Real Estate Title Insurance

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Ken
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Post by Ken »

Here in Calgary, I can and have gone to the public building and bought copies of land surveys and even subdivision blueprints (the details for a single property). No problem, and not expensive.

But also, here in Calgary, we have a different system (I forget the name... see upthread) which pretty well prevents title fraud.
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Post by Jo Anne »

I'm about to buy title insurance for my house. We've lived her 3 years, and we have no mortgage.

The whole thing came up when I was visiting the lawyer regarding my dad's new house purchase - dad got title insurance on his new house. Our lawyer is able to do the title insurance directly over the internet, and he doesn't pass on the cost of doing this to his clients. So it's going to cost me $116.00.

I think that's a pretty good deal for the eternal peace of mind I'll have.
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Post by Ken »

Jo Anne wrote:I'm about to buy title insurance for my house. We've lived her 3 years, and we have no mortgage.

The whole thing came up when I was visiting the lawyer regarding my dad's new house purchase - dad got title insurance on his new house. Our lawyer is able to do the title insurance directly over the internet, and he doesn't pass on the cost of doing this to his clients. So it's going to cost me $116.00.

I think that's a pretty good deal for the eternal peace of mind I'll have.
Jo Anne, although your profile doesn't say so, I think you live in Ontario.
Which is important... I just want to point out that the need for title insurance depends upon the title system in place where you live.
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Post by pitz »

Bylo Selhi wrote:
worthy wrote:
"At present we have lazy banks, dilatory government and insurance salesmen selling us something we don't really need."
Title insurance, as explained in my post above, covers a lot more than fraud.
Yes, I understand that. I'm not particularly worried about a bad title. And even if I should be, my lawyer carries E&O insurance. But apart from depending on Ontario's Land Titles Assurance Fund, how do I protect myself from the consequences of "lazy banks" et al who allow fraudulent mortgages to be taken on my property without my knowledge?
Hi Bylo, CIBC recently lost a case in the Court of Queens Bench of Saskatchewan with respect to the issue:

http://www.lawsociety.sk.ca/judgments/2 ... kqb470.pdf

The trial judge held, in essence, that the bank was responsible for ensuring that they granted the mortgage to the actual individual who was listed on the title, and that the bank had a duty of due diligence in verifying that the identity of the individual applying for the mortgage is in fact the individual who is the duly registered owner of the property.

Merely checking names is not enough. In that instance, the bank was found to have formed a charge against the individual who fraudulently granted the mortgage by impersonating the registered owner, as opposed a charge against the land that was fraudulently mortgaged. Of course, some obvious warning signs were ignored by the mortgage broker (ie: the discrepancies in the credit reports). But unfortunately for CIBC, they were left on the hook.

As to how to protect yourself -- the situation above could have been avoided if the owners had taken out a HELOC for 75% of the value of the home, ie: a Manulife One account or similar. Obviously any subsequent mortgage would have to be registered as a second ranking charge against the property, and this would obviously set off alarm flags in various places.

Another thing you might be able to do is register a mortgage to yourself against your own property. Register an interest for a million bucks or whatever, should do the trick. Don't know if this is allowed, but it would prevent other 'stuff' from going on the title.

(btw, we have a Torrens-based system in Sask., so by law, the Land Titles registry is the definitive source for determining the ownership of a particular piece of land and fixtures.)
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Post by twa2w »

As to how to protect yourself -- the situation above could have been avoided if the owners had taken out a HELOC for 75% of the value of the home, ie: a Manulife One account or similar. Obviously any subsequent mortgage would have to be registered as a second ranking charge against the property, and this would obviously set off alarm flags in various places.
Not really. Many of the frauds occur where the crook discharges the mortgage on title. ie just show up at the land titles office with the doc's and register a discharge. Its easy to fake a discharge. Then just register a change in title and voila, arrange a new mortgage. Easily done in every province in Canada as shown by the incidence of frauds although so far the crooks seem to confine themselves to the lager centres. I just finished a seminar on mortgage fraud. It is unbelieveable what these guys can do. - and what it will cost you in legal fees to proove either you still own the house , or the mortgage that was put on in your name is not yours.
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Post by dakota »

On the other hand, when a new house was built next to my old one, I noticed that the builder was using the surveyor who did my property years ago. I asked the surveyor to update my survey when he did the final for the new place. He insisted on delivering it to me at my house. Maybe surveyors now routinely take steps to ensure they're not giving a survey to any Tom, Dick or Harry.
I have built a number of houses and a survey taken within the last two years was required by the lender in each case. I had recently acquired the lots so no problem. In an older property a new survey would have been required
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Post by dakota »

