Aug 1 | 2017

Is Your Cottage or Investment Property Vulnerable to Fraud?

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Is your cottage or investment property vulnerable to fraud?While people may see the value of getting title insurance for their homes, it is equally important to title insure any property you own – a cottage, summer home or even an investment.

Fraudsters may target properties that appear vacant or are rented out, especially ones that are mortgage free, and can either illegally transfer the deed to themselves and sell it out from under you or take out a mortgage on it and escape with the proceeds.

In one instance, a young man decided to use some of his savings and invest in real estate. He purchased an investment property for $204,500.00, as well as an FCT homeowner title insurance policy. Two years after the purchase, he received a notice stating that the mortgage was in default and that the lender would be taking possession of the property. Confused, he went to a lawyer as he knew that his mortgage was in good standing. An investigation revealed that though the man’s original mortgage was not discharged, the title was fraudulently transferred from the insured homeowner and a mortgage in the amount of $165,000 had been registered on the title. Mortgage funds were paid to the fraudster, who was now nowhere to be found.

Luckily for the young man, he was protected by an FCT title insurance policy. We coordinated and retained a lawyer on his behalf, and ultimately paid out $12,548.09 in legal fees to remove the fraudulent mortgage from title and rightfully transfer title back. The young man was able to keep his investment property, while being spared the time, expense and hassle of having to defend himself against the fraud.

While it’s not feasible to prevent fraud from taking place, the easiest way to protect yourself is to purchase title insurance. It will ensure that you are able to defend and retain the title to your property without experiencing all the stress and the costs associated with it, in addition to protecting you from a host of other title and non-title issues.

Have any questions about fraud protection? Share it with us in the comments section!

Apr 19 | 2017

How can you Mitigate Real Estate Fraud?

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real estate fraudMortgage fraud has quickly become the fastest growing crime in North America, most often affecting the institutions that lend money to individuals purchasing property.

The most common form of mortgage fraud involves fraudsters who acquire property and then artificially increase its value through a series of sales between themselves and an accomplice. A mortgage is then secured on the property based on the falsely inflated price.

FCT is dedicated to helping our valued lending partners protect themselves against losses inflicted by fraudsters. Since 2012, FCT has identified more than $401 million in suspicious mortgage transactions. A title insurance lender policy from FCT provides the ultimate protection and allows a financial institution:

  • the ability to protect its financial interests
  • to safeguard its reputation and business by easily mitigating risk associated with claims

We have created a list of fraud flags and tips to help you mitigate your risk of becoming a victim of mortgage fraud. Whether you are a bank branch lender, credit union lender, a mortgage broker or a mortgage specialist, these tips can help inform you of what to look for when processing a mortgage transaction.

For more information about how to protect you and your customers against mortgage fraud, please visit www.fct.ca or contact your dedicated Business Development Manager.

Mar 24 | 2015

Property fraud: a cautionary tale, Hollywood style

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For ages our society has loved to paint landlords as somewhat evil — individuals that use and abuse their power and position over their helpless tenants.

But recall the 1990 thriller, Pacific Heights, staring a young, fresh Melanie Griffith and a handsome Matthew Modine as a couple terrorized by a conniving and twisted renter, Carter Hayes, played so convincingly by Michael Keaton. Carter never pays any rent, drives the other tenants away (by breeding cockroaches, no less!) and systematically ruins the lives of his landlords, as well as racking up their credit card bills.

landlord-smallAlthough fictional, Pacific Heights offers a cautionary — albeit over-the-top — tale illustrating the perils of property fraud.

In an economy where the average home price in Toronto exceeds the one million dollar mark, it is increasingly common for real-life homeowners to use income from tenants to pay down their mortgages or earn additional income. It can also prove fertile ground for fraudsters.

 

Just ask Calgary landlord Rod Faulkner:

“In the 12 years, people have scammed me in just about every way imaginable,” says Faulkner, who owns 12 Calgary revenue properties. “And every time I get scammed, it costs me money, and I learn a new lesson.”

In the 2012 online article entitled Avoiding property fraud 101, writer Peter Mitham paints a grim picture:

Regulators in each province track mortgage-and title-related fraud, and Better Business Bureaus track other types, but mortgage-related fraud alone regularly tops $300 million a year in Canada. When frauds of all types relating to real estate are factored in, the tally is easily more than $500 million annually.

