Derrick Penner
Sun
CREDIT: Steve Bosch, Vancouver Sun Gordon Altman, a private mortgage lender who was victimized by fraud, is a believer in title insurance.
Independent mortgage lender Gordon Altman thought he was simply closing another deal last year when he gave an elderly White Rock man a $250,000 mortgage against a $500,000 house he said he planned to sell.
The man and his identification had already been verified by a lawyer who provided legal advice, and by a mortgage broker known to Altman.
It wasn’t until Altman checked with the White Rock realtor who was handling the listing that he discovered the man didn’t own the house and had fooled them all in a brazen scam known as title fraud, a crime that is becoming more common in B.C.’s hot real estate market.
“Lo and behold, the real estate agent said, ‘Who the hell are you,’ ” Altman recalls.
When Altman told the realtor he held a mortgage against the property, she said that would have been impossible.
“She said ‘there is no mortgage, and couldn’t be because the owner is dead,” Altman said.
The realtor represented the heirs of the owner, who lived out the final years of his life in a Winnipeg nursing home.
Susan Leslie, vice-president of claims for the insurance firm First Canadian Title, said title fraud has become the biggest source of claims to her company, accounting for 36 per cent of the money paid out in 2004, compared to only six per cent in 2000.
Leslie added that B.C. has become her company’s second biggest source of claims as fraud artists are drawn to the province’s high-priced real estate.
“As property values increase, the crime becomes more lucrative,” she explained. “If properties are worth an average of $500,00, you can get a lot more by mortgaging a house in Vancouver than in Regina, where a house is only worth $100,000.”
Leslie said there is no central repository for reporting such crimes, but she estimates that it costs victims hundreds of millions of dollars annually.
Title fraud is, at its core, identity theft, Leslie said.
A criminal assumes the identity of a homeowner, preferably one who owns a property free and clear because there is then less paperwork involved in obtaining a mortgage. He then uses false identification to either obtain a mortgage, or to forge the transfer of a property’s title to another person, again often using a stolen identity.
The person to whom the title is transferred then fraudulently obtains a mortgage against the property and makes off with the proceeds from the loan.
Leslie said the real property owner often does not find out he or she has been victimized until the mortgage lender comes looking for repayment of the loan, which is in a name the owner has never heard of.
She added title fraud is made easier by the proliferation of mortgage brokers who deal online, where “the race in the mortgage industry is for fast approvals,” and the identification of applicants does not get checked until they sign documents.
In B.C., authorities are required to witness the signing of property title transfer documents, but Leslie said many scam artists have no qualms about forging those as well.
She noted that provinces maintain funds to protect homeowners against title fraud, but claim periods can be lengthy and don’t always cover a victim’s entire losses.
Altman said he was lucky because he had taken out title insurance on the mortgage, which protected him from the fraud. Besides being an independent lender, he is also a real estate lawyer and is involved in the insurance business.
Altman added that B.C. has a special fund to compensate homeowners bilked by fraudsters. However, the fund does not protect mortgage lenders.
He said his own experience makes him more of a believer in title insurance, which does protect lenders.
In his case, police were able to track down a suspect, a 62-year-old who faced charges for another similar crime.
Investigators also discovered that the $250,000 from the mortgage had been converted to gold coins, but the suspect was killed in a car crash before he could be charged.
Altman said the coins were never found.
© The Vancouver Sun 2005