I have a question for people living in ON. I bought my lot paying cash and it was registered in both of our names. Then I proceeded to build and have built a new home, paying cash, so I would asume that only the value of the lot is registered in the Ontario Land Registry Office (name may be a different now) what do you think my risk would be for a fraudulant title transaction?
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Mortgage Phishing and Liability

Post by Mouly »

Did anyone else hear the story this morning on CBC Radio about mortgage phishing? I can't believe I heard it right but the gist seemed to be: If someone registers a fraudulent mortgage on your home, you are still responsible for the mortgage.

Now there isn't a case of a Canadian bank enforcing this but in theory it can be done
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Post by Inquisitive »

I did hear the CBC story, and the woman profiled says at first she was told the 250K mortgage was her responsibility, but eventually it "all worked out".

The details of what happened to the woman,actor Elizabeth Shepherd, are in this Star story:
http://www.thestar.com/NASApp/cs/Conten ... 9483202845
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Mortgage Fraud and Title Insurance

Post by DonM »

I decided to look into buying some Title Insurance and after doing some research into the various Canadian Companies that offer it - I found that the going rate is $200.00 for a home that is mortgage free and in the $200K to $500 range here in Ontario.

I thought that is a small price to pay for peace of mind - that is until I contacted my lawyer who handled the purchase of the home in 2001.

For his "services" I was told that in addition to the above fee, I was going to have to pay him something in the range of $400 to $500.

All he would have to do is a simple title search (which can probably be done online from his office) and I suspect that he wouldn't even be doing it himself (a law clerk could handle this) .

At any rate, I'll be damned if I am going to fork that kind of outrageous fee - I woud not have minded if his fees had amounted to $200.00 plus the cost of the insurance itself but $600.00 (in total) is a bit much.

What a rip - I think Shakespeare had it right when he wrote that line...."The first thing we do......."
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Post by brucecohen »

I paid $170 for title insurance when I bought my current home in 2005. Maybe rates have risen or maybe they're banded based on home value.

Instead of using your lawyer, see if there's a paralegal firm in your area that can arrange the insurance.

I don't know where it stands now, but there was legislation working its way through the Ontario legislature that put the onus for mortgage fraud on the lender, not the homeowner. My guess is that its enactment into law will prompt all the banks to offer title insurance on the cheap.
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Re: Mortgage Fraud and Title Insurance

Post by Bylo Selhi »

DonM wrote:At any rate, I'll be damned if I am going to fork that kind of outrageous fee
You may not have to. There's legislation in the works to protect homeowners by statute as well as some recent court decisions that have sided with the homeowner and against the mortgage lenders.

Due diligence: The growing problem of mortgage fraud
In the case of Rabi and Shafiei, Ontario Superior Court Justice Randall Echlin ruled they were the innocent victims of identity thieves and were not responsible for a mortgage taken out on the property by scam artists. "The fraudsters transferred the property and obtained the mortgage from the bank in one transaction, it was incumbent upon the bank to exercise due diligence which might be able to prevent the fraud," Echlin wrote. "Clearly, it did not. Its simple failure to ensure that a proper in-person appraisal involving contact with the occupants of the subject premises would have uncovered the fraud." He voided the mortgage and said the bank was not an innocent victim of the crime. Lawyers for the bank had argued that the couple was still responsible for paying it...

The Ontario government recently introduced legislation aimed at protecting homeowners from real estate fraud. If passed, it would ensure that ownership of a property couldn't be lost as a result of the registration of a falsified mortgage, fraudulent sale or a counterfeit power of attorney. Title would be restored to the rightful homeowner...
See also this previous thread: http://www.financialwisdomforum.org/for ... php?t=1164
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Post by Money101 »

BruceCohen wrote: I don't know where it stands now, but there was legislation working its way through the Ontario legislature that put the onus for mortgage fraud on the lender, not the homeowner. My guess is that its enactment into law will prompt all the banks to offer title insurance on the cheap.
It recently passed. It's called the The Consumer Protection and Service Modernization Act. From the Gov of Ontario site:

http://www.gov.on.ca/MGS/en/News/108180.html

December 13, 2006

Backgrounder: The Ministry of Government Services Consumer Protection and Service Modernization Act

Legislation has been passed to strengthen consumer protection, enhance the delivery of public services and modernize government in preparation for the future challenges and opportunities of the 21st century.

