Suspicion of fraud? Why denying a policy may benefit both lawyer and lender
Mar 18th, 2014 | By Paul Miron
It is difficult to pick up a newspaper today, and not see an article relating to real estate title fraud. While consumers or lenders can rest more easily if they have a title insurance policy, what about the law firm who acted on a transaction which turns out to be fraudulent? Title insurance will compensate the owner or lender for losses suffered as a result of fraud and title insurers waive their right of subrogation against the lawyer; however they are unable to protect the law firm’s reputation. A lender may also suffer from such a reputational loss.
You can only imagine the damage to a firm’s reputation when the local police department, the OPP or the RCMP arrive at your office, which may be filled with clients, armed with a search warrant and asking to review your real estate files. The Law Society will not be far behind to perform its own review. These are very real possibilities, and as a lawyer or law clerk you have the ability to help prevent real estate fraud and save your firm from the stress and havoc real estate fraud can pose on your firm. Similar investigations may happen to lenders.
As title insurers, we see both the best and, unfortunately, the very worst of real estate transactions. As such, we have developed sophisticated tools and techniques to weed out suspicious transactions related to title fraud that have proven to be very successful. These tools and techniques continue to develop and change as the fraudsters adapt their approaches to get around these barriers.
By co-operating with your title insurer on purchase and mortgage transactions we all end up working together to help combat fraud. While the underwriting process and questions may seem to be obtrusive or tedious at times, they are put in place to not only protect your clients, but also to protect the law firm, the lender and of course us as well.
What this means to you as a legal professional or lender is that we, as title insurers, are another set of eyes to review your deals based on our experience and stringent analysis of fraudulent transactions. If we do end up denying to insure one of your transactions because we suspect fraud, we not only mitigate our risk but also may be saving you the hardships and embarrassments from being associated with a fraud.