Will you face the risk of mortgage fraud without title insurance?
Nov 14th, 2013 | By John Tracy
Recently I read an answer column in @TheProvince suggesting to a BC homeowner that they work with a bank and a lawyer to remove a fraudulent mortgage from their property. http://ow.ly/qorbe My heart sank when I noticed the absence of any information about title insurance by the homeowner or the columnist.
Hot housing markets with high home prices attract fraudsters. BC has some of the highest home prices in the country and counter-intuitively one of the lowest adoption rates of title insurance. I have created a chart below to demonstrate what happens if there is a mortgage fraud on your house with and without title insurance. On one side of the table are the steps a homeowner with title insurance needs to do when he/she finds out that there is a fraudulent mortgage on title and on the other side are the steps for a homeowner without title insurance. The process from a title insurer’s perspective generally takes 3-8 months depending on the complexity of the claim.
|Actions||With Title Insurance||Without Title Insurance|
|At time of home purchase||Homeowner pays one-time premium for a homeowner title insurance policy. Premium is based on home purchase price. For properties valued between $200- $500,000, the premium averages $250-$350. Homeowner may also purchase Title Fraud protection policy after purchase (Cost is slightly higher than at time of purchase transaction)||Homeowner declines or is not advised of homeowner’s title insurance at time of purchase.|
|Secure legal representation||Contact title insurer and submit claim:- Provide documentation, statements etc to title insurer to establish coverage under claim. Title insurer secures representation on claim file with a knowledgeable legal advisor.||Homeowner must locate a lawyer who practices in the area of title fraud.- Homeowner(s) must attend an initial meeting with & determine if they want to retain that lawyer to take on their case. May require more than 1 meeting|
|Cost for legal representation||There is no deductible on a title insurance policy.||Homeowner must discuss terms of payment with the retained lawyer and pay an upfront retainer if requiredEstimated $3,000-5,000.|
|Hearing Process||Once title insurer agrees to cover your claim, insurer completes the process of having the fraudulent mortgage deleted from title. Insured may be required to attend meetings or hearings to complete the process||Homeowner must liaise and instruct the lawyer as the case continues.
If hearing is successful, fraudulent mortgage is removed from title<
May be able to recover some costs from a Provincial Land Title Assurance Fund
|Total Cost to Restore Title||Policy Premium amount averages: $250-$350.00||$10,000-15,000.00 estimated|
The real benefits to the homeowner with title insurance are as follows:
- You have the peace of mind that you have insurance coverage for the issue;
- You do not have to worry about paying any of the out-of-pocket legal costs associated with having the mortgage deleted from your title;
- You have the peace of mind that you are dealing with a company that is very familiar with the issue of title fraud and will choose knowledgeable professionals to deal with the matter; and
- The cost to you at the end of the day will be significantly less.
Again it should be your choice as a homeowner on how much risk you are willing to take on the issue. So be an informed consumer and, please ask us questions!