their income is difficult to substantiate, or property owners who have financial difficulties and are considering “reverse mortgages” for a substantial portion of the value of the property. Fraud can be perpetrated in these situations if the title is being held by a person or entity other than the owner-occupant of the residence. In these situations, the lender could hold the title and assume a mortgage with a second or third party. If the lender defaults on the mortgage, the original owner- occupant could lose the property.