No one wants a tenant from hell like Carter Hayes in Pacific Heights. If you’re looking for a Hollywood ending to your rental story, below are some practical ways to protect yourself and your investment when renting:

Consider redirecting your mail
If possible, do not have tax bills, credit card bills, bank statements or any other financial information sent directly to your home. Instead, consider getting a P.O. Box, or having the documents sent electronically to a private, secure email address or access documents directly through your financial institution’s portal.

Remove or secure all financial information on the premises
If you are sharing accommodation with a renter, remove old income tax files, property tax records and other bills from the premises. A locked cabinet drawer will not deter a savvy fraudster. Keep the documents in a secure off-site location.

Do ALL security checks
Police criminal record checks and credit checks are worth the nominal fees for the information you gain. Call all references provided, but take their recommendation with a grain of salt: they may be in on any potential scam. Another great way to learn more about your prospective renter is to search their online profile. You’d be amazed at what you can find with a simple Google search! And above all, trust your instincts.

Know your neighbours
Take the time to introduce yourself to your neighbours who can be your eyes and ears when you’re not around.

Get title insurance
Remember fraudsters are getting more and more savvy all the time and although there is no such thing as a 100% guarantee against fraud, title insurance can help greatly mitigate your overall risk. You can learn more about the benefits of title insurance online at FCT.ca.

A recent Toronto Star article, How Ontario landlords can avoid bad tenants outlines additional tips that you may also find interesting.

Know any good landlord or tenant horror stories? Share them here.

Mar 17 | 2015

Top real estate frauds of 2014 —The best of the worst

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top-story_small
As is our custom during March — Fraud Prevention Month — we bring you the previous year’s top fraud stories. And once again there was no shortage of scams or victims to some of the largest financial crimes reported in Canada. However, what is notable about this list is that most of the fraud artists were women. Here is my equal-opportunity list of the best of the worst for 2014:

 

 

1.    Centrium Condominium Fraud in Toronto — Canada’s largest condo fraud

An estimated $15 million in deposit money slated for down payments on a new condo development went missing from a lawyer’s office in Toronto. Lawyer Meerai Cho faces 75 charges in connection with the theft and her license has been suspended by the Law Society of Upper Canada. The only silver lining is that Tarion, which administers the provincial home warranty, will likely provide some coverage for those defrauded.

2.    An amazing opportunity to invest in South American and South African wineries!

Or so the 200 people who invested money with Rashid Samji thought. The British Columbia-based financial planner was actually operating a $110 million Ponzi scheme, selling a 30% return on the investments of the “Mark Anthony Group” in international wineries. She faces 32 charges and up to $33 million in fines under the BC Securities Act.

3.    Breaking Bad in Alberta

In October, Allan Dawson MacMullin, ringleader of a $6 million mortgage fraud was described as an “economic predator” and a “heartless racketeer” then handed a 10-year prison term. He was also ordered to pay more than $1 million in restitution to two financial institutions and various individual straw buyers after being convicted of 38 counts of fraud for incidents of mortgage fraud that took place between 2000 and 2004.

4.    Converting mortgage proceeds to gold bars in Toronto

Apparently this can be done — who knew? Early in 2014, we learned about Omar Kalair who was offering mortgage arrangements to devout Muslims who believed that they were forbidden under Islamic law from making interest payments. He apparently converted the money into gold bars, coins and electronics and then skipped town. Which begs the question: how did he manage to leave with all the loot in tow?

5.    How far does $3.5M Canadian go in India?

Although the recent drop of the Canadian dollar has probably not helped with her long-term plans, Reta Grewal, the Mississauga lawyer who went missing in November with $3.5 million of her client’s mortgage money can answer that question.

Mar 4 | 2015

How to protect against mortgage fraud

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how_to_protect_you_smallMarch is Fraud Prevention Month, and as such, our focus turns to this month-long education campaign aimed at addressing fraud within Canada. As one of the fastest growing crimes in North America, it is absolutely vital for all Canadian individuals and businesses to be able to recognize and prevent it.

What is mortgage fraud?
Mortgage fraud is a type of real estate fraud that most often hurts the institutions lending money to individuals purchasing property.

The most common type of mortgage fraud is when fraudsters acquire property and then artificially increase the property’s value through a series of sales and resales between themselves and an accomplice. A mortgage is then secured on the property based on the artificially inflated price.

Mortgage fraud can also occur when individuals falsify information used to qualify for loans beyond their financial reach.

