(Canadian Institute of Mortgage Brokers and Lenders)
The Canadian Institute of Mortgage Brokers and Lenders says mortgage fraud is on the rise and costing Canadians hundreds of millions of dollars each year. The most common method used to perpetrate mortgage fraud is to misrepresent the purchase price of a property
Ontario Land Title Registry Office: Responsible for province-wide administration of local l
and title offices. Tesoro was able to walk into a local land title office with forged documents and transfer title to six homes to himself.
In 1999, the province began a pilot project allowing online registration of land titles. By September of 2002, the service was extended to 12 municipalities, including Toronto. The Ontario government describes it as the first ever self-serve, electronic land registration system in the world. The Ministry of Consumer and Business Services says electronic registration will cut down on frauds like Tesoro’s. Others suggest the system may provide opportunities for a technologically savvy con artist. (The Law Society of Upper Canada)
The Law Society of Upper Canada is aware of increasing instances of fraud in relation to mortgage loan transactions. These frauds usually involve either complicit or fraudulent purchasers, and/or real estate agents, mortgage brokers and unfortunately, in some cases, lawyers.Typically, mortgage fraud involves the use of false identities
and the artificial inflation of property values. Both these elements can be present in the same transaction.
A PROPOSAL TO SOLVE THE MORTGAGE FRAUD PROBLEM THE HOUSE KEY
Your mortgage and the title of your propery is as sensitive as your credit card number. Yet the problems of mortgage fraud continue to increase as a result of computerization of the land titles system.
All of this could be avoided if a property was given some sort of a passcode.
An owner of a home is given a card with an 18 digit code. This code is kept by the true owner of the property and the government land titles office.
The filing of the code does not form part of the land titles public record but is filed with the land titles office. Title cannot be transferred, conveyed, or charged unless the pass codes match between the land titles office and the true property owner when instruments are to be applied to the title of the property.
This concept would have to be administrated through the government land titles office. Private corporations who have been selected to computerize the land title data would have to work with the government to administrate the program. The main resolve to this problem lies in the hands of the registry office and the companies they have selected to computerize their land registry data. A House Key program could be a free or paid service whereby property owners have to voluntarily subscribe to the program to protect their properties. Insurance companies could insist that property owners subscribe to the program before underwriting any policy be it, property insurance or title insurance. Alternatively if the program can be enforced, insurance companies could agree to reduced rates if you subscribe to the program.
Why are other fraud programs failing?
Proactive vs Reactive
Kevin Bousquet, a Certified Fraud Examiner and President of The Corpa Group, a 15 year old Private Investigation agency maintains the focus of most fraud programs are on a failing REACTIVE programs.
Reactive meaning “after the fact”. Reacting to the fraud after it has been perpetrated. Giving people bandaids after they are bleeding.
If there are a bunch of fires happening on a street do we go and form associations and clubs trying to lobby the government to hire more firemen? No, we set up a PROACTIVE program to stop the fires from happening in the first place. We do inspections, we make sure home owners are protected ahead of time with fire extinguishers and smoke detectors.
This problem is no different then protecting your credit card number. The credit card company has the responsibility to set up passwords, and security procedures to make sure your, you, when the credit card is used.
This is not a police problem there is not enough police in the world to combat fraud. Fraud in general is worse then ever before in the history of mankind. With the growth of the internet there are now more fraudsters and more victims in play.
With the sophistication of scanners and photocopiers its a mathematical certainty the problem will get worse.
There is no incentive to even resolve on a proactive level. Everyone everyone is making money on the problem. Insurance companies, lawyers, forensic accountants, private investigators all stand to profit from the costs associated from aiding a person after they have been a victim. This is nothing more then giving a person a band aid when they are already bleeding. We need to prevent the problem before it can happen and stop handing out bandaids.
Bousquet’s agency continues to be retained by title insurance companies and their legal counsel and states that his case load is increasing more and more each month.
Victims of mortgage fraud (and fraud in general) are relying on public law enforcement to punish perpetrators and the civil court system to collect their losses. “Both of which will most certainly fail” says Bousquet.
Municipal Police forces are backlogged over a year on fraud matters, some over two says, Bousquet. By that time the perpetrator has ample time to get away. Witnesses have probably moved, documentation relating to the matter can become harder to find.
“It’s all a big waste of time says Bousquet”. Law enforcement and punishment through the courts is not a deterrent to this crime.” says Bousquet.
It’s worth it for these criminals to get some probabation and maybe a little jail time on the weekends to pocket $50,000.00 to $100,000.00 of stolen money.
“If you think you’re going to actually collect your losses through the civil court system you’re well mistaken” says Bousquet.
Most perpetrators have no assets in their name. The proceeds from fraud (or any crime for that matter) are seldom deposited in any bank account that could be garnished.
While victims of fraud may succeed in getting a civil court judgment (or a criminal restitution order) it will most certainly be an uncollectible worthless piece of paper.
Bousquet says, “the rules of civil collection with a judgment or a restitution order are very simple. You have to try and collect on a bank account, employment wages, property, or a vehicle that has no lien on it”. “Good luck and don’t expect the court to help you find these assets in order to collect on them, you’re on your own” says Bousquet.
These methods of attacking fraud are nothing more then punishment and collection all of which fail without doubt. At the end of the day the property owner is completely victimized
and in some cases financially ruined forever with their credit record destroyed.
Bousquet argues that a true fraud program should be towards a PROACTIVE program to stop the act before it can occur. This starts with password protecting or computerized landtitle system.
A clear program with the cooperation of the government land titles office and the companies that they are using to computerize the land title data to protect property owner.
In a password protected system the true property owner is notified every time an instrument is being applied to the title of their property be it a mortgage, lien, transfer or conveyance. “No different then a password or secret code that may be associated with your credit card” says, Bousquet.
However the title can not be touched unless the passwords match.
A kind of system where the land registry office must see the true owners secret code when the documents are being filed either at the land registry office or through the computerized system.
Bousquet has forwarded his ideas to Teraview, a company that has been responsible for computerizing the land title data in Ontario.
Bousquet maintains mortgage fraud is completely out of control. The true resolve to this problem starts with the government implementing this kind of a program or at least focusing on a Proactive system.
While many experts are maintaining that people should be checking their credit bureau file on a regular basis. Bousquet maintains this is still a “reactive view”. It has to start with the government implementing a new proactive password protected system.
I find it funny that there are now companies in place that can notify you, call you, or send a letter to you (the true owner) whenever someone even takes a peek at your credit bureau file. Yet the land registry system and the companies who computerise them can’t develop a password protected land title system.
Real simple…you can’t alter, add, or charge my home unless the password that I filed at the land registry office on the date I purchased matches.
I have just recently did a show on mortgage fraud in follow up to this article. You can see a recorded version at http://www.resourceschannel.com/programs-undercover.html
I guess this is a bad time to tell the public that this same type of scam is now being conducted on vehicles in Ontario.
People are having their vehicles seized because fraudsters register liens/loans on vehicles unknown to the true owner. I’ll be writing about this scam later.
I will also be discussing both of these types of frauds on my show “Undercover with Kevin Bousquet” .Kevin Bousquet is Certified Fraud Examiner and President of The Corpa Group Inc (www.corpa.com).
Corpa is a 15 year old private investigation agency involved in Fraud, Asset and corporate Investigation. Corpa continues to be retained by law firms, banks, insurance companies (and their legal counsel) as it relates to their specialized area of investigation.
Kevin BousquetThe Corpa Group Inc. www.corpa.com