Real Estate Fraud:

Ensuring that ownership of a property cannot be lost as a result of the registration of a falsified mortgage, fraudulent sale or a counterfeit power of attorney

Implementing a streamlined and expedited Land Titles Assurance Fund process for individuals who are victims of fraud so that title is returned and a decision on compensation is made within 90 days

Introducing additional safeguards for suspending and revoking the accounts of fraudsters so that they cannot register documents

Raising existing fines for real estate fraud related offences to $50,000 from $1,000.
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Post by Bylo Selhi »

Mortgage fraud victory
Susan Lawrence won back her 100-year-old home, stolen from her on paper by identity fraudsters, when the province's highest court, in a rare move, reversed its own decision on a previous mortgage fraud... An impostor posing as Susan Lawrence transferred the home to another impostor calling himself Thomas Wright, who in turn obtained a $291,924 mortgage from Maple Trust. The property ownership was transferred to Wright, and Maple Trust registered its mortgage against the property. Yesterday, a panel of five judges in the Court of Appeal released a unanimous decision favouring the victimized homeowner and ordering Maple Trust to pay $25,000 toward her legal costs...
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HELOC instead of home Title Insurance

Post by knotley »

We have almost paid off mortgage and were discussing the paperwork associated with "burning the mortgage" last evening with our bank. We have about 4 months left.

Bank rep told us that with our current HELOC we really won't be able to "burn the mortgage" because there will always be a HELOC associated with our home - even if we have no outstanding balance.In order to burn the mortgage we must remove the HELOC. I said that seems fine - it costs nothing to have the HELOC sitting there if we need the money for something. I then asked about Title Insurance on the house. Bank rep said that with a HELOC registered against the home, even if it is at zero, there is no way anyone could sell the home out from beneath us. Title insurance would then be a waste of money.

I seem to recall that the Prov of Ont government enacted legislation to prevent this happening in the last few months and a recent court case was in the news as well. I also recall some financial commentators still recommending Title Insurance though.

So has anyone heard of this form of Title Insurance by having a HELOC?

Thank you

Knotley
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Post by brucecohen »

I paid cash for a property in the summer and at closing put a HELOC on it. My lawyer still advised us to get title insurance.

A HELOC is a first charge against the property so it theoretically shouldn't be possible for someone to sell the house out from under you. But Ontario's land registry system obviously wasn't watertight before and how can we be certain it is now? IIRC, the title insurance didn't cost very much and it's a one-time expense.
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Post by max88 »

Title insurance also protects you from problems rooted in the past. If someone claims title to the property and wins in the court, an HELOC as first charge doesn't stop the property being taken away from you.

With HELOC, insurance premium should be reduced by at least 50%, as the risk of property being "stolen" no longer exists. However all insurers just happily collect full premium.
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Post by gossg »

max88 wrote:Title insurance also protects you from problems rooted in the past. If someone claims title to the property and wins in the court, an HELOC as first charge doesn't stop the property being taken away from you.

With HELOC, insurance premium should be reduced by at least 50%, as the risk of property being "stolen" no longer exists. However all insurers just happily collect full premium.
I first heard this as a throwaway item at a Dave Jones presentation a year ago. He (they) were trying to sell LPs in a mall, but started with an hourlong seminar on investing in general. Along the way he gave a couple of examples of fraudulent sale with mortgage cases. He pointed out that if TD is on the title with you, then there are eight floors of lawyers waiting downtown to help resolve the problem. If you're alone on the title, it's you and whatever lawyer you can afford versus the bank (eight floors etc) that got tricked into offering a mortgage on the purchase.

He recommended a HELOC as a cheap (free ongoing, very low legal costs to set up, often waived.) way to secure your title.

I later heard it from a co-worker who had taken out a HELOC for exactly that reason.
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Post by marty123 »

Are we taking about:

a) taking a HELOC to protect the title; or
b) keeping a HELOC to protect the title

I would just point out that the cost of taking a HELOC (~$400), and my recollection of premium costs is that Title Insurance is about the same amount. The HELOC provides other benefits (i.e. you can borrow against it!), but so does the Title Insurance (i.e. it protects you against non-mortgage fraud, survey errors, etc.).

I'm saying that, but I don't ever see myself not keeping a HELOC on my house, even if it's just to make sure that I don't run into issues applying for one when I actually need one, in my 80s for health issues, or in my 90s because the piggy bank is finally empty.

