In the modern-day world of scams and other trickery, various forms of property fraud have been drawing increasing attention as opportunists wade into this arena more frequently. This article will look at some of the most prevalent examples of property fraud. While this kind of fraud can victimize people of almost any age, we’ll point out circumstances unique to senior citizens that make older Coloradans more vulnerable than others. Much of the information provided here is from the Colorado Department of Regulatory Agencies (DORA) / Division of Real Estate with additional facts from the Denver-based Colorado Legal Defense Group.
Home Title or Deed Forgery
Call it home title fraud, title theft, or deed forgery, this crime occurs when someone fraudulently replaces your name with their name on the title to your property. This brand of fraud is growing, especially as information about people becomes more accessible online. A Florida newspaper reported a notable case in which a 91-year-old homeowner who had lived in his house for 60 years discovered the deed to his property had been fraudulently transferred to someone else. He learned this only when he tried to renew his homeowner’s insurance and was told he could not because the deed had been changed. (Things were eventually made right for this victim.)
The news article called it “frighteningly easy” to commit this type of fraud. It might require a fraudster to simply download a blank quitclaim deed, insert their name as the “grantee” (person receiving the property), and forge the signature of the legitimate owner. If they find a notary willing to flout the law regarding the correct affirmation of a valid signature, the notarized document can then be recorded in the public records.
The legal process, and the illegal maneuvers
In a legal transfer of property, a deed names the grantee and is signed by the legal original owner/grantor in the physical presence of a notary. Before the grantor and notary sign the deed, the notary will ask the grantor to produce proper identification to confirm the legitimacy of the grantor. Even this legal process can be subverted, however, if a fraudster has your personal information obtained through other scamming done ahead of time, such as grabbing your personal identity through phishing schemes or other means. Armed with such stolen information, it’s easy for the culprit to assume your identity and create phony documents such as Social Security cards, driver’s licenses, etc., used to trick a notary into signing off on an illegal property transfer. (Bear in mind that the internet itself is often a source of information about you. And you know the mantra: Always be on guard whenever someone requests your sensitive information.)
A deed in the above scenario would, of course, have your forged signature. In the extreme, some fraudsters forge an entire deed, including the notary page and stamp. After the deed is notarized, the fraudster will record the deed at the local county recorder’s office for a nominal fee. For document purposes, he or she has become the new owner.
The most vulnerable properties for Fraud
Authorities who are studying this type of fraud and theft see a few patterns. Fraudsters search obituaries of older persons, which can lead to a house being vacant at least for a short period, with lesser attention being paid to it. They then make an illegal transfer, swindling surviving family members or other heirs out of the deceased’s property.
Experts also say the properties that are most vulnerable to title fraud are those that have accumulated substantial equity. Fraudsters often have designs on exploiting that equity, such as in “borrowing” on that value or in “selling” the property to a follow-up victim. Equity-heavy properties often mean properties of older owners.
Also especially vulnerable are properties that are vacant (continuously or intermittently), owned as a vacation home, or held for investment purposes. One example would be having dual homes in different parts of the country owned by retirees who split their time between the two. People who own these types of properties may not be as consistently on top of managing them day-to-day and thus may not readily notice any suspicious activity.
What about buying protection against title/deed fraud?
Like identity theft protections (e.g., Aura, Identity Force, IDShield, Lifelock, etc.), programs have surfaced offering protection against title/deed fraud. Public officials in some areas urge people to enroll in them. But these programs have gotten mixed reviews as to how necessary or how protective they are. Larry Light, an investment writer at Forbes, discussed such programs in an online Q&A session with Rick Kahler of Kahler Financial Group of Rapid City, SD.
Kahler said companies offering title fraud protection “don’t understand the law” because, for instance, “a forged deed is not valid and legally conveys nothing. Only you can legally transfer your title to a third party.” Kahler goes on: “If a buyer or a lender relies on a forged deed and don’t do their due diligence on a property’s title, they are out of luck. They, not the legitimate property owner, will ultimately lose any money paid to the thief [such as if the thief ‘sells’ the property].”
Kahler insists lenders, title companies, and real estate firms have so many safeguards in place that there is little chance of a fraudulent transfer going undiscovered. “Only the most naïve buyer will fail to obtain title insurance,” he says, “and title insurance protects buyers against defects in the title, including liens, fraud and forgery. … No legitimate attorney or real estate firm will allow you to buy a property without this insurance.”
In the unlikely event that a fraudster risks committing all the crimes involved in title fraud, some of which are felonies, Kahler notes the cost of clearing the title is the biggest risk to a homeowner. That will require the assistance of an attorney. Does that potential expense make it worthwhile to consider buying title theft insurance? Kahler’s answer: “Perhaps, assuming the policy covered such expenses.” But he adds, “Unfortunately, none do.”
Some counties in the country are establishing property fraud alert services to immediately notify homeowners by email if any documents surface that transfer ownership of their home. We could not find any such alert programs in Colorado, although the Colorado Department of Regulatory Agencies (DORA) / Division of Real Estate does post advisories online when a specific fraud has been detected and exposed. As a periodic “checkup” step, similar to reviewing annual credit reports, homeowners can always log on to their county assessor’s website and look up their property listing to make sure it is showing them as the legal owners.
Other real estate-related frauds
Following are other real estate-related frauds described on Colorado’s DORA website.
