Mortgage fraud....

[recycled sixtie]

Just a couple of questions for the lawyers. I am aware that the law is not always the same between the different States and Provinces but there must be a general principle involved with mortgage fraud.

I was talking to a neighbor recently and he experienced mortgage fraud about thirteen years ago. He said he took legal action years after and they told him it was too late(Stature of limitations?).

He said his wife and him were nearly wiped out by a woman who successfully applied for a mortgage on their property. They eventually found her in her workplace but was told it was too to take any action against her.

Now my question is this. Is the issuing company of the mortgage always on the hook because they did not do enough research on the new mortgage application?

Is there a time limit on suing the mortgage co. and the person who made the new mortgage application?

How do I know if somebody has successfully applied for a mortgage against our paid up property if the bank has not done its homework properly?

[stomachmonkey]

Title Insurance?

[ossiblue]

Given the few details in your OP, one can only guess why the situation went the way it did. Additionally, Canada may have different laws, as you mention.

From your description, however, here is an educated response.

It's not clear what you mean by "mortgage fraud." If the woman took out a mortgage on their property without their knowledge, this is likely what happened. She may have committed the fraud by forging papers, transferring the deed to her, then applied for a mortgage. The lender, doing a title search (due diligence) would not necessarily find the fraud and most likely see the title as "clear" and in her name.

It's not likely a mortgage lender will issue a mortgage without a title search and a title insurance policy issued to the lender. If this happened, then the title company possibly failed in their due diligence, but the lender will be made whole. Again, if the title was in the name of the person committing the fraud, then the title company would not likely find a problem. The og home owners--the victims of the fraud--would have to fight the fraud on their own unless they had a buyers title insurance policy that few people secure. It would cover their costs and fight for their title.

If the fraud happened, as above, the mortgage company is not liable because they are simply a lender and have no obligation to protect the buyer except to the degree that their investment (the property) is protected. Usually, the buyer is protected, to a degree, because the lender does the checking of the title for self-protection. The title search company may also not be liable as it may have done its job and was defrauded as well by forged papers. The only person subject to suit is the woman who took out the mortgage. Your friends likely met up against the statue of limitations in pursuit of the fraudster. In many cases, in the US, the statute begins from the time the crime is discovered by the victim, not the time the crime was committed. We don't know the law in Canada nor the reason why your neighbors were told it was "too late," but I'd bet it was the statute of limitation on fraud committed by the woman involved.

[1975porsche]

Years ago when this was going on in Toronto people putting mortgages on peoples houses unknowingly they really were pushing at the banks do for title insurance my way around it was to go to the bank the house was paid off put Al line of credit on as big as they let me .line of credits always there for me never used it but if you want to put another mortgage on the house it's already full up there's not enough room to put a mortgage just a thought didn't cost anything line of credit still sits there .

[Rinty]

Originally Posted by recycled sixtie

...Is the issuing company of the mortgage always on the hook because they did not do enough research on the new mortgage application?

Is there a time limit on suing the mortgage co. and the person who made the new mortgage application?

How do I know if somebody has successfully applied for a mortgage against our paid up property if the bank has not done its homework properly?

Recycled:

Alberta has the Torrens Land Registration system, where the provincial government guarantees that certificates of title and the registrations endorsed on them, are correct. This is called indefeasibility of title.

There are some exceptions to indefeasibility, and one of them is fraud. So if a homeowner discovered someone had forged his name on a mortgage, he could sue the lender for an order discharging the mortgage. The homeowner must sue within 2 years of when he knew, or ought to have known, about the mortgage, with an absolute time limit of 10 years (the drop dead period).

Mortgage lenders carry blanket insurance policies on their loans to protect against fraud, but most homeowners don't. It is possible to buy title insurance in Alberta at relatively low cost, but the forging of signatures on mortgages, in my experience, is very rare. I have seen only two cases in 44 years of practise.

Please note that I am not commenting specifically on your neighbour's case.

[svandamme]

I don't understand how this day and age, in a modern country, this kind of fraud is at all possible.

[flipper35]

Because people are too lazy to do a good job.

[JJ 911SC]

Originally Posted by svandamme

I don't understand how this day and age, in a modern country, this kind of fraud is at all possible.

Tip of the iceberg... Data breach at Equifax

[svandamme]

Originally Posted by flipper35

Because people are too lazy to do a good job.

they why don't we have the same thing here in Europe.
I don't buy the idea that y'all have more lazy people then we do.

So the problem must be the process and legislation.

Mortgages here, are notarized. The Notary's head is on the block if he f's up the due dilligence.

We don't have such fraud here. At all.
The idea of "title insurance" is beyond comprehension to me, simply because it does not happen.
The one that has the insurance, is the notary.

[JJ 911SC]

Originally Posted by svandamme

... Mortgages here, are notarized. The Notary's head is on the block if he f's up the due diligence...

