Title Theft, Title Locking, and Title Insurance . . . Oh My!!

Title Fraud - What Can Happen?

All varieties of title fraud revolve around a single goal - money. The fraudster gains title or the appearance of having title to the property and either sells the property to an unwitting buyer or borrows money using the property as collateral. In either case, they seek to be long gone by the time that the fraud is discovered by the actual owner, the victim buyer, or the lender.

How does the fraudster gain apparent title to the property?

They typically use forgery or impersonation.

Forging a deed is relatively easy. There are millions of examples of deeds online, including public records which show valid deeds in that state. Most states require a witness and a notary for a deed to be recordable. Creating a false witness is child's play since any illegible "signature" will do. The notary may be in on the scheme or, more likely, the notary signature and seal are fake. The county or parish will record any deed presented that meets the recording standards for the jurisdiction. I remember an investigative news piece years ago in which the reporter showed up in a Florida recording office to grill the county clerk as to why they recorded a false deed. The premise of the interrogation shows a complete misunderstanding of how title records work. The seller does not personally bring a deed to the clerk and show their identification. Most deeds are delivered to the clerks via regular mail or overnight delivery. The clerks have no way to determine whether every deed is real nor is that a requirement of their role. They are required to record everything that meets the recording standards and is presented with the correct recording fees.

Impersonation involves either getting false identification (ask any 18-20 year old how hard it is to get a fake ID) or finding a property owned by someone with the same name as the fraudster. If another Cheryl King appeared before a notary and signed a deed for my property using their identification, the notary would have no idea that the deed is being signed for property that a different Cheryl King owns.

Borrowing money against someone else's property is a little more difficult but certainly not impossible. It is easiest if they use hard money lenders and individual investors who tend to ask fewer questions and do less due diligence than institutional banks and mortgage companies. The interest rates are higher with these alternative forms of financing but that is no concern for someone who never intends to pay the loan anyway.

Are there some properties that are more at risk that others?

Absolutely. Why is it unlikely that someone would take title to my property? I live there. My husband lives there (and works there). My home, and most peoples' homes, are not an attractive target because we will notice if potential buyers try to look at the property or an appraiser comes by to check it out before a lender will provide a loan. Our primary residences are not the low hanging fruit most attractive and profitable to the criminals.

Properties that are more at risk are vacant properties, which includes vacation homes, and investment properties since the occupant will be less likely to question someone coming by "for the owner." Owners should let tenants know that you will not send someone to the property without giving them notice. Owners should personally, or through an agent or management company, check on vacant properties periodically for a variety of reasons.

There are fraud schemes that arise when the actual owner signs away their title.

This happens through fraudulent loan modification programs, fake foreclosure avoidance schemes, and scams that prey on older persons. The actual owner signs away the title to the property but without true knowledge of the intentions of the person or entity to whom they convey their title. Getting the property back may be very difficult. The family of aging homeowners need to take steps to minimize the potential that property may be deeded away during a period of confusion and homeowners need to be careful when they sign legal documents. Any homeowner struggling financially can reach out to a HUD (U.S. Department of Housing and Urban Development) approved housing counseling agency so that they know they are dealing with a reputable organization.

Title Insurance

Why do we have title insurance?

Title insurance was born out of necessity and dates back to an 1868 Pennsylvania Supreme Court case, Watson v. Muirhead, 57 Pa. 161. In this case, the conveyancer found a lien on the title and submitted it to an attorney for review. The attorney gave the opinion that it was not a valid lien. The conveyancer went through with the transaction. The lien was indeed valid and the property was sold at a sheriff's sale to satisfy the judgement. The buyer sued the conveyancer but the court found that the conveyancer was not negligent and thus not liable to the buyer for the damage since they had sought legal counsel and were simply given a bad opinion. In reaction to this, a group of Pennsylvania conveyancers combined forces to create a title insurance company to protect innocent buyers from this type of issue. The idea spread to other major cities and beyond in the ensuing decades. The vast majority of the title companies in existence today date back to the late 1800's and early 1900's and are registered companies on the NYSE or NASDAQ stock exchange. This places them under the oversight of the Securities and Exchange Commission and requires that they file regular and public financial reports.

What title insurance covers has changed over time.

