Headline: Home Title Fraud
Date:
Body: Ok, a bit of a change of pace here this week. Ever purchased a home? One requirement is to ensure that “clean title” can indeed be conveyed by the seller. In most cases, this goes without a hitch, but what if it doesn’t? Is there a condition when the title being passed on is rather murky? This is happening with more and more frequency. In fact the frequency is so high, there are services being offered to help you deal with this potential Home Title Fraud.
Is this REALLY a big deal?
In 2017, the FBI reported over 9,600 real estate and rental fraud victims with losses totaling over $56 million. In just two years, this number grew to almost 12,000 victims with losses totaling over $220 million. Though these are large numbers, they are small compared to the entire housing stock. That said, when this kind of fraud happens, the real owner’’s life is turned upside down.
What happens in these cases?
Most frequently, the fraudsters decide upon a home that appears to be a second home for the mark, most frequently in an urban environment. The fraudsters then gather as much information about you as possible. They gather facts, identification numbers and all kinds of personal data. They use this data to impersonate you, and transfer your property to themselves or a third party. They then use this transferred property as collateral on a loan they take out or re-sell the property. When these transactions go bad (and they WILL) the fraudsters walk away and you could be easily forced into foreclosure.
How big is the problem, really?
The FBI reported that in 2017 there were 9,654 cases of real estate fraud, resulting in more than $56 million in losses. Home title fraud has grown considerably since then, with 11,578 cases of real estate fraud reported in 2021, totaling more than $350 million. This is an increase of 20% in the number of cases and a 525% increase in the value of losses. These numbers however include all real estate fraud, and home title fraud makes up only a small portion of that.
This scam began being seen in 2008, and is most often seen in urban areas of the country. But, getting a grip on the size of the problem is difficult as the FBI doesn’t break it out into its own category. But, you can afford to take a breath. If somebody fraudulently tries to transfer your title without your agreement, it can easily be “unwound.” Further, it is necessary that a Notary Public sign these forms, and they shouldn’t until they have concrete visual evidence that you are agreeing to the exchange, and that you are who you present yourself to be.
When we drill down it is clear that the instances of home title fraud are pretty low and usually occur in very specific situations:
- When there is not a mortgage on the property. If there is an incumbent lender when a scammer tries to retitle the property, the lender is on the deed and will need to approve any transfer of title and the existing loan will have to be paid off. If you have a loan on your property, the chance of this happening is near zero.
- When properties are vacant and not monitored it is easier to forge a deed and transfer the property illegally.
- Elderly property owners are more vulnerable as monitoring this may be too difficult for them.
Said another way, in order to undertake this fraud involves a lot of different verifications and therefore, several well-timed frauds. Most fraudsters will find this onerous, so many of them look for easier frauds to execute. But, when it does work for them, the real owner is in for one heck of a surprise, and NOT a good one.
I have seen services that will, for a fee, work to ensure that this doesn’t happen to you.
I have also seen these advertisements. My advice would be to take a cost-averse DIY approach and check your property record every 6 months or so. What you are looking for are deeds that were not prepared by you or your attorney, and you’re also looking for liens that have been placed against your property that you know nothing about. Many counties automatically notify you about changes concerning your property. Other than this, be sure that the municipality has your most recent mailing address. Further, you can get an idea that something untoward is happening when your revenue or expenses change dramatically without apparent cause.
If this were to happen, and the perpetrator was able to take out a loan and receive cash using the property as collateral, the rightful owner would be under no obligation to repay the loan. The deed is fraudulent, the scammer never actually was the homeowner, and the lender has no legal claim on your property to satisfy the fraudulent borrowing. Interestingly, lender’s insurance, which is usually a part of closing costs when a loan is taken out, pays the lender in cases like these making it easier to reconcile the problem, although there may be some legal costs associated with the cleanup. The important thing to remember here, is that these services offer you monitoring, only. Said another way, there is no preventative mechanism here, only a detection control once malfeasance has already occurred.
So, what should I do to avoid this problem?
- Breathe (This occurs #1 more often than I had anticipated.)
- Check your ownership documents with the county every year or so. Most counties have this information online, so, access is not a problem. If you see a filing that you cannot account for, dispute it immediately.
- If you do have land that is largely vacant, or elderly family members, check on them both regularly.
- Monitor your credit (Remember, you can get 3 credit reports every year.)
- If you are not receiving bills that you normally should, follow up with these vendors to see if a change in title generated a change in billing.
- Get title insurance. (I learned something here. There are 2 flavors of title insurance. Type 1 (lender’s) ensures that you and only you have title to the piece of land that the Bank is giving you a loan for. An owner’s title insurance covers you for problems with the title after you have taken possession of it. You want to make sure that the second type has been purchased.)
So, what should I do if this problem happens to me?
- Call the companies where fraud occurred
- Place a fraud alert with your creditors and pull your credit reports
- Report identity theft to the FTC
- Report the fraud to an FBI field office.
- File a report with your local police department
The Verdict
So, we have learned that this fraud is pretty tricky to pull off correctly. This should make it rare. But, carefully consider the number of cases cited above. Then consider that the problem is serious enough that the State of Maryland started The Maryland Mortgage Fraud Task Force in an effort to better coordinate the different agencies that are part of a potential solution. Given all of this, I guess that the key would be patient action. Oh, and don’t believe everything that you see on TV.
REFERENCES
https://www.experian.com/blogs/ask-experian/what-is-home-title-fraud/
https://www.bbb.org/article/news-releases/22679-bbb-alert-home-title-fraud
https://www.forbes.com/sites/lawrencelight/2021/09/11/the-home-title-theft-baloney/?sh=1924c791242d
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.