Title & Closing Fraud have become larger problems as modern technology has made it ever easier for fraudsters, armed with the necessary documentation and knowledge of the industry, to perpetuate real estate frauds of all types.
How do Title & Closing Fraud happen?
Let's start with the basics:
The title is the document that proves your legal ownership of your property by being placed in your name. You obtained the title when the seller signed transfer documents, a deed transferring ownership of the property to you. When that deed is recorded, the public records show you are the owner and anyone searching those public records can
find out that information easily.
Armed with that, a fraudster can steal your identity as the legitimate owner of the property. An example might be that the criminal then “sells” the property to an unsuspecting purchaser who has managed to get mortgage financing. The new “buyer” moves into the property. You, as the real owner, have to evict the new “buyer”, go to court to defend your title and
may find yourself responsible for any new mortgages the crook took out on the title under fraudulent circumstances.
There are many types of fraud. Another scenario is when a spouse mortgages a property for their own benefit with an accomplice impersonating their spouse. Such a con is common enough to even bear the title “spousal fraud.”
Another scenario is when a lawyer obtains an equity loan on the property and absconds with the funds. The title of the property may have even been transferred into the name of a new purchaser, but the property remains subject to the prior mortgage.
Credit reports can be run online and thieves love to target people with good credit. If your mortgage is paid off, all the better. That means the fraudster can apply for an even larger mortgage in your name. Notaries can be bribed; signatures forged; and vital records can go missing. Surveys can be faked and home inspection scams became a cottage industry in the early 2000’s.
The role of title companies has become even more critical in these perilous times. Both homeowners and lenders can protect themselves by obtaining title insurance from a reputable title company. Title insurance policies protect innocent homeowners and lenders who might otherwise face financial losses from such fraud.
A one-time payment purchases title insurance coverage that covers the entire period the homeowner owns the property and the lender holds the mortgage and, when the claim is covered, the title company will pay the legal fees, costs and expenses related to having the title restored to the insured that they lost due to fraud.
For more information on real estate fraud, click here.