Home Title Lock is a service that I have heard advertised recently. The service purports to protect home owners against fraudulent title schemes. To oversimplify it, here’s an outline of the scheme that the purveyors of this service are talking about. First, suppose a thief records a forged deed, transferring title to your home to the thief’s name without your knowledge. Next, the thief gets a loan using your home as collateral. Finally, the thief absconds with the funds from the loan. You are left with a home that is technically titled in the thief’s name, and is encumbered by a loan that you didn’t get.
When I heard the advertising for Home Title Lock, I couldn’t help wondering about two aspects of their pitch. First, how many home loans are made in which the lender doesn’t check to make sure that the borrower has good title to the home? Second, would such a scheme be covered by any other insurance that a homeowner would already have?
The type of scheme I outlined above can happen, mainly because there are some lenders who make relatively small home equity loans without bothering to get title insurance, or even a title search, on the property that is the collateral for the loan. No major home mortgage lender is going to do it that way, however, for the obvious reason that they want to make sure, before they make a large loan, that they will have an enforceable lien against the property that’s the collateral for the loan. The lender either charges the borrower for the cost of the title insurance or builds the cost of the title search into the loan, anyway.
But because there are some lenders whose loan practices can allow a thief to pull off the scheme Home Title Lock is warning about, that risk does exist. I don’t think there are very many lenders that do it that way, and the ones I have seen doing it that way are making relatively small loans, so it’s probably not as big of a problem as it sounds like.
The bigger question about Home Title Lock in my mind is whether they are selling a service that’s not even necessary, or at least not anywhere near as vital as their advertising suggests. So I took a look at the form of title insurance policy that is probably the most widely used for single family residences. It’s called the American Land Title Association (ALTA) Homeowner’s Policy of Title Insurance. The most recent version of that policy that I could easily find, which was last revised in 2013, says that one of the covered risks is: “Someone else claims to have rights affecting your title because of forgery or impersonation.” That’s exactly what Home Title Lock is telling you that you should protect yourself against by purchasing their service.
That doesn’t get us all the way to the conclusion of this analysis, however, because most title insurance coverage is backward-looking. In other words, it insures against conditions that existed when you got the insurance. But the ALTA Homeowner’s Policy has another covered risk provision that says this: “Any of [the] Covered Risks… occurring after the Policy Date.” The policy date will almost always be the date that you acquired the property.
Now we’re getting somewhere, because that is, once again, exactly what Home Title Lock says they are going to protect you against: a forgery affecting your title that occurs after you acquired the property. So it sounds like Home Title Lock is selling protection against a risk for which you already have insurance, if you have an ALTA Homeowner’s Policy.
I haven’t done any research to confirm that my reading of the policy is the same as the interpretation a title insurer would give it, but the meaning of those covered risk provisions seems pretty plain. If someone forges a deed to your property, then gets a loan by claiming to be the true owner of the property, I think the ALTA Homeowner’s Policy insures you against that risk.
I also think, although I have not researched this either, that if your homeowner’s insurance policy (the casualty and liability policy that you pay for every year, not the title insurance policy that you got when you bought the property) includes identity theft coverage, that might also insure you against a fraudulent deed.
Since I have not done any research to confirm my conclusions on these insurance coverages, if this is a topic that concerns you, get out your title insurance policy, or your homeowner’s insurance policy, and read it. If you have questions, or if you think you may be the victim of a fraudulent title scheme, please give me a call.
THE RULES ON TENANTS’ RIGHTS WHEN PROPERTY IS SOLD REALLY AREN’T THAT COMPLICATED
I don’t understand much of anything that goes on in Washington DC, but I really don’t get what’s going on there with residential landlords and tenants, even though that is a topic that I thought I knew something about.
There’s a law on the books in Washington DC that requires a residential landlord to give their tenant a right of first refusal if the landlord decides to sell the property. A right of first refusal simply means that if a property owner receives an offer to purchase their property, the owner must then give their tenant the right to purchase it first (hence, the tenant has right of first refusal). The law seems to be predicated on the notion that the tenant’s right to remain in the property can be terminated by a change of ownership.
But that’s not how it works, at least in jurisdictions like Arizona where common law property rules still have some vitality. If I rent my property (whether it’s residential or commercial) to you under a lease for a defined term (period of time), you have the right to stay in the property for the length of that term, whether I continue to own the property until the term of the lease expires or not. I can transfer ownership of the property to someone else if I want to, but that ownership is subject to your lease until the term of the lease expires. Once the lease expires, however, I can terminate your occupancy for any reason, whether I want to move into the property myself, sell it to someone else who wants to occupy it, or lease it to someone else.
Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions. He is also a noted blogger, and you can find more of his articles on his private blog,
Contact Attorney Hannah: firstname.lastname@example.org or 520/ 322-5000
This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.