■ MORTGAGE LAW What can solicitors do to reduce MORTGAGE FRAUD?

By MATTHEW BRANSGROVE

Matthew Bransgrove is the have worked for finance brokers, proper- was. If that date was when your borrower principal of Bransgroves ty developers, solicitors, licensed con- turned seven, then you are dealing with Mortgage Solicitors. He has veyancers, real-estate agents and registra- John junior and not John senior. presented four papers on tion agents. A key element in spotting The words “This edition issued pur- mortgage law for the College fraud is to understand that fraudsters can suant to s.111 Real Property Act 1900” of Law, copies of which may emulate normal conveyancing behavior. A should wave a red flag. It means the Reg- be purchased from the College. practitioner should not draw comfort from istrar General was satisfied the previous the apparent normality of a transaction. A edition lost, mislaid or destroyed. The real chat on the telephone with a paralegal owner may have the old edition under New editions of titles, who uses all the correct terminology and their bed while the replacement applica- knows all the correct procedures is no tion was made by the fraudster. several caveats on the guarantee a transaction is bona fide. Several caveats, especially ones which Another area, where fraud is not only go to the interest of one of two or title, variations in names expected, but is frequent, is within fami- more registered proprietors, are an indi- lies. A solicitor acting for a borrower cation something may be afoot. This is or identities, a desire for should not let their guard down just because caveats often indicate last-resort an ‘urgent’ settlement: because they have identified one of the borrowing. People in desperate straits mortgagors satisfactorily. For example, often borrow without their co-proprietor’s these should all ring drug addicts are often more than happy to permission and then forge their co-propri- steal from members of their family, feel- etor’s signature to increase those borrow- alarm bells, alerting you ing less apprehension in doing so than ings. from a stranger. Family members also Solicitor searches – verify whom to the possibility of have inside knowledge of where the cer- you are dealing with tificate of title or birth certificates are You can trust other solicitors, but the fraudulent dealing. kept, or when their relatives are overseas, question is, are you dealing with another and, importantly, often have the ability to solicitor? One problem is that many prac- intercept mail. tices create their letterhead using word LTHOUGH THERE HAS BEEN A great processors and these are easily forged. deal of press about identity Your most powerful tools Also, the name on the letterhead may look theft, where the victim is totally in detecting fraud familiar, but is it the real McCoy? The A unrelated to the fraudster, the The three most powerful tools in detect- matter may be put to rest by comparing bulk of instances of mortgage fraud ing fraud are: the contact details on the letterhead with involve a friend or relative with conve- ❑ title searches those on the Law Society’s ‘Find a lawyer’ nient access to the certificate of title ❑ solicitor searches online database (www.lawsociety.com. and/or the property. There are many ❑ driver’s licences and passports. au/Search).1 actions which lenders can (and are best Study title searches Driver’s licences and passports placed to) take to prevent fraud, but there A title search can tell you many things. If you are acting for a borrower, insist is also much that can be done by solicitors An unencumbered title is particularly on sighting their original driver’s licence for the lender and the borrower. inviting to fraudsters as they only need to or passport. They are hard to forge and dupe the incoming mortgagee – not the both have a photo. Credit cards or Medi- The fraudsters outgoing mortgagee as well. An unen- care cards are of limited use. A fraudster Fraudsters need at least some knowl- cumbered property is rare, because the may have access to the registered propri- edge of conveyancing practice to attempt bulk of mortgages are refinances or pur- etors wallet as well as their certificate of a fraud. The more knowledge they have, chases, so it prompts a closer look. The title. Although there are stories of perfect- the more sophisticated the fraud will be. edition date on the search will tell you ly forged licences and passports, your Likely contenders include persons who when the last transaction on the property fraudster probably does not have access ILLUSTRATION: SIMON BOSCH

