The idea of a forged deed may sound pretty unusual to you; probably the only time you've heard the term was when you were studying for your real estate exam. (Hopefully you remember that forged deeds are one of the title defects covered by both standard and extended policies of title insurance.) Maybe when you hear the term now, you’re visualizing an old-fashioned movie villain twirling his mustache while he labors over a deed with a bottle of ink and a magnifying glass.
Well, forged deeds are no laughing matter, and they haven’t gone out of fashion; in fact, the number of forged deeds is actually on the rise, as scammers take advantage of the huge number of foreclosures, short sales, and vacant properties. In a few cases, a “forged deed” has turned out to be exactly what the name implies: a case where a fraudster has created a new deed, forged the homeowner’s signature, and then used it to claim that title has been transferred.
Other, more common cases, are a little trickier. For instance, a scammer may create a quitclaim deed and forge the homeowner’s name on it. Once it’s notarized (either based on false ID or by a notary acting illegally), it’s recorded, but the fraudster never tries to take possession of the house. Instead, he just uses the deed as the basis for taking out a mortgage on the property, then flees with the proceeds. He doesn’t stick around to watch the lender start foreclosure procedures against the homeowner, who had no idea that the mortgage existed against his property.
The problem for homeowners is that there’s no easy way to protect yourself from the recording of illegitimate deeds. The reality is that anyone can go to the county recorder’s office and record any document concerning a particular property. The county recorder is not responsible for verifying the validity of that document. (That’s supposed to be up to the notary public who handles the acknowledgment, but if the notary is misled or simply in on the scam, that can be an easy hurdle to overcome.)
Some recorders’ offices have begun taking measures that make it easier to detect or prosecute such frauds. Some send a copy of the recorded document to the property address. This would give the homeowner notice of a fraudulent deed well before finding it out the hard way (when trying to sell, or when a lender threatens foreclosure). Some recorders’ offices have also begun requiring a thumbprint in addition to a signature from all persons recording documents.
It’s a good idea to warn your clients to be on the lookout for signs of deed fraud. Signs may include notice of newly recorded documents, as well as new loan documents, mortgage bills, or Notices of Default or Sale associated with previously unknown loan transactions. If deed fraud occurs, homeowners should report it to not only local police, but also to the county recorder’s office and the real estate and notary public licensing authorities for your state. Homeowners should also contact their title insurer, and possibly a lawyer to see if legal action to quiet title should be undertaken. For more information, the California Department of Real Estate has recently published a pamphlet on this growing trend.
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