"We have proactive tools that can be used to chase away potential fraudsters at the initial stages of the mortgage application process."
This article was produced in partnership with Key Law Professional Corporation.
Desmond Devoy, of Canadian Mortgage Professional, spoke with Melonie Carroll and Dave Deonarain, lawyers at Key Law in Toronto, along with Jay Krushell, chief legal officer and co-founder of Treefort, Karen Decker, senior vice president and chief underwriting counsel, Stewart Title Guaranty Company, and Connie Bird, assistant vice president, sales and business development, Chicago Title Insurance Company Canada, to discuss mortgage fraud and how using Know Your Client (KYC) tools like Treefort Technologies can help mortgage brokers and others involved in the transaction save time and money by catching fraud early on in the process.
Fraudsters have a new nemesis in the shape of an identity verification program, Treefort, which can be used by mortgage brokers, lenders and real estate lawyers alike.
The need to protect against fraudsters is still a reality as title fraud and mortgage fraud remains at pre-pandemic levels.
Melonie Carroll, a lawyer with Key Law Professional Corporation in Richmond Hill and Mississauga, Ontario, cited a report from Equifax Canada, which found that mortgage fraud dropped 13.3% in the second quarter of 2022, compared to the same quarter in 2021. While the fraud rate fell, Equifax also found that it remained 29.5% higher in 2022 than where it was before the pandemic began.
With this in mind, what can mortgage brokers and their partners do to deal with the problem of fraudsters and even “straw borrowers”?
“We have proactive tools that can be used to chase away potential fraudsters at the initial stages of the mortgage application process,” said Dave Deonarain, solicitor with Key Law. “My firm has recently set up an account with Treefort Technologies (www.treeforttech.com) so I can help mortgage agents by conducting the Treefort three stage IDV (identity verification) before the file comes to the lawyer’s office and before title insurance is ordered.”
Deonarain knows this turf well – he used to be an investigator with the Financial Services Regulatory Authority of Ontario.
At Key Law, “he lends us that critical eye, when we’re looking at our files,” said Carroll.
By using the Treefort system brokers can save time.
“They can avoid wasting weeks or months, working with an unknown fraudster only to discover, at the 11th hour, that title insurance identified a title fraud,” Deonarain said. He encouraged brokers to “invest in doing IDVs at the initial stages of the mortgage application.”
By using Treefort, “I can help mortgage clients conduct the three-stage IDV before the file comes to the lawyer’s office and before title insurance is ordered.”
Investing in technology to help law firms and their clients
Jay Krushell, chief legal officer and co-founder of Treefort Technologies commented that “lawyers and others in the real-estate eco-system have not always had access to the tools required to adequately fulfil their Know Your Client (KYC) obligations.”
He went on to add that “from the start, Treefort’s mandate has been to put world-class digital ID tools into the hands of lawyers and other regulated entities so they can dramatically improve the client experience and help mitigate the risk of identity fraud. We take great pride in knowing that firms like Key Law have adopted these tools, integrated them into their workflow and are benefiting from the results.”
Karen Decker, senior vice president and chief underwriting counsel at Stewart Title Guaranty Company, said: “There are situations where the borrower isn’t who they said they are and is impersonating the ‘true’ (and innocent) owner in order to place a mortgage on the property. In this case, the imposter steals the mortgage proceeds and the ‘true’ owner is left to deal with the forged mortgage on their property.
To prevent this type of imposter title fraud, it’s important to perform extra due diligence to verify the borrower. KYC/ID verification tools such as the one provided by Treefort Technologies can help detect and prevent imposter title fraud before it occurs.
Stewart Title is pleased to offer Treefort IDV directly to law firms so they can implement KYC and verification measures to help detect these types of transactions before they close. Preventing title fraud benefits everyone in the industry, preserving the reputation of the professionals involved and maintaining the integrity of the real estate system as a whole.”
Connie Bird, assistant vice president, sales and business development, Chicago Title Insurance Company Canada (owned by Fidelity National Financial Inc.), said that her company uses Treefort “on a daily basis.”
Chicago Title Insurance Canada started using the IDV program about two years ago, and since then “it’s definitely paid off,” Bird said, having seen many files being declined as a result.
“With the increase in equity in homes, not only are fraudsters putting mortgages on innocent homeowners’ homes but also now engaging in vendor fraud, where fraudsters impersonate the homeowners and selling the house out from under them,” Bird said.
And they don’t do it in small doses either.
According to Bird, the police service pulled over two suspects in a mortgage fraud case and found that they had been impersonating homeowners.
“They each had six identities, six driver’s licenses, six passports,” and all with the same picture. This is something Treefort would have caught.
During the pandemic, more documents, including scans, had to be shared electronically.
“How do we know that the scan is actually legitimate?” said Deonarain.
That’s why he is utilizing the Treefort program.
“It’s very efficient for us to use Treefort to complete our files in terms of identifying and verifying the client, so it’s a best practice,” he said. “If mortgage brokers, law firms, title insurance companies, are using a tool like Treefort, then it’s going to make it really hard for fraudsters to obtain mortgages that they shouldn’t be getting. So, it’s good for all of us.”
For more on Key Law Professional Corporation, visit: www.keylawcan.com.
Key Law Professional Corporation offers a wide range of solicitor-based services related to real estate purchases, sales or mortgage financing. They are based in Richmond Hill and Mississauga, Ontario.