Jul 25, 2006 -- An identity thief steals your personal information, uses it to take out a home-equity loan in your name and absconds with the cash. You try to sell your house and know nothing until a few days before the closing, when the buyer's lender or the title company uncovers the outstanding loan on your home and says, "Stop!"
"It's too late to fix the problem and keep the sale on track," says Howard Gold, president of National Homestead, a title guarantee company. "Besides clearing your name, you have to deal with the mess of a delayed closing and a frustrated buyer at the worst possible time. Your sale could even fall through."
It sounds incredible that an identity thief could get a phony home-equity loan, but it's not hard for a skilled crook, says Gold, who's also a busy real-estate lawyer.
Home loans are handled by phone, fax and email, and there's typically no physical inspection of the interior of the house. The crook also uses your stolen identity to gather your financial information so he can convincingly pose as you. The identity thief could be a random stranger or an insider -- a relative, former spouse, or a crooked employee at a lender, mortgage broker or law firm who knows how to work the system.
FBI Assistant Director Chris Swecker calls mortgage fraud "pervasive and growing."
According to a 2005 member survey by the American Land Title Association (ALTA) title problems were found in 36 percent of all residential real estate transactions (new and resale homes and refinances), up from 25 percent in 2000. ALTA doesn't track how many of these are caused by identity theft.
But most title problems still result from negligence, oversight or lethargy, not fraud, Gold says. The refinancing boom has flooded the system with about 475 million documents since 1999, and overburdened lenders, lawyers and county recorders didn't record all these documents properly. Though the homeowner paid off a previous mortgage, proving it is time-consuming and can cost a lot in legal fees and additional escrow.
Information is the key to preventing a rude shock. Gold's Company, National Homestead, offers the "Ready to Close" Title Guarantee, which can be ordered online by the homeowner before the sale or a refinancing. Available in all states, the service guarantees to both find and clear any title defects, including fraudulent mortgages or loans on the property.
The service, at www.nationalhomestead.com, uncovers and corrects erroneous and fraudulent mortgages, missing mortgages assignments (transfers from one lender to another), liens and other title defects so that the closing will proceed smoothly. The one-of-a-kind service costs $295 and it takes just a few minutes to order it online.