Part 2 of 2: ByWayneS.Bell(Chief Counsel) andSummerB.Bakotich(Special Investigator) – California Department of Real Estate
Part 1 click here
Last week we discussed Fraudulent Deeds recorded against properties. This week we will discuss scams used to falsify deeds. Following is an article received from the California Department of Real Estate.
There are numerous types and scenarios of deed fraud, and they are only limited by the creativity, abilities, and tactics of the fraudsters. Thus, the cases mentioned below are not exhaustive, but illustrations only.
A fraudster may forge a homeowner’s name on a quitclaim deed or another deed to a home. The deed is acknowledged and signed by a notary public (either legitimately based on false identification or illegitimately), and then recorded, effectively transferring the property to the scammer without the knowledge of the true homeowner. The bad actor then obtains a mortgage loan on the home and uses the loan proceeds for his or her own use. The loan payments are not made and the home goes into foreclosure.
A criminal might trick or pressure a homeowner into signing a deed for the home, thus “transferring” the property to the fraudster or another when the deed is recorded. The homeowner is essentially unaware that the document they are signing is a grant deed. In this regard, it is extremely important for a property owner to never sign documents with blank spaces left in them, and to never sign a real property deed or property-related document that he or she has not read and does not fully understand. Owners should also be very skeptical of assertions that documents to be signed are of no consequence or are “just a bunch of legalese” and not really important. Where owners are unsure, or have questions regarding real estate title documents, they should contact a licensed California real estate broker or salesperson, or a California lawyer, for advice and counsel.
Sometimes the homeowner is falsely told the deed will be recorded upon the happening of a condition, but the deed is recorded regardless of the condition being satisfied or completed.
A distressed homeowner might seek help in avoiding, or be approached by a person who falsely claims that he or she can help the homeowner to avoid, a pending foreclosure. A homeowner may be falsely advised to sign a number of recordable deeds or other documents, which are then recorded and “cloud” (create defects in) the title to the home. A party who receives the deeded interest may take out a loan or sell the property to another. Also, more commonly, a fractional deed may be recorded, with or without the property owner’s knowledge, over to a party who has filed for bankruptcy protection. This deed transfer and the pending bankruptcy are then sent to the lender in order to delay the pending foreclosure. It is important to understand that these types of scams may delay a foreclosure while the lender or servicer of the home loan unwinds the fraudulent deeds, but it will not stop an otherwise lawful foreclosure. In this regard, property owners must be extremely wary of claims by solicitors who tell owners that a deed must be recorded on their property(ies) (transferring ownership to the solicitor or some other third party) in order to save the property(ies) from foreclosure.
In other cases, a grant deed may be signed under a power of attorney for real property transactions, and then recorded. In this type of situation, the person with the alleged power of attorney will sign the deed on behalf of the grantor and the homeowner never signed a power of attorney document authorizing the power of attorney and/or does not know the person executing the deed under a power of attorney.
There have even been cases where a property owner’s deed is stolen and then used by the fraudster to create a new deed and forge the homeowner’s signature. For this reason, it is extremely important to safeguard your original recorded property deed and any real property title documents. Having said that, it is noted that even where your deed is safe and secure, everything a criminal needs to commit this type of fraud in California is available in the public records maintained by the recorder in the county in which your property is located. It may take a bit of effort by the criminal, but he or she can access a copy of a deed on your property and simply create a new deed showing himself or herself as the transferee, and then record that forged deed.
It should be observed at this point that while perpetrators of this type of fraud can be a family member or business associate of the property owner, or entirely unknown by the property owner, this fraud may involve the work of a complicit, fraudulent notary public. Because grant deeds, quitclaim deeds, and deeds of trust are documents that must be signed in the presence of notary public in California, the forging of any such document may also involve a cooperating notary public. In some instances, an individual may impersonate a notary and unlawfully acknowledge the document, or may be a true notary (i.e., appointed and commissioned by the Secretary of State) who acknowledges a deed without confirming and/or reviewing the signer’s identification document in compliance with California law. In both cases, the documents are acknowledged fraudulently and then presented to the county recorder for recordation.
A Note Regarding Fraud “Targeting”:
The victims of fraud involving forged and/or fraudulent deeds are often times senior citizen homeowners, who have substantial equity in their property or who own their homes free and clear of any mortgage loan. In such cases, the fraudsters can create a fake Promissory Note showing that the senior citizen owes the scammer money, and then forge and record a Deed of Trust securing the Promissory Note. The senior may never know about the recorded deed during his or her lifetime. Obviously, a number of fraudulent deeds could be created and recorded where a property has significant equity.
In addition, homeowners whose primary language is not English may be a potential target of deed fraudsters.
Moreover, those who commit deed fraud also target distressed areas and neighborhoods where there are abandoned and vacant homes. In those cases, the criminal would conduct a title search on the targeted property, forge a deed with the name of the true owner, record the false deed, and then either sell the home or take out a loan against the home.
Warning Signs of Deed Fraud.
