Of Prime Interest: Title insurance—weapon against real estate fraud

The role of legal professionals and title insurance companies has become even more critical in the fight to prevent title fraud.

  • Tue Mar 24th, 2015 2:00pm
  • Life

Incidents of real estate 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.

Homeowners and lenders can protect themselves by obtaining a title insurance policy through either First Canadian Title or Stewart Title.

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.

Legal ownership in property is evidenced by the title to the property being placed into your name.

The government land registration records will reflect you as the owner and anyone searching those records will also recognize you as the owner.

You should protect that ownership and therefore, protect one of your most prized assets—your home.

A typical example of real estate fraud: 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 just one example. Other examples include survey coverage, septic systems, fraud, forgery, impersonation, duress and mental incompetence, encroachment, liens on title, others claiming a legal interest in title and a few others.

Generally, the losses to homeowners can be catastrophic with the homeowners paying thousands of dollars in legal fees to defend their title and lenders often losing the full amount of their mortgage. Although it’s difficult to pinpoint an exact number, one association suggests that mortgage fraud amounted to $1.5 billion a year across Canada.

Most lending institutions now require title insurance upon registration of your mortgage with the lawyer/notary for either purchasing or refinancing your home.

This requirement protects the lending institution in the event of real estate fraud.

It would be prudent to have a separate policy to protect yourself in the case of any of the above fraudulent acts.

Should you already have a mortgage in place on your home and not have title insurance to protect yourself, it’s not too late to do so.

All you have to do is contact your lawyer or notary and they will be able to help you.

They will be able to explain what it covers so you fully understand the benefits of title insurance.

The cost is actually inexpensive when you look at the overall protection to one of your most valued assets.

After all, you insure your life to protect your family so why not insure your home to protect you from losing precious equity you have.