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Homeowners, realtors should take steps to protect against title fraud

Years after fully paying off your mortgage, a disconcerting letter arrives in your mailbox. It's from a bank, claiming you're in default and owe them money. This is bewildering. You never took out another mortgage, let alone dealt with this bank. Yet, the paperwork they provide suggests otherwise. It dawns on you that you might be a victim of fraud.

This might sound like an improbable scenario, but experts warn that title and mortgage fraud are on the rise in Canada. Homeowners and real estate professionals should be proactive in safeguarding their properties and identities against these schemes.

Title fraud occurs when the ownership or title of a property is illicitly altered or forged documents are used to enable a fraudster to unlawfully sell or refinance the property. Although extreme cases like those seen in recent Toronto police investigations, where homes were listed for sale without the owners' consent, garner attention, mortgage fraud is more prevalent.

In mortgage fraud, impostors acquire a mortgage from a lender under false pretenses by assuming the identity of a legitimate homeowner. They often use counterfeit IDs, fabricated job letters, falsified credit reports, or fake references to deceive banks into granting them mortgages. Despite existing safeguards, fraudsters are becoming increasingly adept at replicating IDs and stealing identities, making detection challenging.

Upon receiving a demand for payment from the bank, genuine homeowners realize they've fallen victim to fraud. Proving their innocence and absolving themselves of the fraudulent mortgage can be an arduous and costly ordeal.

One cost-effective defense against title fraud is title insurance, which typically covers the entire period of property ownership. Without it, rectifying the situation independently can be financially and temporally draining.

Vulnerable groups such as newcomers to Canada and seniors are primary targets of title or mortgage fraud attempts. Newcomers, especially those facing language barriers, and seniors, who often own mortgage-free homes, are particularly susceptible to these schemes.

Technology has facilitated fraudulent activities, with fraudsters leveraging digital advancements to replicate identities almost undetectably. Recognizing the evolving nature of fraud, organizations like FCT have intensified efforts to identify red flags and employ advanced digital identity verification technologies.

In response to the escalating threat of mortgage fraud, regulatory authorities like the Financial Services Regulatory Authority of Ontario have issued guidance to combat fraudulent practices among brokers. Requirements include conducting business ethically and monitoring for signs of potential fraud, with recommendations for implementing multi-factor authentication for identity verification.

Brokers are urged to scrutinize discrepancies in client information and cross-reference employment details to ensure legitimacy. Failure to comply with regulations may result in enforcement actions, emphasizing the importance of brokers' diligence in detecting and preventing fraud.

In essence, the proliferation of title and mortgage fraud underscores the imperative for homeowners and real estate professionals to remain vigilant and implement robust safeguards to protect against fraudulent activities that threaten property ownership and financial security.