MORTGAGE FRAUD PROTECTION
If your home or any other real estate holding(s) is/are mortgage-free or know someone fortunate
enough to be in this position, then you should keep reading.
Throughout the past few years, a huge spike has occurred in real estate fraud throughout Canada and
BC, but there is a way to prevent it. we can help prevent it. Real estate fraud is becoming more and
more common. Where it was once unheard of for someone to pose as an owner and sell a property
belonging to someone else, this is no longer a rare incident.
There are 2 main types of fraud – mortgage fraud and title fraud.
The typical mortgage fraud scenario occurs when a fraudster uses false identification to impersonate the
true owner of the property. Using this false identification, the fraudster approaches a lender, has a
mortgage approved and signs all the necessary documents. Neither the lender nor the lawyer/notary is
aware that the identification is false, resulting in a charge on title. By the time the true owner learns of
the mortgage, the fraudster has vanished. Unfortunately, the true owner of the property must bear the
expense of cancelling the mortgage.
A rarer, yet more serious, fraud is title fraud. Again, using false identification, the fraudster approaches a
realtor to list the property. The contract of purchase and sale is entered, and again all necessary
documents are signed using the false identification. Neither the realtor nor lawyer/notary is aware that
the identification is false, resulting in a transfer of title from the true owner to an innocent third-party
purchaser. By the time the true owner learns of the transfer, the fraudster has vanished.
The effects of title fraud are much more serious, and often devastating. Why? Because in British
Columbia a person may lose their home if the fraudster sells to an innocent third party. Yes, someone
could forge the identity of an unsuspecting homeowner, sell that property to a bona fide purchaser who
has no knowledge of the fraud, and the current homeowner loses their home. The true owner can apply
for compensation from the Assurance Fund which is administered by the Land Title and Survey
Authority; however, the bona fide purchaser will retain title to the home.
Fraudsters prefer to work with properties that are ‘free and clear’ of all financial charges, so an owner
could place a line of credit type mortgage on title. This will reduce, but not eliminate the risk of title
fraud. Alternatively, the true owner could obtain a title insurance policy to cover the costs of clearing
title or compensate for the loss of title. Again, this does not eliminate or even reduce the risk of title
fraud, title insurance only offers an easier path of compensation. Title insurance, however, will not
prevent mortgage or title fraud.
The only way to prevent real estate fraud from ever occurring for mortgage-free homes is to pull and
secure the Duplicate Indefeasible Title Certificate (DIT) from the Land Title Survey Authority (LTSA). By
pulling the DIT from the LTSA, the title to the home is effectively frozen, ensuring no party (even the
homeowner) can place a charge on the title, or transfer title to a third party.
Proper storage of the DIT is critical. If the document is ever lost a new certificate must be issued from
the LTSA, a process that can take months and several thousand dollars. Any owner pulling the DIT should
take great care to not lose that document.
The following information is provided by a partner law firm I have worked with for many years. If
protecting your mortgage-free interests are of high importance please read the costs associated and
As always, if you require further assistance with this matter or any other financing related questions
please do not hesitate to reach out.
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