Some Title Insurance Policies Protect Against Home Title Theft. Does Yours?

When the man served Donna (not her real name) with a notice of eviction, she hid for a while under the comfort of complete denial. It didn’t make sense to her because she had owned the home for almost three decades. How was this even possible? She later discovered that unknown fraudsters had forged and filed documents to make it look like her house had been sold at a foreclosure sale. They then initiated an eviction lawsuit against her.

For centuries, the notary public was the stalwart guardian against forged deeds, ensuring that every signature was genuine, and each document bore the official seal of authenticity. This system worked remarkably well until fraudsters developed technology to defeat the notarial process. This shift occurred about 25 years ago when advances in computers made it easy to create believable forgeries. Sophisticated printers and software turned out fake documents that could fool even the trained eye, and notary stamps, once symbols of trust, became available for purchase online. The guardians had been outpaced, leaving property owners vulnerable.

What can a true owner do if this happens to them? Many people want to believe they can simply tell their county clerk to delete the fake deed, but it doesn’t work that way. The clerk has no way of knowing who is telling the truth. That’s a job for the courts. Unfortunately, a “quiet title” lawsuit to unwind a fraudulent transfer will take a minimum of six months, often extending to several years, during which time the true property owner cannot sell or refinance. Moreover, legal services will cost at least $5,000 and likely much more. Most victims cannot afford the fight to recover their title, and some lose their homes altogether.

This problem is not easily solved, but some private companies and county governments are trying valiantly to stem the tide by offering title monitoring services, which alert property owners as soon as a deed affecting their title is filed. These services, while helpful, only provide a reactive solution. The damage has already been done.

Despite this grim outlook, there is a title insurance product that offers homeowners immediate peace of mind. Unlike traditional title insurance, which only protects against title fraud that occurred prior to the purchase of the property, this policy also covers fraudulent deeds that are filed years later. This crucial distinction means that if a fraudulent deed is discovered, homeowners can simply file a claim with their title insurance company and let them handle the problem.

Many homeowners who bought their policies after 1997 may already have this policy without realizing its full benefits. They should dig out their title insurance paperwork and, in the “Covered Risks” section, look to see if they are covered for “forgery and impersonation” “after the Policy Date.” If it’s not there, they should consider purchasing a new policy with this coverage. They should be prepared for some pushback, as even many title insurance professionals are unaware of this option. The American Land Title Association (ALTA) offers an exemplar of this policy under the name Homeowner’s Policy of Title Insurance, which is distinct from the similarly named Owner’s Policy of Title Insurance that does not provide the same protection.

Deed fraud is an invisible and growing threat, but homeowners are not powerless against it. By securing appropriate title insurance, property owners can protect themselves from the nightmare of expensive legal battles. This simple step ensures that if fraud occurs, the insurance company will take over, allowing homeowners to sleep easy.