When you receive notification or become aware of:
1. A recorded document on your property where you never signed the document and your signature was forged;
2. A recorded document on your property where ownership in your property, or a portion thereof, was transferred or sold to another party without your knowledge;
3. A recorded document on your property where the signer of the document was deceased at the time of execution of the document;
4. A loan was taken out on your property without your knowledge; and
5. Changes or alterations were made to a recorded document after you signed it.
Also, if you:
1. Stop receiving your property tax bill or notices;
2. Receive a Notice of Default or Notice of Trustee’s Sale when you own your home outright (free and clear of a mortgage loan), or when you have a mortgage and you are not delinquent on your loan payments;
3. Receive loan documents in the mail for a loan that was obtained without your knowledge; and/or
4. Receive real estate documents in the mail for a transaction on your property that was conducted without your knowledge.
If You Have Been a Victim of Fraudulent Deed Activity, You Must Take Immediate Action: Report The Activity to Government and Enforcement Authorities.
Whether you learn of the forged and/or fraudulent deed from the county recorder, your title company, a lender or servicer, a real estate licensee, or from any other source, you must act immediately to protect your ownership interest in your home.
You should immediately gather and collect all of the information, documents, and other evidence you have and report the forged and/or fraudulent deed to:
1. Your local police and/or Sheriff’s department, and to such police agencies where the property is located (if different from where you reside).
2. The offices of the City and District Attorneys where your home/property is located. The Los Angeles District Attorney’s office has helpful tips for consumers regarding foreclosure fraud on their website. It can be accessed at http://da.co.la.ca.us/cpd/foreclosure.htm
3. The office of the recorder in the county where your property is located.
4. Your local city’s or county’s department of consumer affairs.
5. The California Secretary of State, Notary Public Section. The Notary Public Section is responsible for investigating violations of law by notaries. If violations are found, the Section may take disciplinary action against the law-breaking notary pursuant to the California Administrative Procedures Act. If you would like to file a complaint against a commissioned notary public, or wish to report a person impersonating or fraudulently using the credentials, seal or other indicia of a notary, please contact the Secretary of State, Notary Public Section at (916) 653-3595 or via the Internet at www.sos.ca.gov/business/notary/. Also, if you are interested in filing a claim against or learning about the availability of a notary public’s surety bond, please contact the county clerk’s office identified in the notary’s seal and request information about the notary public’s bonding company.
6. The California Department of Real Estate at www.dre.ca.gov if a real estate broker or salesperson, or unlicensed person purporting to be a real estate licensee, is involved in the forging of any deed or fraudulent recording of a false, fictitious, or forged deed. The DRE has a Consumer Recovery Fund that may be able to compensate you (up to statutory limits) if you meet certain requirements.
Other Actions to Protect Your Property Interests.
1. Review Your Title Insurance Policy; Contact Your Title Insurer.
If you have a title insurance policy on your property (this is a policy that may have been obtained when you first purchased the property), contact the title company that issued the policy to inquire if you have insurance against forged deeds recorded after you purchased your home. Some policies do offer homeowners protections against forgery after the homeowner has taken title to the property. More importantly, if you become aware of a forged deed in the chain of title to your home, and have a title policy with forgery protection, the title company may be able to help you get the fraudulent deed removed from the record via civil litigation and/or to cover certain costs up to the policy’s coverage limits.
2. Seek and/or Commence Legal Action to Unwind Deed Scam(s) and to “Clear” and “Quiet” Your Property’s Title.
Because of the “cloud” on your home title created by fraudulent deeds, an action in court must be commenced to “quiet” title to the property. That is the legal term which refers to cleaning, cleansing or clearing the title to the property’s official records by invalidating the forged, fraudulent and improperly recorded deed(s) and document(s). For more on “Cloud on the Title” click here.
Sometimes a City Attorney or District Attorney may be able to obtain a court order quieting the title in connection with a criminal prosecution of the criminals or fraudsters for forgery, grand theft, and other criminal counts. If that is not a possibility, you should contact, meet with and hire a knowledgeable California lawyer to bring a quiet title action. If you cannot afford a civil litigation lawyer, you should call the State Bar of California or a local county bar association and ask for a referral to a public interest law firm, and then meet with a lawyer there as soon as possible.
The important thing is for you to act immediately to protect your ownership rights. Lawyers have the training to know whether a fraudulent deed is “void” (invalid from the beginning – this is the case with a “forged” deed; and which may be also be the case where a property owner has been fraudulently deceived about the nature of the title document executed and thereby “excusably ignorant” as to the effect of the document) or “voidable” (valid until annulled by a court or official action), the necessary and/or most advantageous legal and equitable arguments to make on your behalf, the various applicable remedies available to you as the victim of fraud – which might include, in addition to a “quiet title action” and without limitation, causes of action for declaratory judgment and ejectment, and the proper way to plead the case to a court.
- Because each case is different and is based on the property record and the facts of the crime or scam, this “consumer warning” has been written in general terms and is not – and should not be viewed as – a substitute for the professional and competent legal advice that you should seek.
- In addition to safeguarding your original property transaction records as recommended above, (and while it may be bothersome) property owners should periodically check “title” to their property, just as they check on their credit. Also, the next time you purchase and/or finance real property and are considering a title insurance policy, it would be wise to inquire with the title company about the different protections and risks covered under their policy.
Conclusion.
Deed fraud seems to be ever growing, and it can scam you out of your home or any other property you own. As discussed in this alert, such fraud can be perpetrated against any property.
You need to be proactive, stay informed about the status of your property title and records, protect yourself as much as possible3, and take immediate action if you become a victim.
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Nancy Hankin
