Saving innocent parties from a bogus mortgage

He lambasted TD Bank for failing to exercise due diligence when it granted a mortgage to crooks posing as the condo's legitimate owners. He said the real owners, being absolutely blameless, should not have to pay off a mortgage they had no part in acquiring. He said that in an age when identity theft is increasingly common, "a homeowner's rights ought to be at least equal to the rights of commercial lenders."

The Globe and Mail
November 3, 2006

Saving innocent parties from a bogus mortgage
Editorial

Score one for common sense. Reading Tuesday's judgment by Mr. Justice Randall Echlin of the Ontario Superior Court is like feeling a cool breeze of reason brush against the face. His ruling on mortgage fraud is in one sense complex, hinging on whether Ontario's Land Titles Act is governed by immediate or deferred "indefeasibility" — the point at which the registration of a fraudulently obtained mortgage becomes legally irreversible even though it was fraudulent. In another sense, the judgment is as clear as day. Judge Echlin ruled that two people who had their identities stolen, and whose condominium was saddled with an illegally obtained mortgage without their knowledge, should not have to suffer because of that fraud.

Seyed Aboulgasm Rabi and Shohreh Shafiei experienced the homeowner's ultimate nightmare. They bought their property in 2001 and paid off their mortgage on May 3, 2004. Unknown to them, two weeks later fraudsters posing as them arranged for the transfer of their home to another fraudster and, through a mortgage broker, arranged for a $247,860 mortgage with Toronto-Dominion Bank. Mr. Rabi and Ms. Shafiei learned in 2005, almost by accident, that they no longer owned their home. And when the fraud was uncovered (though the crooks had vanished), they were told that even though they could keep their home, they would have to pay off the huge mortgage because the Land Titles Act placed "indefeasibility" ahead of a basic recognition of right and wrong.

Judge Echlin was having none of it. He lambasted TD Bank for failing to exercise due diligence when it granted a mortgage to crooks posing as the condo's legitimate owners. He said the real owners, being absolutely blameless, should not have to pay off a mortgage they had no part in acquiring. He said that in an age when identity theft is increasingly common, "a homeowner's rights ought to be at least equal to the rights of commercial lenders." And, since other courts have interpreted the relevant sections of the Land Titles Act differently — a higher court may have to pronounce on those disagreements — he appealed to the Ontario legislature to ensure that victims of such identity theft have recourse to government help without "years of proceedings and tens of thousands of dollars in legal expense, not to mention heartbreak and aggravation."

The coup de grĂ¢ce: "Finally, thought ought to be given to ensuring that all past, present and future victims of fraud under the Land Titles Act are provided with the protection and the assurance they expect from a system run by the government and held out to the public to be a system which can be relied upon."

Justice, What a concept.


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