In North America, only in Quebec are the mortgage notarized as the justice system is a juridical legal system (pertaining to the administration of justice) under which civil matters are regulated by French-heritage civil law.

When I move to Ontario I could not believe that I would have to trust a "lawyer" for my house closing.

[svandamme]

Then why doesn't the legislation improve over time?

[OffCamber00]

Originally Posted by JJ 911SC

Tip of the iceberg... Data breach at Equifax

Equifax issue was negligence on the part of the IT department. No fraud involved.

[john70t]

Originally Posted by svandamme

Then why doesn't the legislation improve over time?

^Bingo!
There it is. Our problem.

"And for all you listening...Let's hear that question again folks, just in case you didn't hear it the first time around."

Originally Posted by svandamme

Then why doesn't the legislation improve over time?

There it is.
Why hasn't our USA Congress enacted consumer protections and safeguards after all these years?
We have always been the shining example of semi-managed "democracy", to the upcoming 3rd world, but the US can't even handle the basic things.

[JJ 911SC]

Originally Posted by OffCamber00

Equifax issue was negligence on the part of the IT department. No fraud involved.

Yes but there will be a lot of fraud resulting from that breach.

[Rinty]

Originally Posted by svandamme

...Mortgages here, are notarized. The Notary's head is on the block if he f's up the due dilligence...

It's basically the same thing, here, Stijn. Notaries here are called lawyers (except in Quebec), and in Canada they do almost all the conveyancing and securitization. If a fraud occurs, and they were negligent in the performance of their duties, they would be responsible, and they are insured for that. There a few hundred notaries in B.C. who are not lawyers.

In my province, title insurance is not used for most transactions, as it is simply not needed.

In the U.S., many transactions are closed by escrow clerks, who work for escrow companies.

Whether it's a notary, a lawyer, or an escrow clerk, they are human and they can make mistakes. But forgeries are rare.

Also, there are lots of people who are not notaries, lawyers, or escrow clerks who know how to prepare and register a mortgage. Realtors, or mortgage brokers, for example.

In the only fraud case on which I have been consulted in 44 years, a local lawyer allowed a person to sign and swear an affidavit that he had seen a property owner sign a hypothecation deed, without confirming with the property owner that he had actually signed it. If the owner would have pursued a claim, the lawyer would have been found negligent, if it had gone to court.

[svandamme]

I'm not sure it is Rinty,
a Notary here, is technically a state appointed a civil servant
They organize the deed of the house sale, check if everything is in order and also register the mortages.. They typically get payed a percentage of the house sale and a percentage of the mortage to cover their costs.
Nobody else can do that here. Nobody can start a company and start registring mortages, it's a very much a close nit group of people who can do it.

And i'm not saying mistakes do not happen, but for the most part they don't.
To get a mortage here, you go to the bank, you apply for the whole shebang, then you and the bank representative have to physically go to the notary together, and he will have the deed of the house out, check everything, face to face, and everybody will sign his paperwork there and then.
There are so many checks and balances along the way that i don't see how anybody could ever get a mortage on somebody elses house here.

[MBAtarga]

So what is the result of this fraud? The non-owner gets a 2nd mortgage using the house as collateral and walks away with cash?

[recycled sixtie]

One of my previous tenants was a mortgage fraud officer which was her job full time.
Namely to detect fraudulent mortgage applications. So this kind of sheet must be happening a lot.

[Rinty]

Originally Posted by MBAtarga

So what is the result of this fraud? The non-owner gets a 2nd mortgage using the house as collateral and walks away with cash?

In Alberta, the property owner would apply to a court for an order discharging the mortgage from his title, and the lender would be out the money.

So this kind of sheet must happen a lot...recycled sixtie

It flares up from time to time. The classic technique is where realtors prepare double offers to pump up the value of a property, and have property appraisers who are prepared to issue jacked up appraisals. They get real people, called qualifiers, to sign the documents, including inflated mortgages, and they get paid a fee for doing so. Sometimes the bank officers are in on it.

From a practitioner's standpoint, they're not that hard to spot.

[svandamme]

Over here, as a buyer if you get a mortgage, you never even get your hands on the money.
The bank will come with you to the notary for the signing of the house. And the notary will pay out to the seller. You don't even get to touch the bank cheque, and even if you did, it's not in your name. You couldn't cash it.

The Seller on the other hand, if he has a mortage on the house he sells, he won't get the money either. the Notary will divvy up the money received, pay off the existing mortage first. and pay out only the difference...

You can't sell a house with a mortgage on it, and not pay off the mortage .. can't sell it off hand and run off with the cash. Impossible.

The only kind of fraude with house sales we know off, is people who make an agreement to buy a house, and who stupidly pay a cash advance when they sign the agreement.
Sensible people would again go to the notary, who they need anyway to get the title signed over.. And deposit that cash advance in escrow with the notary.. Who does that for free anyways.

Buyer and seller are both free to choose their own notary. At no extra cost you can have your notary co-chair with the seller's notary.. Second pair of eyes and they split the fees.