Real Estate Law Enforcement: Catching Up to Deed Fraudsters

Some years back, the state of Georgia, under the Georgia Code (GA § 4 4 -2-43), made stealing houses by recording fraudulent or counterfeit real estate deeds a felony, incurring 1-10 years in prison. Witnesses who help perpetrate Georgia deed fraud are subject to the same potential penalties.

Georgia is not alone in its resolve. The FBI reports that real estate fraud ranks among the fastest-growing U.S. crime categories. Now, laws are catching up to the fraudsters, deed recorders are starting to alert people to filings on their homes, and cities are helping people confront the con artists.

The View from the States

Those who wrongly take or keep houses face fines and sentences in every state, and can be charged either for felonies, which carry long sentences, or as misdemeanors, which carry sentences up to a year.

Sometimes the crime begins by overstepping the boundaries of a power of attorney, or taking advantage of the role of a deceased person’s representative. Manipulative personal representatives use their authority to sign for owners, transferring deeds into their own names or family members’ names.

Another type of house-stealing involves fake signatures. Once a fake deed is created, some fraudsters sell property to unwitting buyers — typically with quitclaims, which don’t require title searches or warranties. In every state, certain types of forgery can be charged as felonies. In New York State, for example, deed forgery is classified as second-degree forgery — which makes it a felony.

Your state law sets forth the statute of limitations; after that time passes, many fraudulent deeds will be difficult to set aside. InTexas the time’s up after four years. But if the deed is a forgery, it’s void from the start, so not time limit applies. A forged deed is void ab initio and has no valid existence.

The personal representative who wrongly signs a deed has committed fraud — but not forgery, because the document was, on its face, executed by the owner’s representative. Such a deed may be held void in a court, but it is not the same thing as a forgery, which was ineffective from the moment it was created.

Note: Criminal law is not the victim’s only recourse. Deed fraud is also subject to civil actions by those who are harmed by it.

Enforcement at the Federal Level

Forgery is a federal crime if the deed is taken or sent across state lines or if the crime spans multiple states. A forgery could also constitute the federal felony of identity theft. Various types of real estate fraud can be prosecuted at the federal level, especially when carried out through organized criminal schemes. Federal crimes tend to carry harsher sentences.

The Federal Bureau of Investigation focuses on organized fraud for profit, sometimes committed by professionals in the industry who abuse their inside knowledge of real estate or mortgages to steal deeds, cash, or value from lenders or homeowners. The Secret Service, too, works with its field offices in states to arrest criminals who manipulate real estate documents for profit. The FBI and Secret Service even pursue individual deed fraudsters, if the community impact or level of loss is high. Another federal agency often involved in deed fraud is the Federal Housing Finance Agency, part of the U.S. Office of the Inspector General. The FHFA investigates crimes jointly with the states’ attorneys general and insurance departments.

Many real estate fraudsters sought by federal investigators steal others’ identities to defraud banks and credit unions. Others systematically take advantage of distressed mortgage holders. The perpetrators pretend to be able to rescue the struggling homeowners by transferring the deeds to investors, but their plans involve selling the properties and extracting fees from panicked homeowners. Sometimes the swindlers rent the property back to their victims — while ignoring the mortgages, leaving the homes at risk of foreclosure after all.

Still other scams involve collecting names of deceased deed holders. The criminals scour the obituaries and forge deceased people’s names on deeds and record them so they can borrow money off the properties that they’ll never repay. Some deed fraudsters have been known to flee the country.

More Protective Policies Help Catch and Prosecute Deed Fraud

Catching deed fraud early matters. As with any fraud, the longer it takes to find and address it, the more complicated a problem can become. As a general rule, owners should check the county records connected with their property from time to time and be on the lookout for unusual filings.

Protective policy-making has occurred in the city of Philadelphia, which now offers the Deed Fraud Guard system. People can register to be notified of filings on their properties — and look at the documents for free.

New York City’s Department of Finance (DOF) now also lets people sign up for alerts that tell them when liens for unpaid debts and other documents are filed against their properties. The DOF urges New York City residents to take a number of actions including the following. The list is informative for homeowners anywhere:

Check deed records yearly for any unexpected deeds or liens.
Update your address after a move.
Never let mail pile up when away from home.
If you stop receiving utility or tax bills, or receive unusually steep charges, contact the finance department. Don’t ignore the matter, as someone else could be using your identity.
Check your homeowner’s insurance to find out if it covers deed fraud and assists with legal fees for righting the wrong.
Homeowners should also beware of calls about loan modifications from distressed mortgage consultants, even if these consultants claim to work with the homeowner’s mortgage.

Victims of house-stealing in New York are often elderly, ill, or struggling financially. The state is confronting the swindlers, cracking down on manipulative consultants and making it easier for victims to fight New York deed fraud in court. And it’s prosecuting the crime. In January 2019, the state Attorney General issued the state’s first deed fraud sentence: a 60-day jail sentence plus 5 years of probation, and restitution for the swindled New York City homeowners. Two months later, two Long Island residents were indicted on felony charges for house-stealing in Brooklyn and Queens.

After deed thefts are prosecuted, victims can ask the court to apply the conviction to a quiet title action, restoring their homes.

New Deed Fraud Wave Amidst the Pandemic

We updated our readers a little while ago about real estate fraud during the Covid-19 pandemic. This continues to be a big issue. Unemployment increases the chances that homeowners will be targets of deed theft or fraud.

In October 2020, responding to real estate fraud amidst the pandemic, NYC councilmembers introduced a new bill confronting deed theft, with plans to:

Create an annual Sheriff’s report on deed crimes.
Provide easier reporting channels for victims.
Create new notary responsibilities.
Restrict corporate names that are easily confused with public agencies’ names.
Declare a cease-and-desist zone in Brooklyn, enabling communities sign up for a do-not-call list to shut off contacts from manipulative mortgage consultants.

The City Sheriff’s office reports having arrested 49 people for alleged real estate scams in the past six years. But 2020 is making housing fraud harder to prosecute, as courts have suspended some of the processes necessary to interview witnesses and convicting perpetrators.

Deed Fraud Can Happen to Anyone

It’s not just happening in the big cities. In September 2020, Tennessee’s Washington County Register of Deeds launched a tool to send free property fraud alerts to those who entrust their deeds to the county recorder. Such tools are being offered by numerous counties and cities today, and it’s a good idea to request them, and to show vulnerable people how to do this too.

While fraud can happen to any of us, some of us are more vulnerable than others. The most likely to be targeted are elders, immigrants, people who get behind in their mortgage payments, and those who have second homes or who have vacated their homes to receive healthcare.

The manipulative schemes show no signs of abating. But attention is growing throughout the country. In the future, recorders and notaries, with the help of new communication technologies, will likely assume active roles in flagging suspicious deed activity. And vulnerable homeowners will receive more support than they did in the past. Financial struggles during the 2020 pandemic has only added urgency to this issue.

References

FBI: White-Collar Crime: Mortgage Fraud.

Trey Wilson, Dirty Deeds: The Important Distinction Between Deed Fraud and Deed Forgery (Dec. 29, 2019).

Carol A. Sigmond, New York Real Estate Law Reporter, Recent Investigation, Prosecution and Legislation Regarding Fraudulent Deeds (Dec. 2019).

Ryan Briggs, WHYY.org, Philly Steps Up Fight Against Deed Fraud With New Tools (Oct. 30, 2019).

Sadef Ali Kully, Council Bills Look to Protect Homeowners from Deed Fraud Amidst PandemicCity Limits (Oct. 15, 2020).

Photo from Pixabay.