What do brokers need to know?
Experts are urging homeowners and real estate professionals to adopt protective measures against mortgage and title fraud.
Their advice comes amid reports of homeowners receiving unexpected default notices from banks they had no prior interactions with.
In Toronto, police recently conducted investigations into instances where properties were put on the market or even sold without the consent of the actual owners.
Although these incidents represent extreme cases, they highlight a broader trend of fraudsters securing mortgage loans by assuming the identity of legitimate property owners, according to one real estate attorney.
Daniel La Gamba, a partner at LD Law LLP, said these fraudsters use counterfeit identification and documentation to secure a mortgage. The actual property owner is left unaware until they are confronted with demands for payment on a loan they never initiated.
“Even with all the safeguards in place... fraudsters are getting quite sophisticated in their ability to replicate ID, steal identity,” La Gamba told the Canadian Press. “Sometimes, we're really left with only our gut feeling. If something doesn't smell right, then we start digging and asking a few more questions.”
Mortgage fraud on the rise
Title insurance company FCT has estimated that at least one attempted fraud incident occurs every four business days.
John Tracy, FCT’s senior legal counsel, said the prevalence of these attempts is likely due to the “huge” payoff associated with mortgage fraud.
“Compared to getting a credit card in my name — you might get $10,000 worth of stereo stuff or gift cards. But if you can steal my ID and mortgage my house, the payoff is a magnitude of times bigger,” he said.
To combat this issue, the Financial Services Regulatory Authority of Ontario (FSRA) has released guidelines requiring brokers to monitor for and respond to signs of fraud.
Antoinette Leung, head of financial institutions and mortgage brokerage conduct at the FSRA, said a broker must be able to demonstrate that they have “taken reasonable steps to identify fraud” by verifying the identity of a client and making sure that they have authority to mortgage a property.
“Anyone who notices these red flags should be following up and looking into them,” she added.
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