I don't have Title Insurance, but I've got my own 8 floors at RBC, presumably willing to help out with any mortgage fraud. I'm not a big proponent of title insurance, it's just one more group of people trying to separate me from my money. However, I can see myself making a call to the lawyer that closed my deal at some point, asking him why he didn't offer and seeing how cheap it would be. - just for peace of mind.

Another few watchouts:

- Most banks will not absorb HELOC setup fees if the HELOC is not immediately used, so if the fee is paid solely for protection, it may not be the optimal move.
- Title Insurance is a one-time payment. Some banks charge a fee for inactivity, while the rest of them reserve the right to change their fee schedule to charge one in the future.

- Are the 8 floors of lawyers going to fight your title battle if the HELOC balance is $0.00? Maybe you can make an emergency withdrawal of $200,000 if you find out you're victim of a fraud, but:

i) The mortgage charge is the bank's protection as a last resort IF YOU CAN'T PAY. Will they be keen to go into a costly battle with fraudsters if they know you're sitting on a 6 or 7-digit retirement portfolio and that $200,000 you just withdrew?

ii) IANAL, but I wonder if you could be deemed to have acted in bad faith when you withdrew that $200,000, knowing that the bank did not have the protection they negotiated with you?

A HELOC will likely stop a title transfer, or at least make it more difficult to transfer a title without being noticed. It maybe more of a deterrent: a fraudster will see it as being more complicated to circumvent, and may move on to a house that has no mortgage charge, much in the same way as a burglar may move to an unprotected house when they see that yours has a burglar alarm. On the other hand, title insurance is just that: insurance. It will never prevent real estate fraud, it will instead compensate you for your loss. As such, you still risk having a logistical nightmare burdening you, and you risk being thrown out of your own house, albeit with compensation. The best protection is probably both: a mild deterrent (HELOC) with title insurance in case it wasn't enough.


added:

- How does a HELOC prevent someone from putting a 2nd mortgage on your house? The bank holding the legitimate HELOC knows they'll get their money when the house is resold, you'll just be left having to pay the 2nd mortgage before selling, and after paying the legitimate HELOC
- I'm not sure, but title insurance may cover you fight against a fraudulent lien being placed on your property. The bank holding a HELOC would not need to be concerned with such lien.

I wonder if the "HELOC instead of title insurance" crowd includes many people beyond those that sell HELOCs, and journalists that don't fully research their stories. Has any bank come up with the guts (or irresponsiblity) to put this argument in writing?
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Post by gossg »

marty123 wrote: I wonder if the "HELOC instead of title insurance" crowd includes many people beyond those that sell HELOCs, and journalists that don't fully research their stories. Has any bank come up with the guts (or irresponsiblity) to put this argument in writing?
The motive of the guy I first heard this from was someone hoping to sell an investment. If you take a HELOC to protect your home, then you have an easy way to pull some money to invest in his mall project.
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Post by brucecohen »

Consider too that the 8 floors of bank lawyers are there to protect the bank, not you, and wrote the agreement that covers your HELOC. I can't check mine because it's in the safety deposit box, but I wouldn't be surprised to find a fine print clause which states that if -- for any reason -- the property is sold, the HELOC's outstanding balance immediately becomes due in full.

BTW, the advisability of having title insurance depends on the province where the home is located. As I understand it, some provincial registries are set up so that there's virtually no risk of mortgage fraud.
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Post by twa2w »

FYI, if you have a HELOC on your house chances are your bank used FCT, First Canadian Title, to prepare and register the mortgage and the bank holds title insurance - ie it protects the bank not you but it adds a layer of protection. Not sure if it protects against future fraudulent conveyances or not but I am meeting with an FCT rep on Tuesday - If i remember I will ask him.

If you went to a lawyer to sign papers when you got your HELOC then it is unlikely there is title insurance.

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Post by worthy »

Depending on bank competence and their self-interest to protect you from a fraudulent conveyance. Someones' pulling my leg! Title insurance is cheaper, surer and morecomprehensive. (Not to say that you're totally secured from title insurers either.)
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HELOC & Title Insurance

Post by Nanaimo »

Query: What happens if the HELOC mortgage is fraudeulently discharged from title and then fraudulently replaced with a mortgage in favour of a new lender - only Title Insurance would assist in those circumstances.
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Post by knotley »

Thanks for the replies! It appears there is some logic in not having title insurance, but for the small premium - it would be prudent to purchase.

Knotley
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