The media is filled these days with reports of title theft and fraud surrounding peoples’ ownership of homes and condominiums. For example, the Toronto Star reported in October that one of Canada’s largest banks is locked in a legal battle with a North York couple who lost their condo to identity thieves. The Owners owners are faced with a $247,860.00 mortgage which was put on their home. The court has ordered the mortgage cancelled, but the bank is considering an appeal.
This latest case of property fraud comes to light as Ontario courts and legislatures scramble to protect homeowners from the consequences of identity theft. In title theft, the fraudster uses stolen or forged identity to change the title, sell the property or re-mortgage it without the true owners knowing. The fraudsters then take off with their ill-gotten gains leaving owners and lenders to bear the loss. The Ontario government has proposed that title would be restored to the owner who lost it, however, critics of the proposal believe that this would be punishing an innocent buyer at the expense of owners.
One critic stated: “The flip side to a law which would restore title to an innocent owner who has been defrauded is that virtually no one will be able to say with certainty they own their home. It does not matter how many years you have lived there and how much money you may have put into it, one day someone could knock on your door and tell you to leave”.
Until the government and courts decide upon an equitable solution to the problem of title theft and fraud, the best thing for existing homeowners is to make sure that they get title insurance.
What is Title Insurance?
Title insurance is a policy of insurance that provides coverage for the title related risks associated with real estate transactions. It is designed to cover the unpredictable or undetectable issues such as forgery, fraud, missing heirs or creditors that can affect rights of ownership.
Because it is insurance, the policy moves the risk associated with title from the home buyer, the lending institution or the lawyer, to the title insurer.
If there is a problem with title that only becomes known after closing, the title insurer may rectify the problem or compensate the policy holder, provided the type of problem that surfaces is covered by the title insurance policy.
Should a policy holder suffer a loss of title through title/identity theft, the insurance will provide funds to discharge the mortgage or compensate for the loss of the property. Without title insurance the home owner is forced to make a claim to the government’s Assurance Fund – a long and expensive process which is not always successful.