Theft of Home Title

There seem to be more and more frequent commercials advertising services to protect homeowners from “home title fraud.” These commercials are not talking about fraudulent applications for mortgages, although that probably happens often. Instead, they are referring to someone who forges a deed to themselves and then tries to borrow money against the property or resell the property to a third party. Despite the frantic tone of the commercials, one has to wonder just how common home title theft is.

How Common Is It?

The FBI reported that in 2020, 13,638 people in the U.S. lost a total of more than $213 million through wire fraud involving real estate, up from $56 million in 2017. However, that is an extremely broad category, and the FBI has not delineated how much of this is home title fraud. In my experience, it is not very common in Texas.

What if It Happens?

There are a number of things to know about home title fraud. First, in Texas, keep in mind that this kind of fraud is enabled if an unsuspecting buyer purchases property from someone without going through a title company. The title company closing process includes protections designed to prevent home title fraud.

Second, be aware that a forged deed is absolutely void and conveys nothing. However, if the forged deed has been filed in the deed records, it can create a cloud on the title to the home. There are several things a homeowner can do in this event. For starters, the owner should contact a real estate lawyer about preparing an affidavit of forgery and filing it in the deed records to counteract the forged deed. If a legitimate future lender or future purchaser finds that unacceptable, it is possible the homeowner may need to file suit against the forger to have the forged deed declared invalid. That judgment will be filed in the deed records. It doesn’t matter if the forger can’t be found—in most cases they are long gone—because the forger can be served by publication, and the homeowner’s attorney can file a motion for summary judgment to obtain a declaratory judgment against the forger. Because there’s no defendant fighting the case, the attorney’s fees for such a proceeding are usually quite modest. Note: None of the “protection services” I researched cover attorney’s fees.

How Can Homeowners Prevent Theft of Home Title?

As far as preventing a forged deed before it happens, the advertisements for these title protection services make claims that are unsubstantiated and, in many cases, false. For example, some advertisements claim that the monitoring service puts a “shield” around your home title. This is not a true statement. All that the protection service does is check the deed records periodically to see if any instruments have been filed with your name on it and then let you know if that happens. However, what they don’t tell you is that many counties in Texas will let you sign up for a fraud alert. In other words, if something is filed in the deed records with your name on it, the county clerk will send you an email alerting you. In most cases, the service is free. Some counties charge a nominal fee.

As part of their sales pitch, these protection services claim that the true owner will be liable for the mortgage payments on a fraudulently obtained loan. Not true. You are not liable for a mortgage fraudulently obtained in your name.

Additional preventive measures that homeowners can take that cost nothing are:

• Lock your credit account at each of the three major credit reporting agencies.
• Periodically check the deed records in the county where your home is located using an online deed records search service. The search is free, though there is a small charge if you order copies of anything you find.
• Be sure you receive the notice of appraised value for your property from the county appraisal office each May and your tax invoice for property taxes from the county tax assessor each November. If you don’t, call them and find out why.
• If you fail to receive any of your utility bills, contact the utility provider promptly.
• If you get some kind of payment book or correspondence from a mortgage company that you don’t recognize, contact that company and find out what’s going on.
• Get a copy of your credit report periodically and make sure everything on it is accurate.
• For vacation or rental property, make sure you’re still getting utility and tax bills and rent payments. If the property is vacant, check on it in person periodically to make sure unauthorized persons aren’t living there.
• When you purchase property, always go through a licensed title company to make sure the title to the property you are purchasing hasn’t been subjected to a previous fraudulent transfer.

While it’s hard to tell just how frequently title fraud occurs, it is not an occasion for the hysteria that is generated by the advertisements of protection services. By taking the steps outlined above, property owners can eliminate most, if not all, concerns themselves.