52 LAW SOCIETY JOURNAL November 2004

■ MORTGAGE FRAUD ment because they are worried your cor- bered, the settlement took place at the respondence will be received by the real city firm’s office. Had it been encum- to them. More likely they will try to fob registered proprietor. Increase the bered, the city firm’s registration agents you off with a relative’s passport or driv- chances of this by sending letters to the would have spotted the difference in the er’s licence. In this regard beware of security address by express post. edition number. names which are not quite identical to the title search. For example, “George Fred- Case study of a mortgagee solicitor erick Jones” on the driver’s licence and who broke all the rules “Frederick Jones” on the title search. In The fraudster was a clerk at a suburban this case you should search the original law firm acting for the registered propri- transfer and compare it to the dates and etor. The registered proprietor bought the signature on the driver’s licence. land unencumbered as an investment Watch out for elderly clients who claim property. The fraudster intercepted the they have neither a passport nor a driver’s certificate of title when it came back from licence. Just because someone is elderly the LPI. The fraudster approached a short- does not mean they are above imperson- term finance lender. The lender’s valuer ating another person for money. The inspected the vacant property after the usual scenario is the real registered pro- fraudster gave access using a copy of the prietor is in a retirement home and their keys collected on settlement. A large city child, niece, nephew or grandchild enlists firm acted for the lender. The fraudster the assistance of an older friend as an used phony numbers and a fake letterhead imposter. To satisfy yourself, you may to purport to be a solicitor acting for the need to be creative – on occasion I have borrower. The lender’s solicitor did not: asked to see wedding photos (where one ❑ verify the identity and contact details of Case study of a mortgagor solicitor spouse was able to produce photo identifi- the solicitor by using the Law Society’s who witnessed only one signature cation but the other was not). online database; The loan was a ‘low-doc’ one, not cov- Beware of urgency ❑ use extra care when the title search ered by the consumer credit code. These Most frauds are carried out in a rush, to revealed the land was unencumbered; loans are particularly dangerous because increase the chances of success. If a set- ❑ use extra care when the title search the lender has not performed due dili- tlement is urgent, ask why it is urgent. revealed the latest certificate of title was gence in verifying the borrower has a job, Then follow up and verify what you have issued in accordance with s.111 of the clear credit, and so forth. Lenders usually been told. If there is a notice to complete Real Property Act; or insist on independent legal advice. This on another property, ask to see the notice. ❑ check the edition number of the certifi- puts the onus of positively identifying a Call the solicitor who issued it. The fraud- cate of title proffered at settlement. borrower onto the borrower’s solicitor. ster might be pushing for a quick settle- Because the security was unencum- The security was owned by a drug-addict-

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54 LAW SOCIETY JOURNAL November 2004 ed fraudster in his 30s (in the proportion The fraudster forged his father’s sig- of one per cent) and his father in his 80s nature and returned the documents. (in the proportion of 99 per cent). Opposite each of the forged signatures On the day of the appointment, only the was the genuine signature of the solicitor fraudster showed up. He said he would purportedly witnessing both the genuine take the papers to his father to sign and forged signatures. A paralegal sent because his father was too sick to travel. the documents to the lender and the loan The solicitor poured cold water on that. settled.

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REP OCT P.10 The fraudster then said, “Sign me up so I The future can go back to work and I will get my There are worrying trends overseas father to come in later”. The solicitor where identity theft is being used to trans- “GRADUATE agreed to this and witnessed the fraud- fer properties using forged discharges ster’s signature. He then asked a parale- and then remortgage them for higher CERTIFICATE” gal to put the security documents back on amounts, all without the real owner being file until the father came in. Two weeks any the wiser. For an insight into this passed and, while the solicitor was on practice, see www.lawpro.ca/LawPRO/ leave, the fraudster came back and asked LawPROmagazine3_2_Jun2004.pdf. ❑ for the mortgage documents. He said he would take them to his father’s solicitor ENDNOTE for witnessing as his father was too ill to 1. In some circumstances Law Society member come into the city. The paralegal consult- details are not published on the website. Contact ed a junior solicitor who gave authority for the Law Society’s Registry (registry@ lawsocnsw.asn.au) if you are unable to find the this course of action. solicitor for whom you are searching. ❑

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November 2004 LAW SOCIETY JOURNAL 55