Homeowners, think twice about home title protection. Here’s why5 min read
Calculating people are always looking for ways to separate the rest of us from our money. Such, it appears, is the case with Home Title Lock, an outfit that promises to “protect” you from home title theft.
Home title theft is when a criminal gains the title to your home and either sells it or takes out a mortgage on it. The bad guys do this by simply forging your name on a deed and recording it with county officials. The county recorder is obligated to place the title in the records, but not to verify its legality. Unless the deed is obviously fake, it is recorded as a matter of course.
To “protect” homeowners from this scam, Home Title Lock says it will monitor a subscriber’s title, 24-7, and notify them right away if anyone tampers with it. The cost: $19.95 a month.
There’s no telling how often home title theft occurs. But the company, whose spokesmen include defrocked attorney Rudy Giuliani and former Speaker of the House Newt Gingrich, maintains it happens with regularity. Indeed, the company claims that the FBI classifies home title theft as “one of the fastest growing” crimes in America.
ABC News has thoroughly trashed that claim, along with the unsubstantiated claims of two supposed victims of the crime. In a major story published in mid-June, the network said the FBI has no evidence of ever making such an assertion. Another Title Lock spokesman, former FBI agent Art Pfizenmayer, provided a document to ABC to try to justify the claim. But the document he provided was nearly two decades old and “wasn’t about home title theft at all,” but rather mortgage fraud, ABC found.
As the network points out, the two are entirely different: “Mortgage fraud involves lying to lenders to obtain loans, while title theft involves filing fraudulent documents with county authorities to claim ownership of a property.”
ABC also checked with numerous sources to see just how prevalent title theft really is. While some jurisdictions said it is not common, others said it was epidemic.
But Steve Gottheim, general counsel for the American Land Title Association (ALTA), told ABC that his members are “not seeing (title theft) nationwide.”
Others say the same.
“If it comes up once a year, I’d be surprised,” Nathan Bossers of Boston National Title told me.
“From what I’ve been able to find, this is rare,” Colleen Taylor of the Old Republic National Title Insurance Co. wrote in a trade magazine in March.
ABC asked Home Title Lock how many cases of title theft it has found, as well as any situations in which the service has helped someone reclaim a stolen title and how much was spent covering a customer’s legal fees. No such information was forthcoming, the network says.
And here’s the rub: Even if Home Title Lock notices something’s amiss with your title, you are pretty much left to deal with it on your own.
It would be “extremely valuable” if a company paid the legal fees necessary to clear the title of a forged document, real estate litigator William Maffucci told Smart Business Philadelphia. “But that’s a huge ‘if.’ I’m not aware of any providers of ‘title theft’ protection” that do that. If they did, Maffucci said, the service “would almost certainly cost much more.”
Diane Tomb, CEO of ALTA, agreed. “Paid monitoring services send alerts to customers when any type of document is filed,” she told me. “These companies are not title insurers and typically don’t pay to help protect a consumer’s property rights.”
Instead of subscribing to Title Home Lock or a similar service, savvy owners can check with their recorder’s office as often as they like. In some places, you can sign up to receive free notifications if any type of document is filed against your property’s address.
Even if a forged deed is filed on your property, Maffucci says, the document conveys nothing because it is not legal.
Agrees Tomb, “A false deed does not actually cause the current owner to lose his property rights.”
Nevertheless, title theft can have a “devastating impact” on the homeowner, Maffucci said. Homeowners must hire an attorney and file suit to clear the title, which could be a lengthy, expensive process.
First, though, think back to when you purchased your house. If you needed a mortgage, you almost certainly purchased title insurance to protect your lender against any defects in your home’s lineage that could cloud your ownership. You were likely also given the opportunity to purchase a separate title policy that protected you.
Because regular title insurance protects against defects that occurred up to the day you took ownership, it won’t help with title fraud. But so-called enhanced policies usually cover post-policy forgeries and other possibilities.
Quotes for enhanced policies range from 10% to 40% more than the premium for a regular title policy. Make sure the policy covers title theft before you sign up.
If you didn’t purchase such coverage at closing, you can buy it now, Bossers tells me. If you want to cover the cost of your house when you purchased it, coverage will cost roughly the same as it would have then. If you want to cover the current value, though, you’ll pay more.
Meanwhile, regular title insurance will protect a buyer who unknowingly purchases a house from someone who used a fake deed to pretend to be the owner. But buyers also might want to consider enhanced coverage. After all, it you were a victim buying in, you also could be a victim selling out.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at [email protected]