Identity fraud is often used in mortgage fraud schemes in order to hide the identity of the perpetrators or to obtain a credit profile that meets lender guidelines. Lenders give loans based on a borrower’s credit profile, and fraudsters often use stolen identities as a means of acquiring property illegally. The increase in this type of activity is extremely relevant to title agents, since lenders will often try to hold them liable for not detecting fraud at the closing table. In these instances, lenders attempt to file a claim by alleging the agent failed to follow the closing instructions.
Closing instructions from a lender typically require the closing agent to ascertain and verify the identity of all parties involved in the transaction. This requires the closing agent to have each borrower complete and sign the ID affidavit, and obtain a copy of an unexpired government-issued identification that bears a photograph. When a scammer uses a false name or fraudulently claims they own property and the insurer issues a policy, the mortgage is potentially unenforceable.
Here are some suspicious activities that could raise red flags to potential mortgage fraud:
- Recent changes of title where new owner is now selling the property
- Closing funds not coming from the buyer, but some other party involved in the transaction
- A power of attorney is used and the attorney in fact is a party to the transaction who will financially benefit (other than a spouse or immediate family member who resides in the property)
- Payouts to third parties especially parties not on the lender’s specific closing instructions
Sorting through these red flags may improve the ability to detect identity fraud before reaching the closing table.
At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.
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