Owning a home carries its share of risk. Some risks, such as a roof needing replacement or a system wearing out (like a furnace), are generally predictable. Others, however, are less obvious. Natural disasters, destruction of property, or even fraud or theft are all risks homeowners face that can jeopardize their largest asset. One lesser threat that homeowners should stay aware of is the threat of title fraud. Learning what title fraud is, and how your title insurance policy can protect you, is essential knowledge that every homeowner should have.
What Is Title Fraud?
Home title fraud is a form of identity theft. Generally, title fraud is accomplished when a criminal reviews publicly available records to locate a home with accrued equity. The title thief then creates a fraudulent bill of sale, forges the homeowner’s transfer of title, and transfers legal ownership of the house to themselves. Once they’ve recorded the transfer, the thief can take out home equity loans or a HELOC — a home equity line of credit — using the home as collateral. When the fraudster fails to repay the loans, the lending institution can foreclose on the home, forcing the sale of the property.
Title fraud can take many forms, including a forged or fraudulent transfer of the home’s ownership, or simply taking out home equity loans in the owner’s name. If the property is vacant, a criminal who commits title fraud may even attempt to sell or rent out the property without the legal owner’s knowledge.
For most homeowners, the risk of title fraud is low, as most jurisdictions require that any document transferring ownership of a property be notarized. If you have a mortgage or other financing, it is unlikely that a fraudulent transfer will go unnoticed. However, homeowners who own their home outright, those who own an investment property that is vacant, and homeowners in distressed financial condition may be susceptible to scams or other fraudulent activities that could affect the title to their homes.
What Should I Do If I Suspect I’ve Been The Victim Of Title Fraud?
Title fraud can have a number of dangerous ramifications, including damage to your credit that can take time and effort to repair. In the worst case scenario, a criminal may attempt to sell your house or rent it out, especially if the home is vacant. It is critically important to act quickly if you suspect you’ve been the victim of title fraud, to prevent thieves from further damaging your credit.
The Federal Trade Commission outlines the steps you should take if you believe you’ve been the victim of title fraud or other identity theft, including:
- Call the companies where you know fraud occurred (in the context of title fraud, this would include calls to your title insurer and mortgage lender).
- Place a free, one-year fraud alert by contacting one of the three credit bureaus. That company must tell the other two.
- Complete the FTC’s online form or call 1-877-438-4338 to report the fraud. Include as many details as possible.
- File a report with your local police department
Once you have completed these steps, you can act to close any accounts that have been fraudulently opened and work to repair any issues that may impact your credit score.
Do I Need Enhanced Title Insurance?
As a buyer, you may want to consider asking your agent or title company about the protections offered by enhanced homeowner’s title insurance. In most home transactions in Illinois and Wisconsin, it is common for the seller to pay for a standard title insurance policy that covers any title encumbrances up through the closing date. However, homeowners who are interested in additional protections can purchase an enhanced owner’s title insurance policy, the American Land Title Association Homeowner’s Policy (as opposed to the more basic Owner’s policy), which is offered by all title insurance companies and insures against post-policy forgery or impersonation.
This policy is not a standard policy, and is paid for by the buyer if the buyer wishes to access enhanced protections. As a buyer, it’s important to ask your agent or title company closing agent what a standard title insurance policy covers, and what additional endorsements or enhanced protections are available to protect your interests.
Other Ways To Protect Against Title Fraud
As with all types of identity theft, regularly monitoring your credit report is a great way to protect against title fraud, particularly if the fraud takes the form of criminals opening a line of credit against your home’s equity. You can also guard against fraud by ensuring that you shred any sensitive financial documents before discarding them, and take proactive steps to protect your online accounts and passwords.
Landtrust Title: Your Partner for Results
When your real estate agent works with Landtrust Title, you get a partner for results. We do things differently than other title companies — whether it’s personalized support, convenient closing times that meet your schedule, or quick and easy payment methods ensuring everyone gets paid right away, our attention to detail will help ensure a smooth transaction. We’re obsessed with making your experience so seamless, you don’t even have to think about it.