What Is Home Title Fraud? A Beginner's Guide

In 2008, the FBI issued a warning about the latest scam on the block, home title fraud. Thieves have found ways to steal houses without homeowners knowing about it. Known as home title fraud, here's what it is and how you can protect yourself.

What is home title fraud?

Home title fraud is where a criminal steals a home by forging a deed. They then illegally transfer ownership of the home without the real homeowners permission. It is essentially where a fraudster steals your home and either sells it or takes out a loan against it without you even knowing about it. When the mortgage is not paid, the property enters foreclosure.

The scammer first finds a property they want to steal, typically one with equity in it. They will then forge documents that transfer the ownership of the house to themselves. After they file the documents with the proper authorities, they now have legal ownership of the property. They then sell the property to unknowing third parties or take home equity lines of credit (HELOC) against the property and don't pay it back. Some criminals have also taken multiple mortgages against the property.

According to the FBI, there are other variations that criminals can take when looking to steal property. Con artists find a vacant home, like a rental property or vacation home and find out who the owner is through a little research. They then steal the owner's identity, illegally transfer the title to their name, and pocket the proceeds from selling the property or getting a HELOC. In some cases, the criminals steal a house with the family still living in it. They sell the home to a buyer without the family even knowing about it. The rightful owners continue paying the mortgage in a house they no longer own.

How can a home title be stolen?

Home title fraud combines two common scams, identity theft and mortgage fraud. After the fraudster find a property they want to steal, they next steal someone's identity. They use the stolen identity to create fake social security cards, fake IDs, and other counterfeit documents. The criminals then forge your signature on a fraudulent bill of sales to transfer property to their fake identity. Many states require the seller, two witnesses, and a notary to sign for the deed to be recorded.

Home title fraud is basically a forged deed. When a seller (the grantor) transfers ownership of a property to a buyer (the grantee), they also transfer the deed and the title. A deed is the physical legal document stating you own the property. A title isn't a physical document, but a concept which designates who has legal ownership of the property.

The forged deed is typically sent to your county's clerk of courts and recorded in your county's public records. The court clerk only verifies that the documents are filled out correctly, they don't verify if the sale of the property is accurate. After submitting the forms to the county clerk, the criminals take legal ownership of the property.

What happens if your home title is stolen?

Once your home title is stolen, the criminals either sell the home to unsuspecting home buyers or to fake buyers (partners in crime using stolen identities). They can also decide to take a HELOC against the property. Once they have the money, they disappear. As the real home buyer you unfortunately don't know about the theft until after it has already happened. Since the documents are fraudulent, the house does not legally belong to the con artists, so their goal is to quickly profit from the scam and walk away, making it difficult for people to catch the criminals before it is too late.

Victims unfortunately can lose their home as a result of home title fraud. Trying to fix the problem can cost tens of thousands in legal fees as it requires involving the title company, lender, buyer, and seller, and taking the issue to court. Home title fraud can also impact your credit score.

How likely is home title fraud?

The FBI states that while house-stealing is not very common, anyone is at risk for getting their property stolen. The most vulnerable to home title fraud are senior citizens and property owners who have had their identity stolen. Vacant properties and properties not monitored regularly are easier to steal and transfer illegally. Properties with a large amount of equity are also more likely to be targeted

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.

How to protect yourself against home title fraud

According to the FBI, the best thing homeowners can do is be vigilant. Title theft is not covered by your homeowner's policy, your HOA, or the banks. According to the FBI, here are some other steps you can take to protect yourself against home title fraud.

• Open any letters you receive from a mortgage company, even if your name is not on it. Find out what it says and follow up to get more information.
• Periodically check all information pertaining to your property through your county's deeds office. You can do this for free or for a small fee. If you see something you don't recognize, look into it.

Other things you can do include subscribing to credit monitoring services, using strong passwords, and using caution when clicking on links or attachments, to protect against identity theft. If you have a vacation property, have someone check the home regularly to see if there are any for sale signs or unauthorized activity at the property.

Are home title lock services worth it?

You can use a monitoring service such as "home title lock." Home title lock services, however, do not prevent home title fraud, nor is it a lock as the name implies. It monitors home title activity and provides alerts if there is a title change, but only after it has occurred. In most counties, you can access property ownership records for free. The chances of home title fraud are small, so you will need to see if it is worth the money. These services typically do not cover the legal fees and other costs to clear your home title from fraud.

There are some companies that state that their title and deed lock services will alert you before, during, and immediately after any property fraud. Some offer services protecting you from property theft, equity theft, rental income theft, clouded title, lien filings, and unauthorized use, among many others. It is important to do your research to see what is covered, their reviews, and if the cost is worth the benefit based on the services they provide.

What to do if you are a victim of home title fraud

If you are a victim of home title fraud, you will need to act quickly. Contact the financial institutions so they can freeze any funds that fraudsters can get a hold of. Call your county's deed recorder and send them any documentation they need.

Next, you should contact the local authorities, the FBI, and the Federal Trade Commission (FTC). If the fraud occurred during your closing, title insurance may cover it, so contact them to see what your policy states. Lastly, contact an experienced attorney so they can help you take the necessary legal steps.

While home title fraud is rare, it is real, and there have been victims who have unknowingly lost their homes or suffered considerable financial losses. Focus on protecting yourself, monitor your credit, and be on the lookout for any suspicious documents.