Identity theft and mortgage fraud are very common, but combined they lead to a new threat looming in today’s market: house theft. From information on the FBI website, house theft is becoming more common. Unlike identity theft, the fraudster does not need your social security number, or any other private information. All they need to do is record a fraudulent deed. This is much easier than imagined. In the past year, at TitleSearch.com we have seen an increasing number of documents recorded without the knowledge of the property owner.
The problem comes from the process of changing property ownership. Real estate title is transferred from one party to another by the use of a deed. The document is not a regulated form, and not a legal document until it is recorded at the records offices. In most counties, a blank warranty deed can be purchased at any office supply store, or downloaded from the internet.
The form is filled out with the property information, and signed by the owner transferring it to someone else. The signed deed is presented to the county recorders office where it then becomes a legal document, and is evidence of new ownership. Once the deed is filed, it is easy for the new “owner” to do anything with the property; rent it, sell it, or mortgage it. In some cases the criminal will get a mortgage on the property, and pocket the proceeds. In other cases they will offer the property for sale and collect the sale amount, or at least the deposits. A vacant home can be used to collect rent payments.
Luxury vacation homes are often targets, as reported on last year in the Robb Report. Even chruches are not exempt from being targets, as this article from New York reports.
The problem is that the government system is not in a position to verify the signature on every deed. If an executed deed is presented to the clerk, and it appears to be in the right format, and have the correct information, it is recorded as being legal. In some cases, a vigilant clerk might notice some irregularity about a person or document, but this is well beyond their responsibility in most cases. The individual clerk cannot be expected to know every signature for every homeowner. Also, in most states there is no requirement for any notice to be sent to a property owner upon a transfer of deed, or placement of a lien or mortgage on their property.
With budget cuts and an explosion of foreclosure activity, there are no extra peronel to search old documents to match signatures. And even then, you would need a qualified signature expert.
How does a thief get a mortgage? They usually target homes which are free and clear to begin with. By only asking the lender for a small amount, such as 10% – 20% of the overall value, they can often get away with little or no documentation. In some cases, they can avoid providing employment information, or even a social security number. We ran a title search for a client in Maricopa County AZ, where a mortgage was placed on a mans property by the prior owner. He had obtained the mortgage approval while still an owner, and waited until the sale went through. Once he got his sale proceeds, he took out a new mortgage on his old house, effectively getting paid twice for the property.
Many county records offices recommend checking your property title on a regular basis, to make sure the deed is still in your name, and that there are no mortgages or liens that you do not know about.
I also recommend that all buyers get “owners title insurance” This will cover the equity that the owner has. Regular title insurance or “lenders title insurance” only insures up to the mortgage amount.
And shop around. Our bank wants $135 per month on Title Insurance that only pays the banks portion (mortgage) and we are required to pay $65 for our portion (equity). Since when are people required to pay other peoples insurance premiums when they aren’t the payee? We also haven’t been told that we can find other insurance companies for insurance, making it look like we have to purchase it from them (but we know now – before signing)Also, considering that we (me and spouse) are going to die someday and the mortgage insurance is $60 for that, then why is mortgage insurance costing more for something that may never happen and for covering a lower amount, than one of us dying and paying out on a higher amount. AND since when does a forged document become a legal document?
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This actually seems like a good case for the eSign/eMortgage initiative. Verify the “signatures” in a national repository, then allow for instant verification of documents when executed or recorded.
This still pales in light of the massive bank fraud in conjunction with the FED and courts,for which hardly any bank CEOs have gone to jail. If that is ‘nipped in the bud’, it would preclude these small-timers from following suit. Remember: “Fish rots from the head!”
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