Fast and easy money with huge consequences
According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), the average case of real estate title fraud amounts to $300,000 and industry insiders estimate these scams are becoming increasingly common.  For lenders, this type of fraud amounts to potentially huge losses resulting from unpaid mortgage and property foreclosures.

FCT pays out more as a result of fraud than any other claim type.

Protect yourself and your organization
In this digital age where face-to-face contact is minimal, it is more important than ever to be vigilant. Prevention is and always will be the best protection against fraud:

•    Know your client
•    Request a face-to-face meeting, whenever possible
•    Ask for identification and verify its information
•    Look for patterns of odd behaviour and trust your instincts
•    Get title insurance

Title insurance — the ultimate protection
A title insurance policy from FCT allows you to:

•    Protect your financial interests with some of the most comprehensive title insurance coverage available
•    Safeguard yourself, your reputation, and your business by easily mitigating risk associated with claims
•    Provide the best possible service to your clients by partnering with the leader in the title insurance industry

For more information, watch for real-life lender claims stories in an upcoming post.

Feb 26 | 2015

Hasn’t the government fixed the land title fraud problem?

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hasnt-fixed-prob_smallDuring speaking engagements, I often raise the issue of title fraud. When I discuss the possibility that a fraudster could sell your home to an innocent third party and abscond with the proceeds, I usually get the following comment:

“I know this was a big problem a number of years ago but hasn’t it been cleared up?”

My response: “Yes, there were some legal changes made by governments, but title fraud and real estate fraud are still a real and present danger for any homeowner today.”

Here is the source of the confusion:

Previously under old Land Title Act laws, if a fraudster sold your house to an innocent third party the innocent third party got to keep your house.

Now under new Land Title Act laws, you get to keep your house, but you still have to prove that you were the victim of fraud and that you “didn’t do it!”

So don’t be lulled into thinking that the possibility of land title fraud no longer exists. That is what the fraudsters want you to think. In fact, there is no surefire prevention for title or mortgage fraud — as there is no surefire prevention strategy for any form of fraud. The reality is that we can take steps to reduce our risk and ensure we are protected from the negative legal and financial impacts of real estate fraud through insurance products like FCT’s Title Fraud Protection+.

Recovering your title is a legal process and generally costs between $10-15,000. Title insurance is a one-time premium with no deductibles  that stays in place for as long as you own your home. Title insurance premiums start at $350 and are based on the value of your home.

Make an informed decision about title insurance for your home as part of your long-term financial plan. Visit www.RetireYourHome.ca  for more information.

Oct 11 | 2013

New scam alert — the Air Loan mortgage fraud

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caampYesterday I had the pleasure of participating on a panel at the CAAMP mortgage fraud summit to discuss “Air Loan” scams. Air loans scams refer to a mortgage fraud where a lender has its security registered “on air.” In this scam lenders are duped into taking security on a vacant parcel of land when all the documentation shows that there is a dwelling located on the land.  The fraud is usually discovered when the mortgage goes into default and the lender discovers that, instead a lot containing a dwelling, the lender has security on a parcel of vacant land.  These frauds can be quite sophisticated and often involve many parties working in concert to defraud the lender of the mortgage proceeds

Each participant on the panel covered a unique aspect of the “air loan” scam. The panel included  Amanda Jackson, Partner, Gowlings, Mathieu Langelier, Property Risk Consultant, and Doug Robinson, Senior Mortgage Security Specialist, Scotiabank to discuss the Mortgage Air loan scam.  The panel was moderated by Randal Slavens Director of Adjudication Strategy, of Canada Guaranty and organized by Nancy Patterson Risk Management Officer and Senior Fraud Specialist also of Canada Guaranty.

My presentation involved some real life case studies of title insurance claims I have been involved with using air loan scams.  In these cases there is often a promise of a new home being built but nothing materializes.  The panel participants focused on what lenders can do to avoid being victimized including diligent underwriting and dealing only with known and trusted professionals. A key to risk mitigation is physical inspection of the property prior to advance of funds – something that is frequently performed by appraisers.  However, current lending practices have evolved away from high-cost appraisals to determine the value of the security, in favor of less expensive solutions like automated valuation models or insurance.  These approaches are faster and cheaper and perhaps even better from an overall portfolio cost – but they can’t help with the exposure to air-loan scams.  Fortunately the lender’s title insurance policy provides coverage for the lenders losses which arise from the failure of the land to contain a single family residence.