Gail Vaz-Oxlade recently answered a series of questions and raised the issue of whether registering a mortgage against your home as security for a line of credit is sufficient protection against real estate fraud. She briefly alluded to the case law on real estate fraud and how registering a line of credit against your home may be self-serving for the banks. This post builds upon Gail’s comment so all credit is due to her for letting me off the hook of thinking of a new topic.
Title fraud consists of: (i) impostor pretends to be a homeowner; (ii) transfer title to himself/herself; (iii) obtains a mortgage pretending to be the current owner (relying on the fact the financial institution does not conduct its due diligence to run a title search); and (iv) disappears with mortgage funds.
The obvious concern is that the true homeowner has lost title to the home but is now responsible for the mortgage obligation.
Without reciting the jurisprudence on this matter, and to simplify this as much as possible for informational purposes, the law in Ontario for all transfers made after October 19, 2006 works under a legal doctrine known as “deferred indefeasibility (the case law and laws outside Ontario take a similar approach but please refer to appropriate information and/or advice if you live elsewhere).
What this doctrine means in plain English is that the true owner continues to hold title in the property if the fraud is discovered. Thu