- Real estate wire fraud
You are in the process of buying a home and you receive an email, text, or phone call from someone claiming to be from the title company, mortgage company, or real estate brokerage providing you instructions on where to wire your escrow funds. The swindler creates a fake website that appears nearly identical to the title or lending company that you are working with and uses “spoofing tactics” to make email addresses, phone numbers, and websites appear legitimate. If an innocent party follows their instructions to wire the money, the funds go to the swindler’s bank account and are withdrawn before anyone is the wiser. DORA says be wary if:
- Sender refuses phone calls and insists on communicating via email only.
- Sender places a “Rush Request” to assert pressure.
- Sender uses odd or incorrect words, spelling, or phrases.
- The return email is incorrect.
- You receive last-minute revised instructions to create confusion.
- Email links are redirecting you to a different website.
How to protect yourself from:
Do not click on any email or text links, or send money online without verifying the wire instructions with a live person on the phone from a phone number that is known to you, and that you have called and previously verified as belonging to the title or lending company that you are using for your transaction. Then, before you send any money to a third party, review the original documents that you received from your lender or title company and call the phone numbers listed in your loan or title documents to verify the wire instructions that you received. Also, be very suspicious if you receive a subsequent email or text requesting a change to wiring instructions that you already have received, and always make sure to confirm the escrow account number before wiring any money. Don’t forget to call your title settlement agent to verify the transfer of the funds immediately after the money is sent.
- Home equity skimming
This is a form of real estate fraud whereby an unscrupulous person does obtain title to someone’s home, and refinances that home to steal the property’s equity. It typically occurs when a homeowner is in financial distress, is unable to make mortgage payments, and is facing foreclosure. A “fake buyer” or investor contacts you to get you out of financial distress and possible foreclosure troubles and offers to take over your mortgage payments, or even promises to pay you a large amount of money when the property is sold. The homeowner, however, must agree to sign over the title to the home and either agree to move out of the house immediately or stay on as a tenant in the home and make monthly rent payments.
While this unscrupulous “savior” continues to collect your monthly rent payments, they never make any promised payments on your mortgage to the lender, resulting in the lender foreclosing on the home. The end result is that the homeowner loses their home and any rental payments made to the equity thief, as well as seriously damaging their credit rating. DORA lists these signs to watch for:
- The “savior” will not give you any money upfront in exchange for you signing over your home to them, but instead promises money to you “down the road.”
- You may be asked to sign a power of attorney or sign over the deed of the home.
- They say to pay them directly and they will in turn pay your mortgage company.
- They tell you there is no need to get your property appraised.
- They do not even bother to thoroughly check out the home.
How to protect yourself
If you are behind on your mortgage payments, contact the Colorado Foreclosure Hotline and talk with a foreclosure counselor at: 1-877-601-HOPE (4673). Always deal with a reputable person and check them out, including any references. Do not rush into transferring over the title to your home without discussing the legal ramifications with an attorney. Remember, signing over the title to your property is separate from your obligations to make mortgage payments to your lender. Never sign a Power of Attorney to someone in these situations without the advice of your own attorney. Doing so may result in the thief stealing more from you in addition to your home. As well, contact your lender to see what options are available if you are behind on your mortgage payments; and discuss with your lender the ramifications of you transferring the title to your home while there is still a mortgage in place.
- Loan flipping
The typical situation here involves a lender that coaxes and convinces a homeowner to repeatedly refinance their mortgage while also persuading them to borrow more money each time. Eventually, the borrower ends up with higher loan payments that they cannot afford while also reducing the hard-earned equity in their home, even as that lender charges fees and points with each transaction. The homeowners snared by this predatory practice tend to be seniors or very unsophisticated borrowers. The lenders persuade these homeowners to take advantage of a cash-out refinance when they may not need to, or they say there is a better loan product available than the one they presently have. While on its face the loan may appear to be a good deal, the additional fees and costs of the loan can put the borrower into a loan product that is not in their best interest. DORA says watch for the following:
- You’re approached without you requesting help needing to obtain a new loan.
- The lending company tries to lock you into a new long-term high-cost loan, even though doing so doesn’t benefit you as the homeowner.
- You are repeatedly asked to refinance your home, oftentimes at a higher loan amount and interest rate.
- You are asked to take out a loan to “cash out” your home equity when there is no need.
How to protect yourself
When it comes to a mortgage, always get advice from a trusted professional and speak to several lenders. If you recently refinanced your home, it may not be in your best interest to quickly turn around and refinance again. Make sure that you deal with legitimate lenders and familiar banks, and also that you can personally meet with their loan officers. You should receive loan disclosures and a satisfactory explanation of all the loan fees and charges. Finally, before closing on a loan, read all of the documents and make sure you understand the new terms and fees.
Property fraud in Colorado
Property fraud in Colorado carries big risks for the perpetrators. In our state, a person commits forgery if they falsely make, complete, or alter a written document with the intent to defraud. This includes forging a deed to property to make it appear that property is owned by the forger. Under Colorado statutes, forgery is a class 5 felony. The penalties for deed forgery include 1 to 3 years in prison, a fine of up to $100,000, and mandatory parole for 2 years. That’s a lot of disincentive to criminals but will not stop everyone with ill intent.
For more information about property fraud and/or to access help if you have been victimized by any of the schemes described in this article, contact one or more of the following entities. Make contact also if you have encountered actions that seem to be a part of any of the frauds discussed.
Colorado Division of Real Estate in the Department of Regulatory Agencies
Colorado Attorney General’s Office: https://coag.gov/
Colorado Bureau of Investigation: https://cbi.colorado.gov/