Graceland, the famous Tennessee home of the late Elvis Presley (now a museum and tourist attraction), has been in the news recently for its involvement in a foreclosure dispute.1 Riley Keough, the oldest grandchild of Elvis, is in court contesting an attempted sale of the property, claiming the company trying to sell the estate as collateral falsified the loan and deed documents. While the case works through the court system, the controversy has sparked a new wave of interest in title fraud among the public. Banks and their customers may be particularly worried about title fraud, considering the potential losses associated with this kind of fraud. Financial institutions risk financial loss due to mortgages and loans secured by fraudulently owned property. Financial institution customers who are victims of title fraud risk financial loss of the equity they have worked hard to build in their property and risk difficulty in securing future lending due to a negatively impacted credit rating. What is Title Fraud? Title fraud occurs when a “thief” steals a person’s identity and/or forges documents to seem as if they are the rightful owner of a property. Once they do so, they can wreak havoc by taking out liens or mortgages on the “stolen” property, burdening the true owner with the financial obligations. These thieves also may attempt to sell or rent out the property to an unsuspecting third party, leaving the true owner in a confusing and expensive legal battle. While these fake deeds and mortgages do not legitimately transfer ownership of the property or create financial obligations the victim is liable for, the process of undoing this harm by proving true ownership can require a devastating amount of time and money. Despite these adverse consequences, banks and their customers should understand the factors influencing the probability of falling victim to title fraud in order to evaluate their individual risk exposure. Evaluating the Risk of Title Fraud The good news is title fraud is not as common as other types of identity theft crimes.2 While some people claim the number of victims of title fraud has risen in step with the recent increase in online closings and notarizations,3 it is unclear whether this characterization is accurate. The FBI’s Internet Crime Report documents the number of victims in the U.S. who have suffered from real estate crime — meaning they have experienced “loss of funds from a real estate investment or fraud involving rental or timeshare property:”4 • 2020: 13,638 victims. • 2021: 11,578 victims. • 2022: 11,727 victims. • 2023: 9,521 victims. These figures suggest the frequency of title fraud may not be on a dramatic rise, contrary to popular perception. Regardless, the following risk factors may help someone determine whether a piece of property is more vulnerable to title fraud: • Property with out-of-state owners. • Property with owners who have more than one home. • Property or real estate left vacant or unoccupied. • Investment property. • Vacation homes. • Property with high equity (no mortgages or liens). • Inherited property, where the original owners are deceased. • Property with aging owners or owners who are inattentive with personal information and technology. Each of these risk factors provides criminals with a greater opportunity to “steal” the title without the true owner knowing. It is easier for title thieves to target individuals who make it easy to steal their identity or individuals who are not (or seem as if they are not) paying attention to their property. Particularly relevant to banks and their customers, property with high equity is more at risk than property encumbered by mortgages or other liens. This is because title thieves know financial institutions with an interest in a piece of property as collateral could be monitoring these properties in various ways. Even a little extra monitoring increases the likelihood a title fraud thief gets caught, making those properties worse targets. Viva Las Titles! Understanding the Risk of Property Title Fraud Emily Tosoni, Associate, and Lauren Dubas, Summer Associate, Baird Holm LLP COUNSELOR’S CORNER 22 NEBRASKA BANKER
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