Rising real estate fraud makes title insurance essential
- Source: The Vancouver Sun on Wednesday, June 25, 2008
It's hard to imagine someone stealing your home. How would the thief load it into
the getaway van? It's easier than you might think -- so easy, in fact, that the
number of cases is climbing.
It happened recently to Norman Gettel. As Vancouver Sun reporter Gillian Shaw
explained last week, Gettel learned he no longer owned his Richmond bungalow
when his tax bill failed to show up as usual.
A call to the B.C. Assessment Authority confirmed that he was no longer the
registered owner and, to make matters worse, the land titles office advised that
the new owner had put a $400,000 mortgage on his paid-off home, assessed last
July at more than $600,000.
The mortgage is in default and CIBC Mortgages Inc. has demanded payment in
full -- $403,034.95 plus interest of $53.18 a day and legal cost of $375 -- or it
will "enforce its security" on the property.
Gettel, who is in his 70s and suffers from lung disease, has paid his lawyer
$10,000 and the case is not yet in court. If and when it gets there, a happy
outcome is not guaranteed. A B.C. Supreme Court decision in an unrelated case
restored fraudulently transferred title to the true owner but it allowed the
fraudulently obtained mortgages to stand.
When we raised the alarm about real estate fraud in an editorial about this time
last year, we were inundated with calls from lawyers and realtors extolling the
virtues of B.C.'s Torrens System of Land Registration, its indefensibility of title,
and comprehensive registry, which purportedly protects homeowners from exactly
the situation Gettel finds himself.
There's nothing inherently wrong with the system, which processes 14 million
applications a year and keeps track of owners and lenders efficiently enough. But
it cannot detect fraud, a deficiency exacerbated by electronic filing.
It's instructive to note that the Land Title Survey Authority has paid out through
the Land Title Assurance Fund just $389,000 in the past 18 years to settle two
claims arising from fraud. The Financial Institutions Commission of B.C. requires
one of the leading title insurance underwriters to reserve $4 million for title
insurance policies written in the province. Clearly, title insurance protects
homeowners; just as clearly, the assurance fund does not.
The one-time premium for title insurance up to a principal of $500,000 with one
mortgage is $229, with increments of $1 per $1,000 above that amount,
according to a quote one insurance company calculated for us. For this
insignificant sum, Gettel could not only have protected his title without the
expense of a lawyer, but the outstanding mortgage would have become the
insurance company's problem, rather than his. The insurer either settles with the
lender or takes over litigation at no cost or inconvenience to the insured.
Title insurance may even prevent crime. From 2004 to 2007, one title insurance
company refused more than $8 million in transactions because it suspected
fraud. So far this year, it has turned down $3.5 million worth of deals.
Many lawyers in B.C. actively discourage homebuyers from buying title insurance,
but wouldn't think of waiving fire, theft and liability insurance. Their motives are
difficult to understand.
Title and mortgage fraud are easy crimes to commit. Title insurance is
inexpensive piece of mind. It should be part of every homebuyer's protection
package.
