OKANAGAN REAL ESTATE COMPANY

According to Statistics Canada, "At the end of 2003, individuals and unincorporated businesses held more than $1.6 trillion in residential structures and land - or about one-third of all assets held by individuals."

By mid-2005, Canadians owed $617 billion in outstanding residential mortgages. Over the past 15 years, residential mortgage credit has grown by an average of 6.4 per cent per year.

That is lot of money - and a lot of opportunity for organized crime and fraud.

What is real estate fraud?

Real estate fraud is a broad term used to describe the different types of fraud that the real estate industry faces. 

1. Mortgage fraud

Mortgage fraud is a type of real estate fraud that most often hurts the financial institutions that lend money for purchasing property. The most common form of mortgage fraud involves fraudsters acquiring property and then artificially increasing the property’s value through a series of sales and resale between the fraudster and someone in cooperation with them. A mortgage is then secured on the property based on the price that has been artificially inflated.

2. Title fraud

Title fraud is a different type of real estate fraud that most often hurts individual homeowners.  In comparison to the more than two million real estate transactions that occur each year in the province, there are a limited number of cases of title fraud. The most common forms of title fraud involve fraudsters using stolen identities or forged documents to transfer a registered owner’s title to himself or herself without the registered owner’s knowledge. The fraudster then obtains a mortgage on this property and once the funds are advanced on the mortgage, he or she disappears. This type of fraud is also sometimes referred to as “mortgage fraud.”

How big a problem is mortgage fraud in Canada?

Mortgage fraud is a crime that the banking industry, police, governments, and other organizations involved in real estate transactions take very seriously. Although there is no central organization that collects statistics nationally there are some indications that the number of incidents is increasing.

While even a single incident is one too many, it is important to put the issue into perspective. There are hundreds of billions of dollars in mortgages held by millions of Canadian homeowners and in the vast majority of cases these mortgages are perfectly normal.

What can you do to protect your property? 

The land registration system in Canada has a proven track record for security, accuracy, and efficiency. Property owners can trust in a constantly improving system that has introduced automation, electronic registration, and enhanced security to land registration. The system is built on 200 years of legal and regulatory best practices, using the best technology currently available.

However, in any system, it is impossible to completely avoid fraud. Homeowners can take an active role in protecting their property by protecting themselves from identity thieves. Fraudsters have been known to impersonate the owner of a property by obtaining false identification and then transferring property that does not belong to them. To help avoid this situation:

• Always store personal information, including your birth certificate, Social Insurance Number card, bank account numbers and credit card details, in a secure place that others cannot access.
• Never carry your birth certificate or SIN card in your wallet.
• Shred documents, such as credit card statements, before you discard them.
• Never reply to spam or e-mails that ask for banking information, credit card details, passwords, or other sensitive information involving property you own.
• Check references from prospective renters if you are renting your property and be sure to check on your rental property regularly.

Be alert to identity theft

Pay attention to the following in order to detect fraud early:

• Tax statements or bills are unexpectedly mailed to your home, addressed to a different individual.
• You receive a phone call from a caller inquiring about a new mortgage that has already been arranged for your property.
• Bills do not arrive as expected.
• Creditors contact you regarding purchases you did not make.
• There are discrepancies in your bank or credit card statements.

Power of attorney

Another way in which you can protect yourself is by being cautious when granting power of attorney. Whenever you give another person a power of attorney that permits them to deal with your personal assets, you should consult with your lawyers or advisers regarding appropriate limitations.

Title insurance

Consumers can also talk to their lawyers and advisers about alternative methods of protection, including the benefits of purchasing title insurance.

What are the banks doing to protect you from real estate fraud?

The banks work constantly to protect you from fraud. All banks have fraud and security teams working around the clock to ensure that security measures are constantly being enhanced, technology is being upgraded, and that the banking industry assists police in investigations to help catch the criminals and put them behind bars.

In addition, the banks and the Canadian Bankers Association are involved in real estate fraud task forces across the country. These task forces bring together lenders, police, government, real estate groups, the legal profession, and other groups to look closely at real estate fraud to determine what changes can be made, individually and collectively, to prevent fraud and protect Canadians. This work is ongoing but, to date, significant changes have been made to directly prevent some instances of real estate fraud from occurring.

How do the banks assist the police in investigating mortgage fraud cases?

It is in all of our best interests to combat mortgage fraud. The banks cooperate fully with police to ensure that homeowners are protected, criminals are brought to justice and that effective measures are put in place to fight and reduce mortgage fraud in Canada.

The banks conduct their own internal investigations and will provide their findings to police. They will also help in any way that they can, within the law, with police investigations into mortgage fraud. This could include providing documents and other information that they have obtained or testifying in court.

The banks and the CBA also sit on task forces and working groups with police, governments, real estate groups, the legal profession, other financial institutions and other stakeholders that look at mortgage fraud and related issues. To commit mortgage fraud, a number of parties need to be working together and they vary the methods used to commit this crime. By sharing information, we can all constantly be taking steps to change practices and close any gaps that may exist in the system.

It takes diligence to identify and stop real estate fraud, do your part to protect yourself and your property.