Newsletters - Stewart Title Guaranty Company

Title & Mortgage Fraud: Identify it. Prevent it.

Title and mortgage fraud continues to increase for both residential and commercial properties, with no sign of abating. It is important to understand that in the midst of the current economic downturn, fraudsters are likely to strengthen their attempts to defraud lenders and property owners.

Fraudsters are particularly targeting mortgage free properties. As such, when you are acting for a purchaser of a mortgage-free property, we ask that you take the necessary steps to confirm that the vendor truly has authority to deal with the property. Similarly, when acting for a lender for a property that is mortgage free, please confirm that the mortgagor truly has authority to deal with the property.

In addition to obtaining proper photo identification, additional steps can be taken to confirm the identity of the vendor or borrower and the legitimacy of the transaction. These steps include confirming that the sale proceeds are paid to the vendor or the mortgage proceeds are paid to the mortgagor.

Listed below are common scenarios that may signal fraud:

Property is mortgage free

Quick closing

Private sale

Involvement of a private lender

Large deposits paid directly to the vendor

Stated age of borrower is inconsistent with his or her appearance

Multiple spellings of borrower's name

Sale or mortgage proceeds being directed to parties not connected with transaction

Stated income seems inconsistent with borrower's age

Borrower's assets seem inconsistent with his or her income

Deposits paid through gifts

Only client contact number is a cell phone number

Loan arranged through a mortgage broker

Agreement of purchase and sale has no handwritten alterations

Client overly anxious for funds

Lawyer on other side of the transaction changes several times prior to closing

Lawyer has never acted for client previously or a power of attorney is used

Keeping this list in mind during each transaction will help to identify potential fraudulent activities. Taking the extra time to ensure you are not involving yourself with fraudulent transactions can be of benefit, as many negative repercussions surround these troubled transactions including:

loss of reputation with lenders;

lost time from responding to inquiries;

loss of ability to electronically register documents; and

potential disciplinary action by the law society.

We appreciate your cooperation as we work together to minimize fraudulent transactions. Should you require more information or have any questions, please contact us at 1-888-667-5151.

ID Verification Requirements

Please be aware of the amendments made by the Law Society of Upper Canada to By-Law 7.1 (sections 20 through 27) on client identification and verification, effective December 31st, 2008. These changes reflect the growing concern of fraud in the legal community.

At Stewart, we have always been at the forefront of assisting lawyers and providing guidance with respect to the due diligence required to mitigate fraud. This not only protects individuals, but also lawyers from becoming the victim of an unscrupulous fraudster.

Additional Fraud Mitigation Initiatives

Stewart Title has recently introduced additional fraud mitigation questions as a result of the Law Society of Upper Canada's new rules aimed at preventing inadvertent money laundering and terrorist financing through lawyers' trust accounts. These new rules, introduced on December 31, 2008, are based on a model developed by the Federation of Law Societies of Canada. Rules similar to these have been, or will soon be enacted, in all other provinces and territories across Canada.

Moving forward, the following transaction types will trigger further review by our underwriting department:

Transactions involving private mortgagees where there is currently no mortgage registered on title

Commercial vacant land refinance transactions (private and institutional) where there is currently no mortgage registered on title

These changes are reflective of the increase in fraud claims involving the transaction types listed above.

Please contact the Verification Department at Stewart Title for further guidance when acting on residential refinance transactions where the lender is not institutional, and there is no mortgage registered on title.

Occupancy Certificates

The Tarion Warranty Corporation introduced a new set of rules in July 2008. Of specific note, a new rule regarding the purpose of occupancy issues was included and states that on or before the date of Closing, the builder is required to deliver to the purchaser:

Where a registered code agency has been appointed for the Building or part of the Building under the Building Code Act (Ontario), a final certificate with respect to the home that contains the prescribed information as required by s. 11(3) of the Building Code Act; or

Where a registered code agency has not been so appointed, either:

An Occupancy permit (as defined in the Addendum); or

A signed written confirmation by the builder that: (i) provisional or temporary Occupancy of the home has been authorized under Article 1.3.3.1 of Division C of the Building Code; or (ii) the conditions for residential Occupancy of the home as set out in s. 11 of the Building Code Act or Article 1.3.3.2 of Division C of the Building Code, as the case may be (the "Conditions of Occupancy") have been fulfilled.

Stewart Title expects all new home purchasers to receive satisfactory evidence of occupancy on or before closing in accordance with these new requirements.

Please contact the Stewart Title Underwriting Department prior to closing should the builder not comply with these requirements.

Technology Spotlight: LegalSTEPS®

Stewart Title is committed to continually developing applications designed to make it easy for legal professionals to order their clients' title insurance policies, while maintaining their position at the forefront of the real estate transaction.

The recently introduced LegalSTEPS® provides Ontario lawyers and their support staff with a web-based application that can be used to order title insurance and complete documents for a real estate transaction.Key components of LegalSTEPS® include document generation, shared up-to-date directories, sophisticated practice management tools and a seamless title insurance ordering process.

Further information on LegalSTEPS® can be found on our website or by downloading the brochure.

To book a demo, click the button below or contact your local Business Development Specialist.

Look for Stewart Title at these upcoming events:

March 26-28, 2009
Cours de perfectionnement du notariat
Centre des Congrès de Québec
Québec City, QC

May 20-23, 2009
The Institute of Law Clerks of Ontario (ILCO) 19th Annual Conference
Hilton Suites Toronto/Markham Conference Centre
Markham, ON

The knowledge and assistance of your local Stewart Title Business Development Specialist is available at just the click of a button.

Visit www.stewart.ca/contactrep to locate the Stewart Title Representative in your area. They will be happy to provide you with in-depth information regarding our variety of products designed for legal professionals.