What is property fraud, i.e., mortgage and title fraud, and how can a homeowner avoid becoming a victim?
I know what you’re thinking – “It won’t happen to me.” Unfortunately, no one is 100% protected from fraudulent activity and fraudsters who use sophisticated ways to access your most personal data, steal your identity with fake identities, and then your assets.
In times of economic hardship, there is more desperation and cybercriminals seeking ways to steal information in exchange for a payout. BBC says property fraud is on the rise. It takes journalists looking for a newsworthy event to report on, and in Canada, recent property fraud has caught the eye of a Toronto reporter Nadine Yosif.
The rise in property values has not gone unnoticed by criminals, and in Canada, the average home is more than $1.2 million. The real estate industry has been a magnet for organized crime, particularly for laundering money acquired by criminal activity. While property fraud has started slowly, it’s rising in Canada, the USA, and the UK.
Homeowners of a Toronto property were on an extended holiday overseas and only found out months later that they no longer owned their home. They checked their bank statement and noticed their mortgage repayments had stopped. Realizing it was unusual, the homeowners investigated further and found that fraudsters used fake identities to steal and sell their property. The new homeowners were not aware of anything untoward about the property transaction.
Property Fraud Explained
Property fraud refers to any fraudulent activity that involves the sale, purchase, or ownership of real estate – primarily residential homes.
The two common types of property fraud are mortgage fraud and title fraud.
Mortgage fraud occurs when someone deliberately provides false information to obtain a mortgage loan. This could include lying about their income, employment status, or credit history. The fraudster may also misrepresent the property’s value to get a more significant loan amount.
Mortgage fraud can result in financial loss for the lender and the homeowner, who may be unable to afford the loan payments.
It is not just homeowners who may act to deceive lenders so they can get access to additional funds. Property fraudsters can also get in by stealing a homeowner’s identity and personal data to apply for a loan.
Title fraud, on the other hand, occurs when someone steals the identity of a property owner and then uses it to transfer ownership of the property to themselves.
The fraudster may take out a new mortgage on the property, sell it to someone else, or use it as collateral for a loan. The homeowner may not know the fraud until they receive a notice of eviction or foreclosure.
How To Avoid Property Fraud
To avoid property fraud, homeowners can take several steps. Caveat emptor, no solution will protect you 100% against fraudulent and criminal activity. However, you can ensure you are not an easy target with the following actions.
Keep your personal information secure.
Personal information includes your social security number, driver’s license number, and other identifying information. Use MFA (multifactor authentication and strong passwords). Plus, apply security updates to your computer devices, including your mobile phone.
Credit report and title checks
Monitor your credit report regularly to ensure no unauthorized accounts or loans in your name.
Check your property’s title regularly to ensure no fraudulent transfers have occurred.
Be wary of unsolicited offers to buy your property or to refinance your mortgage.
Use a reputable real estate attorney or title company to handle property transactions.
If you suspect you may be a victim of property fraud, contact your lender, title company, lawyer, and local law enforcement immediately.
How can a homeowner get their money back?
Yes, when they can have title insurance. It is about now that you’re thinking: “Do we have title insurance?”
What is Property Title Insurance?
Property title insurance is a type of insurance policy that protects a property owner or a mortgage lender against financial losses due to defects in the property’s title.
A title is a legal document that establishes the ownership of a property. Title defects can arise from various reasons, such as errors in public records, undisclosed liens, fraudulent acts, or missing heirs. They can invalidate a property’s title or create disputes over ownership.
When a property is purchased or refinanced, a title search is conducted to determine if there are any issues with the title. However, even the most thorough title search cannot guarantee any hidden defects or errors in the title. This is where title insurance comes in.
Title insurance provides coverage for losses that may occur due to a defect in the title. Suppose a covered title defect is discovered after the policy is issued. In that case, the title insurance company will defend the policyholder’s ownership rights in court and, if necessary, pay for any losses the policyholder suffers up to the policy limit.
In summary, property title insurance is a type of insurance policy that protects property owners and mortgage lenders against financial losses due to defects in the property’s title.
Follow the discussion in our forums.