Last time, we discussed mortgage fraud and “straw buyer” schemes and the red flags that come up when they happen. This time we are taking a look at an even more insidious type of fraud, where the red flags are hard or even impossible to spot until it’s too late.
When you purchase a home, you purchase the title to the property. Your solicitor registers you as the owner of the property in the provincial land title office.
Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft.
This occurs when your personal information is collected and used by someone identifying themselves as you. There are several ways criminals can steal your identity without your knowledge, which includes:
- dumpster diving;
- mail box theft;
- phishing; and
- computer hacking.
Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud.
Here’s what happens with title fraud. A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.
The following are ways you can protect yourself from identity theft:
- Ensure you keep personal information confidential when on the internet or phone until you know who are dealing with, how it will be used and if it will be shared with anyone.
- Only carry minimal information and identification in your wallet, don’t have your social insurance card with you.
- Check your credit report regularly. You can get them free when you request them from the Equifax and Transunion when they mail them to your home. If you notice anything suspicious, contact the credit bureau right away.
- Check your financial, bank and credit card statements regularly for any inconsistencies and unknown charges.
- Consider obtaining a title insurance policy, as title insurance protects against many title risks associated with real estate transactions.
- Check your mailbox for mail on regularly, if not every day.
- Shred and destroy any financial and personal identification documents, as well as any unsolicited credit card applications rather than just simply throwing them away.
- If you don’t receive your bills or other mail, follow up with your creditors.
- If you receive credit cards that you didn’t apply for or if you did apply for them and didn’t receive them.
- Contact your mortgage lender first if you are having difficulty making your mortgage payments.
The following are ways to protect yourself from title fraud when purchasing or refinancing a home:
- Make sure you work with a licensed real estate agent who is familiar with the area you are interested in buying. Select to work with someone that can provide trusted referrals and check on them.
- Check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable.
- Always view the property you are purchasing in person – don’t buy without seeing it first.
- Beware of a real estate agent or mortgage broker who has a financial interest in the transaction.
- Ask for a copy of the land title or go to a registry office and request a historical title search.
- In the offer to purchase, include the option to have the property inspected and appraised.
- When giving a deposit when purchasing a property ensure the funds will be held “in trust” with a solicitor or a real estate agency and not directly with the seller.
- Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab.
- Ask to see receipts and permits for recent renovations.
- Consider the purchase of title insurance.
- Review and make sure you are comfortable with the terms and conditions with the mortgage commitment letter or approval.
- Review the “cost of borrowing disclosure statement” and be aware of any additional fees or charges. Ask questions if you are not sure.
- Know and understand what you are signing. If you have questions, ask. If you are not comfortable or something is not right, do not sign the documents.
- You might want to consider using your own solicitor for legal advice if you are asked to use the same lawyer as the seller.