Basic coverage protects buyers from:

• Forgery or impersonation in the past or present
• Lack of legal competency, capacity, or authority of a party
• A missing signature of a necessary party (examples - spouse, heir, business partner)
• Undisclosed liens and easements that are recorded (mis-indexed by the recorder's office or missed by the examiner)
• Deeds that are not properly recorded
• Errors in legal descriptions
• Lack of access to property

In the early 2000's title companies began offering additional coverage under enhanced policies to cover:

• Certain issues that would have been disclosed on a survey
• Errors on surveys
• Certain unrecorded issues such as a materialman's lien, tax lien, or easement
• Certain subdivision and zoning restrictions
• Neighbors constructing improvements on the insured's property after purchase
• Forgery or impersonation after the insured takes title (i.e., fraud after the fact or "title theft")

What should buyers understand about title insurance?

• The cost is one time.
• The lender's title policy in no way protects the homeowner.
• The policy protects the heirs if the property passes to them after the original owner's death.
• The survey coverage provided in the enhanced title policies is subject to deductibles and limits of liability so purchasing title insurance does not eliminate the value of getting a property survey.
• Not all properties will qualify for the enhanced policy without a survey.
• If there is a title issue, the title policy will cover the attorney costs to resolve the matter or compensate the owner for the loss.

Title "Locking"

Can someone lock their title as they can with their credit or through use of blockchain?

The answer is unequivocally NO. There is no such thing as a title lock yet all of the companies I found that offer deed monitoring uses the word "lock" in their name. This feels exceptionally misleading.

What services do the title "locking" companies provide?

None of the companies purport to be able to prevent a transfer of title or apparent transfer of title. They provide notice after the fact and some offer services to assist after this has happened. How do the services to correct false filings differ from title insurance? It is very difficult to tell since there is no information I could find online about any homeowner that used this service. One of the main companies, and there is certainly more than one, does have 105 mostly 5 star reviews online. I read all 105 reviews. All but a few of them were reviewing the set up process and how nice the employees were. The only reviews I found about actual use of the service were for the portion of the service that allows the homeowner to save their ownership warranty and insurance information on their site. This gave the homeowner access to the information when they needed to make a damage claim while out of town. This is fine but does not require a separate service. Any online storage of records through Gmail or Microsoft or Dropbox or any password / document storage would provide the same benefit for no additional cost.

How can a homeowner be proactive about guarding their home title?

Strongly consider getting a survey. Because of the expanded title insurance coverage, people opt not to spend the money on a survey. It is difficult to protect your property fully if you do not really know where your property starts and stops. Where people have planted hedges or built fences does not determine the property lines. Robert Frost was right that good fences make good neighbors but not all fences are good.

Buy title insurance for all of the reasons listed above.

Check out free services that can help if you want additional piece of mind. Examples:

• DeKalb County, Georgia owners have a Fraud Registry that provides email and text notification services once you register your property. This system was put in place in 2014 in response to the property fraud issues in the city of Atlanta.
• As of 2022, Fulton County, Georgia owners can also sign up for free alerts any time there is a change to their property title. I signed up for their R.E.A.A.C.T. (Real Estate Activity Alert and Contact Tool) in minutes and will get an email and text if there is any activity. This means that all of the city of Atlanta is now covered by a registration system.
• In Georgia, all county deed records are available online through the Georgia Superior Court Clerks' Cooperative Authority (GSCCCA.org) but this is a pay service used predominantly by people and companies in the real estate industry. Some counties also provide their deed records free online on their own county site. Homeowners can check their state and county on netronline.com. Georgia counties that do provide free records searches include: Cherokee County, Cobb County, and Forsyth County.
• Read your mail. Question anything that does not look right but also be wary of responding to illegitimate mail. Most Georgia buyers receive official-looking mailed letters after their purchase stating they need to pay a fee to register their ownership or get their deed. These companies con buyer's into paying upwards of $100 for a copy of the $1 deed the fraudsters printed from the GSCCCA site. When in doubt about anything, as a real estate professional.
• Keep an eye on your property. If you do not live in the same state as the property, it is particularly important to have someone check on the property regularly for signs or access or misuse. That can be a friend or a company paid to help manage the property.
• Seek the assistance of a real estate attorney to look up your property records if there is a question and you cannot easily check.
• Check your credit regularly - almost all banks offer free and immediate access to one of the three credit reporting companies on their site or through their app.
• Question anything suspicious. I used the family group email to register our property in the Fulton alert site. It took less than 10 minutes for my husband to text me to ask if I had registered us with that site. That was exactly what he should do when something comes over that is out of the ordinary.

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