[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.