By Jane Young, CFP, EA
You have probably been inundated with commercials advertising title lock services that spark and prey on the fear that fraudsters may attempt to assume ownership of your home. There is a common assumption that title lock services offer insurance to protect property owners against title theft. Title lock services are not insurance and do not put a lock on your title, they provide a monitoring service. They will notify you if your title has been transferred out of your name. They do not prevent the fraud - they send you an e-mail after the fraud has occurred.
Unlike title lock services, everyone should purchase title insurance to insure a clean title before purchasing property. Title insurance looks backward and protects you for what occurred up to the date of purchase. It does not provide protection for future events.
Regarding title theft, the chain of events that most consumers are most concerned about is someone gaining access to your personal information and forging your name to change ownership on your title. They subsequently take out a mortgage or home equity loan against the equity in your property and disappear. You discover the title theft when the bank moves to foreclose on your property.
Instances of title theft are rare and the chances of a financial institution lending money on a fraudulent title is unlikely. Lenders make every effort to ensure the title is good before they loan money, and the most lenders purchase title insurance. The title insurance company will conduct a full title search which should uncover fraudulent activity.
If a bank lends money based on a forged deed, they will have difficulty legally collecting from the rightful owner. The lender has no legal claim on the true owner. Ironically, the lender may have recourse against the title insurance company if they failed to uncover the title theft.
If you discover that your title has been tampered with, immediately contact your county clerk and recorder. Depending on the complexity of your situation, you may need to hire an attorney to clear your title.
Those most likely to be victims of title theft are the elderly and those who own second homes, vacation homes, vacant homes, and investment property. These individuals are less likely to notice when property tax or utility bills stop arriving. Most consumers are more in tune with bills associated with their primary home.
If you are worried about title theft, you can subscribe to a title lock service for about $15 per month. However, there is no need to pay for a monitoring service because you can do this yourself. Property ownership records are public information and can easily be accessed on your county’s website. It takes less than 5 minutes to log into your county website, enter your address and verify the ownership records. Make this part of your monthly routine when you are paying bills.