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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. Allan now needed to remove them from his property title, which in his case would add up to a loss of over $96,000.
But this was the first Allan had ever heard of the loans, even though his name was on the documents. Someone had taken his identity, approached the lender claiming to be him, taken out Allan’s home equity in his name and walked away with the money—he’d just become the target of title fraud.
Title fraud is on the rise
Title fraud, often involving identity theft and forged documents, is a significant threat to homeowners and mortgage lenders alike. That threat is on the rise, and it’s become much more sophisticated—new fake IDs have even been able to pass in-person inspection.
What’s the impact of title fraud?
In the example above, the fraudster only stole equity from Allan’s home. In other cases, homeowners’ properties have been listed and sold without their knowledge. Depending on the circumstances of the fraud, such as the province where it happened, the outcome can be different. Sometimes the property owner or the innocent buyer may end up keeping the home.
Whether the fraudster walks away with mortgage funds, or the proceeds of a fraudulent home sale, the owner’s title is compromised. Without clear title to their property, an owner can’t sell it or remortgage.
To regain full control of their property, the homeowner needs to have any fraudulent mortgages stricken from their title, and their clear ownership reestablished in the public record. It’s a long, expensive legal process, often costing tens of thousands of dollars.
In Allan’s case, it ended up costing over $96,000 to get both mortgages removed, and his home title restored. Fortunately, he had a title insurance policy with FCT, so that entire amount was covered—without that protection, he would have been on his own.
Title insurance provides fraud coverage and more
Title insurance covers homeowners against large sudden expenses, which makes it the best protection against losses from title fraud. Both mortgage lenders and homeowners rely on title insurance, knowing that even if a fraudster succeeds, their investment is protected.
For homeowners, that means covering all the costs of investigating the fraud and restoring their title. It also means their title insurance company potentially retaining counsel and going to court on their behalf.
FCT’s duty to defend homeowners
Dealing with title fraud isn’t just expensive: restoring title is a long and complex legal process. When a homeowner makes a title insurance claim for fraud, that triggers the duty to defend included in their policy. FCT takes on communicating with all the parties involved, and will step in to handle any court proceedings, if they become necessary.
Having title insurance means that homeowners aren’t left to navigate that process alone. It means having peace of mind, knowing that in the event of fraud, homeowners have an advocate making sure their interests are looked after, and that they’re made whole.
But it only works if that protection is in place before the fraud occurs. That’s why making title insurance part of the real estate transaction process is a best practice for legal professionals. It covers dozens of risks facing homeowners for as long as they have an interest in their property.
Learn more about how title insurance from FCT protects homeowners from the unknown and provides lasting peace of mind.
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.
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