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Identity Theft and Your Home

November 20, 2008

I attended a meeting this morning where it was announced that there had been a significant rise in title insurance claims in New York State.  These claims are made against title insurance policies issued to either the homeowner (if he/she purchased this optional policy at the time they bought their home) or the bank lending the money for their purchase or refinance (such a policy is always required by the bank).

Claims due to fraud and forgery have increased, usually in connection with a limited form of identity theft.  The Thief forges proof of ownership to someone’s home and then either sells or refinances the property without the real Owner’s knowledge.  Many out of town investors are willing to buy homes based simply on a few pictures posted on the Internet.  The Buyer never visits the property until well after the sale at which time he is surprised to see that it is a vacant lot or a home occupied by the real Owner.  Alternatively, the Thief can pretend to be both Seller and Buyer.  He prepares a phony contract for the purchase of the property and then convinces a bank to lend him the money to purchase it.

The Thief, using your identity (and a false identity, if he is also acting as a Buyer), signs the documents needed to sell and/or mortgage the home, takes the money from the Buyer or Bank, and disappears.  If he has sold the property to a third party, the real Owner only finds out when the Buyer finally comes to town to inspect his investment.  If the Thief refinanced or pretended to be a Buyer, the real Owner only finds out when the new Bank (which has never received a mortgage payment) forecloses, and serves the real Owner with the legal papers commencing the action.

This reminds me of another prevalent scam, which occurs often in the City of Buffalo where many vacant and unmonitored investment properties exist.  The Thief poses as a Landlord.  He finds a Tenant, and has them pay as much rent as possible up front and in cash.  He hands them the keys to a house or apartment and disappears.  The Tenant finds out that the Thief has taken his/her money only when the real Owner stops by to inspect what he thought was a vacant house or apartment.