The danger of title and foreclosure fraud as Canadians prepare for return to normalcy

When Canada first went into lockdown last year, we braced for the worst. As much of the economy shut down, many Canadians suddenly found themselves jobless and in a precarious financial state. Experts warned of the dire effects this would have on households, and their ability to pay off their debt and mortgages. Without steady income to keep up payments, people were likely to face insolvency and foreclosures given what we knew at the time.

Surprisingly, insolvency rates in 2020 “hit a 20-year low last year as government financial support offset the shock and economic uncertainty caused by COVID-19”, according to CTV News. Thanks to quick government action on deferred mortgage payments, interest-free loans, and measures such as CERB many Canadians were able to stave off financial crises despite the effects of the pandemic. The impending debt crisis never materialized.

That was last year, however. As efforts to combat the coronavirus have hit their stride, the country is (very cautiously) looking towards a future return to business as normal, perhaps as early as the end of 2021. Accordingly, government assistance measures and programs implemented during the pandemic will near their end. When Canadians can no longer rely on these measures to bolster their finances, it’s very possible that the insolvencies and foreclosures predicted for 2020 may still occur. Without continued assistance or debt forgiveness, many businesses and individuals may find themselves particularly vulnerable and desperate once the deferred payments and taxes are due.

Fraud statistics during the COVID-19 pandemic

Worryingly, there has been a notable increase in scams and fraud across the country since the start of the pandemic:

• According to the Canadian Anti-Fraud Centre there were 40,612 victims of fraud in Canada, with $106.4 million lost.
• Almost 3 out of 4 Canadians were targeted in scams or attacks, based on research conducted by Chartered Professional Accountants of Canada
• Extortion, Identity, and Personal Information fraud were the top three types of fraud reported in 2020

These are troubling statistics in light of the potential uptick in financially vulnerable Canadians we may see in the near future. If fraudulent activity increased unabated even though insolvency was an at all time low, it’s not difficult to imagine the damage they could do to people who once again find themselves in dire straits because of the pandemic.

Understanding title and foreclosure fraud

From a real estate perspective, title and foreclosure fraud are of particular concern. Title fraud, closely related to identity theft, occurs when the title to a home is stolen from its rightful owners and used by the thief to sell the home or apply for a mortgage against it. Given that identity and personal information fraud were among the most common types of fraud Canadians experienced in 2020, people may also experience an increase in title fraud attempts.

Foreclosure fraud is a little more complex than title fraud, but just as harmful. This kind of fraud happens when homeowners who are unable to make mortgage payments are tricked by fraudsters into transferring their titles in exchange for a loan. Usually, these loans have unrealistically attractive terms in order to entice desperate people. Unfortunately, the perpetrators commonly end up withholding payments once the title is signed over, and can then resell or remortgage the property with impunity. As we get closer to the end of mortgage deferral or grace periods, it’s conceivable that businesses and individuals who are still in financial difficulty may fall prey to these too-good-to-be-true scams.

How to protect yourself from real estate fraud

There are measures and safeguards which Canadians can implement to protect themselves such as always checking with a lawyer before giving anyone access to assets, or getting title insurance. While it can seem difficult, it’s best to speak with lenders to work out alternative options rather than turn to less than reputable means in order to find a way out financial trouble. Ultimately, the reward (if there’s a reward at all) is rarely worth the risk. The knowledge that fraudsters and malicious individuals are casting a wide net to target people more vigorously than before is quite concerning and should encourage people to be on guard with their personal details.

We won’t know for certain whether the debt crisis predicted for 2020 will finally rear its head towards the end of the pandemic for quite a while. There could be new initiatives and measures introduced to ease the return of the country back to normalcy, which would go a considerable way towards shielding vulnerable Canadians from the predations of fraudsters. In the meantime, the best we can all do is to maintain vigilance and be aware of our options should we find ourselves in a challenging position.