en
In 2010, Allan Davis* bought a home in Southern Ontario. Everything was quiet until 2016, when Allan got a statement of claim regarding two additional mortgages on his home.
According to the lender, Allan had taken out the mortgages in 2015, and hadn’t been making payments on them. The mortgages were now in default, and the lender was beginning a power of sale in order to recoup its loss. But this was the first Allan had ever heard of them, even though his name was on the documents.
Someone had approached the lender claiming to be him, taken out Allan’s home equity in his name and walked away with the money—it was title fraud.
Fortunately for Allan, his legal professional has ordered title insurance from FCT as part of closing on the property back in 2010. He reached out to FCT, and we stepped in to stop the power of sale and have the fraudulent mortgages stricken from his title. It cost over $96,000 to remove both mortgages and restore Allan’s title, but his title insurance covered the whole thing. Without it, Allan would have been out that money, at best.
Restoring clear title takes time, stress and money
When title fraud happens, it falls on the homeowner to counter the validity and enforceability of the fraudulent mortgage. It’s a long and stressful process that can feel impossible to navigate for someone who isn’t a lawyer. The process is also extremely expensive—between investigation, fees and counsel, it can take tens of thousands of dollars to restore an owner’s title.
Until that happens, the homeowner can’t take equity out of their property, or sell it. For many recent homeowners, still recovering from the upfront costs of their home purchase, that may be money they simply don’t have.
Someone always loses in a fraudulent home sale
When a fraudster sells someone’s property out from under them to an innocent buyer, only one of them can keep that property. Depending on the circumstances, as well as where the fraud took place, that could be the owner or the buyer, potentially after an expensive legal battle.
If the owner wins, the buyer may well have lost their upfront cost completely. Between the loss of time on market, and their savings, that buyer could be completely locked out of the home market because of someone else’s lie. If the buyer wins, the owner just lost their home.
Title insurance means protection against losses and a duty to defend
Title insurance can’t stop the moment of horror someone feels when they realize that fraud has happened, but it transforms every moment that comes after.
Every title insurance policy carries a “duty to defend,” which means that FCT becomes involved the moment an alleged fraud comes to light. We step in to handle any investigation that needs to be carried out, take on coordination with the other parties and their counsel, and will retain counsel of our own and go to court on our insureds’ behalf, if need be.
FCT takes on all the costs associated with resolving the situation and getting title restored. It’s the best protection available from the outcomes of title fraud, but only if that protection is already put in place. That’s why it’s so important to make sure that every client has an owner’s title insurance policy from FCT before the worst happens.
How do I ensure all my clients are protected?
Just like it’s a best practice to verify client identity as part of opening every file, it’s a best practice to make title insurance an automatic part of closing. It makes the process of closing on that deal smoother, but more importantly it makes sure that your client is protected from the very beginning—if your client is buying a fraudulently listed home, this is one of your only opportunities to protect them.
Another best practice is to check older files for an owner’s title insurance policy whenever you pull them out. Title insurance has been an option in Canada since 1991, which means that the longer ago a home last sold, the less likely it is that the homeowner has title insurance. Thanks to the Existing Homeowner’s Policy, your clients can still get protected, even if they’ve owned their home for years.
But that protection comes down to you. Many owners and buyers aren’t familiar with how title insurance can help protect them from fraud, and they rely on their legal professional to help them make the best choices. They need the protection of a title insurance policy—make sure they have it by using title insurance from FCT on every transaction.
*name changed to protect the privacy of our insured
Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.
®Registered Trademark of First American Financial Corporation.
