Mortgage Fraud: Who Has Priority In A Dispute?

A recent Ontario Divisional Court decision, CIBC Mortgages Inc. v Computershare Trust Company of Canada, 2016 ONSC 7094 (CanLII)¹ ("Computershare"), confirms that a mortgage lender may lose priority if their mortgage is fraudulently discharged by the mortgagor. As a result, mortgage lenders may wish to implement a system to monitor whether their mortgages remain registered on title to a mortgaged property.

In the facts resulting in the Computershare decision, the homeowners had provided a purchase money mortgage in the amount of $280,801 to Computershare when they purchased the property in December, 2006. In August, 2009, the homeowners caused an unauthorized party to register a fraudulent discharge of the Computershare mortgage. However, Computershare was not aware of this because the homeowners continued to make mortgage payments to Computershare as usual until January, 2013.