If you typically spend the winter months in the sunny south somewhere, your Canadian home is likely to be unoccupied. That could leave you open to mortgage fraud (even though you might not have had a mortgage on the house for years). Fortunately there’s a simple, cost-effective way to protect you against this. It’s called “title insurance,” and here’s a look at how it works.
Title fraud is a growing problem, especially among the older demographic whose homes are typically mortgage-free, and many of whom are absent during the cold winter months.
When you first buy your home, your lawyer registers you at the government land registry office as the owner with title to the property. But if your identity is stolen (for example, by someone sifting through your trash for unshredded documents that contain your personal information, stealing your mail, or by online fraud such as phishing or hacking), the thieves can use your stolen identity to fraudulently gain title to your property. And, yes, this does happen, with banks, registry offices, and mortgage companies all equally fooled.
How title fraud works
With fraudulent title to the property, the grifters sell your home or re-mortgage it. They have even been known to discharge an existing mortgage, transfer the title, and then use the property to gain an even bigger mortgage.
Trouble is, as soon as they have the money in hand from the sale of the property or from the new mortgage, the thieves disappear, with no one the wiser. That is, until you return from your Florida getaway to find creditors demanding payment or a new “owner” demanding to be let into what you thought was your house.
Those with mortgage-free homes or those who rent out their homes during their absence are particularly susceptible to title fraud. Title fraud is difficult and expensive to extricate yourself from if you’re a victim.
Most provinces have a land titles assurance fund of some kind in place to compensate for financial losses related to title fraud and registry errors. But this is a long, drawn-out process, wrapped up in red tape, and is unlikely to cover your losses entirely. Instead, you should seriously consider title insurance.
What title insurance covers
Title insurance specifically covers losses and legal expenses arising from title fraud. Lender title insurance covers a mortgagee until the mortgage has been repaid, while individual title insurance protects you from losses as long as you he own the home, even if there is no mortgage.
Basically, title insurance covers you against unknown defects in the title, property encroachment issues, existing undisclosed liens against the title, as well as title fraud. The insurance will also cover legal fees and offer coverage for legal errors made during purchase, as well as other riders covering such things as identity theft. Title insurance is issued by such companies as FCT, LawPRO, Stewart Title Guaranty, and Travelers Insurance, and is available through your lawyer. The cost of title insurance varies widely depending on the property and your needs, but typically can range from $350 to over $600.
Courtesy Fundata Canada Inc. © 2016. Robyn Thompson, CFP, CIM, FCSI, is president of Castlemark Wealth Management. This article is not intended as personalized advice.
