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Preventing Title Insurance Fraud

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November/December 2002 - Volume 81, Number 6

by Connie Clark

With fraud as the topic of many headlines these days we need to be aware that it can happen in our industry also. Is your title company prepared to spot the various red flags involved in forgeries? Experience has revealed that forgeries generally fall into one of two broad categories. The first category is sometimes referred to as "mom and pop" forgeries, which involve fraudulent intrafamily conveyances. This category also includes fraudulent conveyances by one or more business partners to the detriment of the other partner or partners. The other broad category includes the "professional" criminals who prey on the property of strangers. In the past, the so-called professional forgeries occurred mainly in large urban areas. However, the target of a recent forgery claim was a small subdivision as well. Here are some of the red flags to be aware of.

Substantial Equity

Normally the target properties are free and clear of any mortgages or other encumbrances. The forger will either forge a deed to himself or herself and take out the equity by mortgaging the property or impersonate the true owner and forge the owner’s name on a mortgage to accomplish the same result.

Absentee Owners

It is much easier for a forger to succeed if the true owner is not in possession of the property. In fact, the farther away the owner, the more attractive the target property becomes. Many states are very attractive to foreign real estate investors, and many individuals maintain vacation homes in states other than their primary residence.

Urgency to Close

This is referred to as the "super rush deal." The forger will want to close the transaction as soon as possible. The agent will most likely receive numerous calls from the borrower and mortgage broker, if one is involved, urging that the closing be scheduled at the earliest possible date.

Equity Lender

In most cases, the fraudulent borrower will not be able to qualify for a conventional loan. Lack of verifiable employment income or other assets will be the most likely reason for disqualification. The forger will instead turn to a lender who is mainly interested in whether there is sufficient equity in the property. The mortgage broker, whose fee is paid at the time of closing and who knows the lender’s loss will be covered by title insurance, has little incentive to aid in the prevention of forgery losses.

High-End Properties

The main targets of professional criminals are those properties that are expensive in relation to the local real estate market. It is not unusual for exclusive waterfront subdivisions to be subjected to this type of activity. In fact, in Florida, where I live, the true owner of one lot in a Miami-Dade subdivision has been the victim of at least two forgery attempts in recent years.

Unimproved or Vacant Property

The professional forger prefers unimproved property because there is no interior inspection required for unimproved property. The forger’s second choice is vacant unimproved property. The scheme will be revealed if the owner discovers that the property is being appraised or surveyed, so occupied property is not an attractive target.

Recent Acquisition

Normally the forged deed presented to the agent will have been executed within the last few days. There is too great a risk of discovery of the fraudulent deed if it is placed of record for any substantial length of time prior to the closing.

Quitclaim Deed

The quitclaim deed is the deed of choice for most forgers. One reason may be the historical practice of allowing quitclaim deeds to be recorded with minimum documentary stamps. However, since the amount of documentary stamps is based on the consideration, the form of deed should be irrelevant. Ask the underwriting companies you work with for guidelines when a quitclaim deed is the muniment (?) of title.

Timing of the Recording of the Vesting Deed

A truly sophisticated forger will time the recording of the fraudulent deed with notices that are mailed to the property owner. This practice was uncovered in a post-arrest interview with a forgery suspect. In a previous forgery attempt by the suspect, a forged deed was discovered when the true owner did not receive an ad valorem tax bill. Thus, in subsequent transactions, the suspect did not record the fraudulent deed until after the tax bills had been mailed.

Minimal Transfer Taxes

A forged deed almost always shows that minimal transfer taxes were paid. The payment of transfer taxes by the forger is considered an unnecessary investment. The forger’s goal is to get the deed recorded, and the filing of a false form is not a roadblock for someone who has already forged the signature of the true owner on a deed.

Vesting Deed Not Prepared by Law Firm or Title Company

Because most legitimate real estate transactions are handled by law firms or title companies, a deed prepared by a party outside the title industry is legitimate reason for concern. In the worst case, the deed may not be genuine. However, even it if is genuine, it may suffer from technical defects such as a faulty legal description or improper execution. Finally, do not give undue credibility to a deed that appears to have been prepared by a title professional. The deed may have been prepared by a law firm or title company and fraudulently executed later, or the forger may have prepared the deed with a false scrivener to give the deed the appearance of legitimacy.

Reliance on Notarization

Do not blindly rely on notarization of the deed. The notary is often a co-conspirator. There are many notaries who do not abide by your state’s laws and who are willing to attest to the signature of a person who did not appear before them. The notary on a forged deed usually falls into one of two categories: They were either part of the fraudulent scheme, or they were willing to do a favor for a friend.

Check Suspicious Signatures

Our experience reveals that most forged signatures are not similar to the signature of the true owner. There may be a document in the chain of title that was signed by the owner that can be used for comparison.

Trust One’s Instincts

Almost without fail, after a forgery is discovered in a current transaction, agents will say that they knew there was something wrong with the transaction. Remember that a crime is being committed and that the parties may do something to raise suspicion. Finally, agents should trust the instincts of their office personnel. Some people seem to have a sixth sense that allows them to recognize dishonest behavior. Agents should listen to any concerns voiced by their paralegals, closing personnel, or staff members about the legitimacy of a transaction.

Agents suspecting a forgery or any form of rest estate fraud in a transaction should call their claims department.

Awareness is Key

By being aware of the many red flags that accompany fraud, we as an industry can cut down on the peril that threatens our livelihood.

Connie Clark is senior claims attorney for Attorneys’ Title Insurance Fund, Inc. Orlando FL. She can be reached at 407-240-3863 or

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