Is title theft insurance something a homeowner should consider?
Well, it may be an unneeded expense. There are several companies that are offering “title protection services” for a fee to homeowners. These companies are claiming they protect property owners from criminals who forge a homeowner’s name on a deed, file the deed at the local courthouse, and then take out a mortgage against the home, or some variation on this theme. While this type of crime has occurred, companies that are advertising this service may be exaggerating the risks of becoming a victim of this scam. The services being offered as a protection appear to be less an insurance offer and more a notification service if there is recording activity related to the property.
A forged deed is not legally valid and does not actually convey anything to the criminal that created and filed it. Only the property owner can convey title to a third party or encumber the property with a security interest against the title holder. Also, it would be very difficult for the scammer to mortgage or sell the property by using a forged deed to any knowledgeable lender or buyer. These days, lenders, title companies and real estate brokerages have safeguards in place so that there is very little chance a fraudulent transfer would not be discovered. The required credit reports, tax and employment information, appraisals and title insurance are all safeguards that should alert an owner, buyer or a lender that something is wrong. Any buyer or lender that purchased the “property” or lent funds in reliance upon a forged deed failed to exercise due diligence through a proper title search on the property and would be out of luck if they tried to foreclose on their security interest/mortgage or make any claims against the legitimate owner.
Some homeowners mistakenly believe that the services that are being offered are similar to title insurance. That is not the case. Title insurance is a one-time purchase that protects the owner and heirs against any claims challenging the validity of ownership prior to the date of purchase.
Of course, there is value in taking steps to be made aware if something has been filed that may impact the title to your home. Unfortunately, what most homeowners do not realize is that the services that are being offered for a fee, might be available FREE of charge from your local county recorder’s office. For example, Cook County, DuPage County and Sangamon County have FREE alert services where a property owner can register to receive notification if something has been filed against their property (see the links below). Many other counties across the state provide similar services which can be found on county web sites.
