The B.C. Court of Appeal wants the province to come up with stricter laws forcing lenders to do a better job of vetting mortgage applicants to ensure they aren't securing property that's been stolen.

In a ruling issued Monday, the Court of Appeal concluded that it shouldn't be good enough for anyone lending money for a mortgage to rely only on a title search to show who is the rightful owner of a property.

But under the B.C. Land Title Act as it is currently written, the court found that lenders have only to do a search.

A lower court judge concluded that if the property shows no liens and a lender gives out a mortgage based on that search, the lender has a valid mortgage and is entitled to be repaid.

In other words, even if the rightful property owners get their property back, they are still stuck paying for mortgages they didn't take out, according to the lower court ruling.

The Court of Appeal disagreed and instead concluded that the lender — not the rightful property owner — is the one out of luck in a fraudulent mortgage scheme.

However, the higher court also questioned whether this is good public policy.

"The legislature of B.C. would appear to have adopted the policy that the cost of frauds perpetrated against mortgagees and other charge-holders should be borne not by the public but by lenders and other charge-holders themselves.

"Whether this policy choice is a good one or not is not for us to decide. We must give effect to the language of the statute in its ordinary and grammatical meaning."

The Court of Appeal was examining two cases where people fraudulently had their property transferred to someone else without their knowledge.

Mortgages were obtained on the properties after the fraudster went to some people for a loan based on the equity in the property. The lenders advanced the money after doing a titles search and finding no liens on the properties.

But then the fraudster disappeared and the crime was discovered after the lenders began foreclosure proceedings. The victims of the frauds went to court to have the mortgages declared void, but the lower court ruled the lenders followed the rules and the owners were out of luck.

However, the Court of Appeal concluded lenders must ensure their mortgages are valid by taking steps to ensure that the registered owner obtained title to the property legally.