Becoming a home owner is a big accomplishment that many people dream about. But with this milestone come risks that aren’t often discussed, and one of them is home title fraud. In fact, in 2018 alone, about one in 109 mortgage loan applications showed signs of possible fraud. And the risk of title fraud is growing, as FundingShield reported a 31.5% increase in real estate wire fraud in the third quarter of 2020. So, what is home title fraud, and how can home owners identify it? Here’s what home owners and real estate professionals alike should know about this issue.
How Home Title Fraud Works
The concept of home title fraud can be confusing. After all, how does someone basically steal a house? They can’t exactly take it physically, so how do they end up with the home? The answer is that cyber criminals use paperwork that they file through the court to transfer ownership from the homeowner’s name to theirs. So while the actual homeowner might be living in the house for now, the cyber criminals who committed home title fraud are suddenly the owners, at least on paper.
This type of scam usually starts when a cyber criminal gets ahold of a homeowner’s personal information and uses it to commit identity theft. He or she might go to the recorder of deeds at the local courthouse and file paperwork in the homeowner’s name—and forge the signature—to switch the property title to his or her own name. This way, after filing the forged deed, the cyber criminal obtains the title in his or her name, and can now do what he or she wants with the house.
In most cases, the desire is not to move in. Instead, cyber criminals who commit home title fraud might intend to sell the home and disappear with the money before the scheme is discovered. This is most common when the property is empty—such as in the case of vacation homes or rental houses that are unoccupied at the moment. This way, the criminal committing this type of fraud can show the house to potential buyers without the home owner catching on.
But there are some ways cyber criminals commit home title fraud without even selling the house. One common example is refinancing the mortgage and cashing out the equity. When cyber criminals do this, they take the cash and then simply don’t pay the new mortgage—causing the homeowner to start getting letters from the bank threatening foreclosure. In most cases, this is exactly how homeowners find out that they’ve been a victim of identity theft followed by title theft!
Another way cyber criminals might commit this crime is by using the homeowner’s name and property address to open a home equity line of credit (HELOC). They then get the equity on the property and fail to make the payments on the line of credit. This not only steals money from the homeowner, but also possibly ruins their credit score if they don’t discover it quickly. Clearly, home title fraud is a big deal that can have drastic consequences for homeowners. Fortunately, there are some ways to spot it early on in order to mitigate the damage.
One of the most common signifiers of home title fraud is that the homeowner has started getting notices that he or she hasn’t paid bills related to the house. So if you’re a homeowner and start getting letters from the bank that you’re behind on the mortgage loan, HELOC, or newly refinanced loan—and you know you’re not—this is a clue that someone else may have taken ownership of your property.
Another sign of home title fraud is that you’re getting property-related mail that’s addressed to your house, but not to your name. So if your utility bill or mortgage bill is suddenly in someone else’s name, this could be a warning that someone else has taken over the home’s title.
In some cases, the cyber criminal might change the address of where the bills should be sent in order to buy time before you find out about the home title fraud. When this happens, you’ll suddenly stop getting utility bills, mortgage bills, and any other bills related to the house—as they’re no longer being sent to your address. If you don’t notice this for a few months, you’ll start seeing evidence of your late payments on your credit report, assuming your utilities aren’t shut off first.
And if you own a house that’s supposed to be unoccupied right now—like a vacation home or investment property you haven’t rented out—be on the lookout for signs that someone has moved in. Sudden activity at the house—as reported to you by a camera on the property or just a neighbor who keeps an eye on the house—could be a sign that a cyber criminal has sold or rented out the house without you knowing.
Any homeowner can end up being a victim of home title fraud. But there are ways to catch it early on and reduce the costs and hassles associated with it. First, it’s imperative to get title insurance when you buy a home. In general, lender’s title insurance is required anyway, but you should also get owner’s insurance for theft protection. This way, if you incur any legal fees fighting to get the home title back in your name after title theft, your policy will pay for them so you don’t have to.
Another way to protect yourself from title fraud is to take note of how your home-related bills are addressed. If they’re ever addressed to another name—or if you suddenly stop getting your mortgage or utility bills altogether—it’s a good idea to check on the deed to ensure it’s still in your name. And if you own any unoccupied properties that could be targeted by cyber criminals, get in the habit of driving by them to make sure no one seems to be moving in. If this isn’t possible, getting cameras on the property or paying a property management company to go by the house regularly would help.
It’s also a good idea to check your credit report often to make sure you don’t have any unauthorized accounts that cyber criminals may have opened in your name. If you see past-due bills related to a house on your credit report, it may be time to consider investigating the issue and filing a complaint with the Federal Trade Commission. You can get free credit reports from the major credit bureaus every year to stay updated in order to catch any title fraud as soon as possible.
Finally, you can reduce your chances of being a victim of title fraud by using digital tools meant to help prevent it. One example is paying for all real estate expenses through a secure platform rather than facing the risks of wire fraud and bounced checks when buying or refinancing a house. To find out more about the benefits of the paymints.io platform, schedule a demo today!