When you invest in a home, you are also acquiring the title to the property. You will be registered as the new homeowner of the property in the provincial land title office.
Unlike with mortgage fraud, title fraud is a form of identity theft. This means that your personal information is gathered and used by someone identifying himself or herself as you. More so, criminals can easily steal your identity without you even knowing by going through your garbage or recycle papers, theft of mail, hacking your computer files or with phishing emails.
Unfortunately, there are few red flags for title fraud except for when your mortgage unexpectedly goes into default and the mortgage lender initiates foreclosure proceedings. And you know what, you probably thought that it could not get any worse, but it does. As the homeowner, you are the one who gets hurt by title fraud, not the lender, which is often the case in a mortgage fraud situation.
Here is the untold truth behind title fraud: Using false identification – pretending to be you, a criminal registers fake documents to transfer your property to his or her name and then, he or she registers a new mortgage against your property forcing a discharge of the existing mortgage. If everything happens as planned, the fraudster runs happily away with the new mortgage loan money without having to make any mortgage payments.
While this is happening, your bank assumes that you are the one not making the monthly payments and as a result, your financial downfall begins causing stress and unforeseen circumstances.
So can you protect yourself from title fraud when purchasing or refinancing a home?
Yes, you can! Here are a few easy ways:
- Always work with a licensed Realtor who is knowledgeable about the area that you are interested in buying. Educate yourself – Check out their website and their testimonials.
- Compare listings in the neighbourhood where the property is located, including home features, size, and location to determine whether the asking price is justifiable.
- Make sure to always view the property that you are interested in purchasing.
- Be cautious of a Realtor or Mortgage Broker who has a financial interest in the transaction.
- Ask for a copy of the land title or visit the registry office to request a title search.
- In the offer conditions, make sure the purchase is subject to an inspection and an appraisal
- While purchasing a property, guarantee that the deposit funds will be held “in trust” with a lawyer or your Realtor’s agency but not directly with the seller.
- Be proactive and get a home inspection to protect yourself against buying a home that has superficial renovations or formerly used as a grow op / drug house.
- If there have been recent renovations, have the seller provide the receipts and permits.
- Purchase Title Insurance. (Typically it is a Lender requirement anyway) Having Title Insurance doesn’t prevent you from fraud but what it will do is have the Insurance company step in and take up the legal battle for you.
- Have your Mortgage Broker explain any the terms and conditions of the mortgage contract.
- Have your Mortgage Broker explain the “cost of borrowing disclosure statement” and inquire about the addition of any questionable fees and or charges.
- Always be knowledgeable about what you are signing; ask lots of questions if you are unsure.
- Use your own lawyer for legal advice, not the same lawyer as the seller.
If you would like to further discuss how you could protect yourself against title fraud when purchasing or refinancing a home, then contact David Iverson for mortgage broker advice.