"Good morning!It appears our last email regarding mortgage fraud hit a nerve, as it was one of the most read and replied to emails we have ever sent.
We have added (a new page) to our website. This page expands upon
mortgage fraud, and how to prevent it from occurring. There are a few options
to reduce the risk of mortgage fraud, and title insurance may cover you if you
are victimized by this, but there is only one way we know of to prevent it (for
those lucky enough to have a free and clear property) - pull and store the
Duplicate Certificate of Indefeasible Title.
The page expands upon our email from a few weeks ago, and answers ALL of the questions we have received. "
Tony Spagnuolo,
Spagnuolo & Company LLP
Mortgage Fraud Protection
Throughout the past few years, a huge spike has occurred in real estate fraud throughout Canada and BC, but we can help prevent it.
Real estate fraud is becoming more and more common. Where it was once unheard of for someone to pose as an owner and sell a property belonging to someone else, this is no longer a rare incident. Throughout the past few years, a huge spike has occurred in real estate fraud throughout Canada and BC, but we can help prevent it.
There are 2 main types of fraud – mortgage fraud and title fraud.
The typical mortgage fraud scenario occurs when a fraudster uses false identification to impersonate the true owner of the property. Using this false identification, the fraudster approaches a lender, has a mortgage approved and signs all the necessary documents. Neither the lender nor the lawyer/notary is aware that the identification is false, resulting in a charge on title. By the time the true owner learns of the mortgage, the fraudster has vanished. Unfortunately, the true owner of the property must bear the expense of cancelling the mortgage.
A rarer, yet more serious, fraud is title fraud. Again, using false identification, the fraudster approaches a realtor to list the property. The contract of purchase and sale is entered, and again all necessary documents are signed using the false identification. Neither the realtor nor lawyer/notary is aware that the identification is false, resulting in a transfer of title from the true owner to an innocent third-party purchaser. By the time the true owner learns of the transfer, the fraudster has vanished.
The effects of title fraud are much more serious, and often devastating. Why? Because in British Columbia a person may lose their home if the fraudster sells to an innocent third party. Yes, someone could forge the identity of an unsuspecting homeowner, sell that property to a bona fide purchaser who has no knowledge of the fraud, and the current homeowner loses their home. The true owner can apply for compensation from the Assurance Fund which is administered by the Land Title and Survey Authority; however, the bona fide purchaser will retain title to the home.
Fraudsters prefer to work with properties that are ‘free and clear’ of all financial charges, so an owner could place a line of credit type mortgage on title. This will reduce, but not eliminate the risk of title fraud. Alternatively, the true owner could obtain a title insurance policy to cover the costs of clearing title or compensate for the loss of title. Again, this does not eliminate or even reduce the risk of title fraud, title insurance only offers an easier path of compensation. Title insurance, however, will not prevent mortgage or title fraud.
The only way to prevent real estate fraud from ever occurring for mortgage-free homes is to pull and secure the Duplicate Indefeasible Title Certificate (DIT) from the Land Title Survey Authority (LTSA). By pulling the DIT from the LTSA, the title to the home is effectively frozen, ensuring no party (even the homeowner) can place a charge on the title, or transfer title to a third party.
Proper storage of the DIT is critical. If the document is ever lost a new certificate must be issued from the LTSA, a process that can take months and several thousand dollars. Any owner pulling the DIT should take great care to not lose that document.
If your home is free and clear of any mortgages, and this fraud prevention is of importance to you, you have options:
- You can pull the DIT yourself – please visit https://ltsa.ca/wp-content/uploads/2020/11/Duplicate-Indefeasible-Title-Certificate.pdf;
- You can retain us to pull the DIT and forward to you for safekeeping. Our fee for this service is $350.00 plus taxes and LTSA fees. Again, be careful with this document. If lost it will cost you several thousand dollars and many months to replace;
- You can retain us to pull the DIT and store it in our fireproof safe in a secured and fire protected location. Our fee for this will be $450.00 plus taxes and LTSA fees. This includes storage of the DIT for one year;
- Our annual fees for safekeeping of the DIT will be $120.00, billed annually starting on the day one year the DIT is placed in our secured location;
If you would like to have us pull and provide you with the DIT, or store it on your behalf, please email us at realestate@spagslaw.ca, or call us at 604-527-4242. We will ensure that no fraudster will register a mortgage or sell your property. We look forward to being of service.
Frequently Asked Questions
Why does this only work for properties that are free and clear of all mortgages?
Having the Duplicate Indefeasible Title out of the LTSA effectively freezes the title. No changes are possible, even if the owner applies on their own. The DIT must be returned to the LTSA before any changes can be made to the title to the property,
Can I do this myself?
Yes, here is the link to the LTSA package – https://ltsa.ca/wp-content/uploads/2020/11/Duplicate-Indefeasible-Title-Certificate.pdf Pull the form from the LTSA website, print, sign and return to them. The LTSA will mail you the DIT which you should store in a safe place. Service fees are just under $80.00.
What if I want to sell the property, or make other changes?
The DIT must be returned to the LTSA. If we are storing the DIT, simply give us no less than 5 business days’ notice and we will return it to the LTSA, at which point the title is available to be changed.
Would having a mortgage or line of credit registered on title stop a fraudulent transfer from occurring?
A financial charge such as a mortgage or HELOC only reduces, not eliminates, the risk of fraud. It is also more expensive than any of the solutions we suggest.
Would a mortgage, reverse mortgage or line of credit be better in some situations?
If the client is interested in financial options they should explore this. For some clients it may be a good pre-retirement strategy to place a line of credit on title as it provides significant and cost effective borrowing power if it is ever needed. From a risk management point of view there is little doubt in our mind that pulling the DIT is the most secure option.
Would it not be better to get title insurance?
Much like fire insurance does not prevent a fire, title insurance does not prevent fraud. Our solution eliminates the risk of title fraud. We are big fans of title insurance, but not for those who own their property with title free and clear and are concerned about title fraud. Title insurance has other benefits and protections, but if the homeowner wants to prevent fraud, pulling the DIT is the preferred option.
What are the issues of a DIT that goes missing?
We can tell you that losing a DIT is a major problem. The first file Tony ever did in 1989 was a sale in East Vancouver where the homeowner lost the DIT. It took months and several thousand dollars to issue a replacement. While the process is a bit more streamlined now than in 1989, it is still time consuming and expensive to have it replaced. If a sale is imminent, the consequences could be significant.
If I pulled the duplicate indefeasible title certificate what happens when I list the property with a realtor?
You must return the DIT to the LTSA. If we are storing the DIT, simply give us at least 5 business days’ notice and we will return the DIT to the LTSA. The property can be listed before this of course, but the DIT must be returned to the LTSA prior to closing.
When the mortgage is paid off, is it better to inform the bank or financial institution to leave the mortgage on title?
As noted above a mortgage does not eliminate the risk of fraud.
If I were to pull the duplicate indefeasible title certificate, can a secured Line of Credit be obtained on this property?
No, the title is frozen.
ARTCLE CREDIT: Spagnuolo & Company LLP
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