Court ruling frees Toronto couple from fraudulent mortgage

A Toronto court ruling that has freed a couple from a bogus mortgage is "unprecedented" and a "breakthrough," the victims' lawyer said Wednesday.

Superior Court Justice Randall Echlin ruled Tuesday that Seyed Rabi and his wife, Shohreh Shafiei, were the innocent victims of identity thieves who placed a $247,860 mortgage on the couple's property.

Toronto lawyer Morris Cooper, who represents the couple and several other victims of mortgage fraud in Ontario, told CBC News Online the decision puts a stop to the "revictimizing of the victim."

Cooper says mortgage fraud in this case aided by a lack of "due diligence" of the bank and the computerization of the real estate system is an easy crime to commit.

"It's a remarkably simple crime to pull.Why put on a mask and rob a bank when you could do this [mortgage fraud]," Cooper said.

'Innocent victim'

In Tuesday's decision, the judge said that if the Toronto-Dominion Bank had exercised "due diligence," it would have detected the scam that left the couple without their home.

"I cannot help observe that there ought to have been more care taken in advancing a sum in excess of one quarter of a million dollars," Echlin said in his decision.

Echlin invalidated the mortgage and said the bank was not an "innocent victim" of the crime.

Although the bank admitted the couple were victims of fraud, lawyers argued that Rabi and Shafiei were still legally responsible for the mortgage.

In 2001, the couple bought the condo and lived there with their children.In 2004, when the property had been paid in full, identity thieves used false documents to take out a mortgage on the unit.

In the ruling, the judge called the Ontario's Land Titles Assurance Fund, which was set up to compensate victims of real property fraud, "a discretionary system of last resort."

Changes coming

Paul DeZara, director of communications for Gerry Phillips, Ontario's minister of government services, said making changes to the fund is a priority so that victims could easily access and navigate the system.

He told CBC News Online that banks, the real estate industry, the provincial and federal governments and consumers all play a part inreducing the opportunity for this type of fraud.

Phillipshas introduced abill aimed at preventing real estate fraud; itis now undergoing second reading.

Joan Huzar, past president of the Consumers Council of Canada, said the ruling "puts banks on notice." She said mortgage fraud is a problem across the country in every jurisdiction.

Last year, Alberta RCMP laid dozens of charges against four men in a $3.9-million mortgage fraud scheme that the Mounties have said is the largest they've ever seen. They said mortgage fraud is a growing problem in the province because of its hot real estate market.