PERSON OF THE WEEK: Although by no means a silver bullet, new legislation recently signed by Tennessee Gov. Bill Lee marks another step forward in the fight against title fraud, which has been on the rise in recent years.
The new legislation aims to protect homeowners from title fraud by specifying the people and entities allowed to submit electronic records to a county register – making “filing vendors,” not registers of deeds, responsible for ensuring that the records being transmitted are legitimate.
Title fraud – also known as deed fraud – is a growing problem that is poised to get worse before it gets better. In April, the Boston Division of the Federal Bureau of Investigation (FBI) posted a warning to property owners and real estate agents about a steady increase in reports of quit claim deed fraud it has received.
So what is driving the increase in title fraud, how prevalent is it, and what can be done to combat it? To find out, MortgageOrb recently interviewed Jon Dovidio, vice president of business development for EquityProtect, which offers fraud prevention and data security solutions to the real estate industry.
Q: How much has home title fraud increased nationally in recent years? Do you have stats you can provide?
Jon Dovidio: According to the FBI’s Internet Crime Complaint Center, from 2019 through 2023, 58,141 victims reported $1.3 billion in losses relating to real estate fraud.
The Boston Division of the FBI – which includes all of Maine, Massachusetts, New Hampshire, and Rhode Island- reports that during the same period, 2,301 victims reported losing more than $61.5 million.
This includes 262 victims in Maine who lost $6,253,008; 1,576 victims in Massachusetts who lost $46,269,818; 239 victims in New Hampshire who lost $4,144,467; and 224 victims in Rhode Island who lost $4,852,220.
Additionally, according to Gitnux.org, an independent market research platform, title theft cases have increased by over 300% in the last five years.
Q: Some people in the housing and housing finance markets argue that deed/title fraud is so rare that it’s almost insignificant. They further argue that it is almost always correctable, through investigations and law enforcement, if reported. Is the industry turning a blind eye to the recent rise in deed/title fraud, or is it getting the attention it deserves?
Dovidio: At our firm, we believe it’s time for the industry and policymakers to shine a brighter light on this growing, and now preventable, crime. Deed and title theft may not occur as frequently as car theft, but any crime showing a 300% increase warrants serious attention.
Likewise, saying the crime is “always correctable” may be misleading. According to independent market research platform Gitnux.org, only 33% of victims are able to recover their homes or financial losses. While it’s true that fraud is not legally protected, proving that fraud occurred can be both challenging and costly.
That’s the crucial point many overlook: Simply reporting the fraud doesn’t make it go away. Once reported, the burden shifts to the homeowner to prove what happened and that process often requires two things many people lack: time and money. Once notified, the lawful homeowner needs to file a quit title action, which can run between $1,500 and $10,000 – and this is just an average. The cost of these proceedings can escalate quickly.
Q: Many argue that the “front line” for combating deed/title fraud is at the municipal level – the town clerks and assessor’s offices that handle the transactions. Why is it that so few municipalities have measures in place to prevent it – such as notifying property owners immediately when paperwork is filed?
Dovidio: To date, I’m not aware of any municipality offering proactive prevention, aside from a few promising partnerships EquityProtect is currently developing. Across the country, many counties have implemented “notification and alert” systems, but these are entirely reactionary. The crime occurs, and then the property owner is alerted. Whether it’s five months, five days, or five minutes later, the damage is already done, leaving the rightful owner with an expensive and avoidable legal mess.
The core issue isn’t a lack of desire. I’ve spoken with county recorders nationwide, and nearly all want a real solution. The problem lies in the structure of the county recorder system itself. It was designed to be administrative, not investigative. In effect, it functions as the most efficient paper processing entity in the country, handling roughly 300,000 documents per day. Expecting each document to be thoroughly vetted is simply unrealistic in terms of time and cost.
Adding to the challenge, the U.S. recording system operates under a “race to record” principle: Whoever records a document first often gains legal priority. This puts the burden on the rightful owner after the fraud has occurred and to resolve the matter through the courts.
Q: Explain the different types of deed fraud. Seems there’s basically two main types – but how do they work?
Dovidio: There are many different forms of deed/title fraud. The two forms you are probably referencing are the “classic” version, or when a fraudster files a quitclaim deed transferring ownership, and that of seller impersonation, which is widely regarded as one of the fastest-growing forms of deed/title fraud.
Filing a fraudulent deed works exactly like it sounds, a fraudster files a deed (quit claim, warranty deed) with the county recorder and transfers ownership to an alias and attempts to sell or refinance the property. This form of fraud takes advantage of the deficiencies in the county recorder system and is the main reason we are seeing some of the recent legal updates in certain states. Seller impersonation, on the other hand, completely takes the county recorder out of the equation. This form of fraud is exactly what it sounds like, the fraudster impersonates the lawful owner and attempts to refinance or sell the property. A July 2024 ALTA study confirmed that 28% of title companies saw an attempted impersonation incident in 2023, with 20% encountering one in April 2024. Seller impersonation is accelerating, largely due to the ease of which real estate data can now be acquired. You can find anything, anywhere with simply a few clicks.
There are many new ways in which the crime of deed fraud is evolving as well. For example, the now famous Graceland fraud scheme. As I am sure you are aware, in this instance the fraudster did not file a quit claim deed or attempt to take out a loan. The fraudster created a fraudulent deed and stated Lisa Maria’s estate was delinquent on the loan. They nearly succeeded in auctioning off arguably the second most well-known home in America.
Q: How is AI playing a role in deed fraud and how might its use make the fraud even harder to prevent?
Dovidio: AI today is like the Wild West – unchecked and full of opportunity for those looking to exploit it. As AI advances, it’s making fraudulent activity easier and more accessible than ever before. Gone are the days when fraudsters needed advanced Photoshop skills to forge documents; now, they can simply command a computer to create them instantly. Large-scale language models are uncovering critical weaknesses in our systems. Using these systems, fraudsters can cross-reference massive datasets – like real estate owned by LLCs with
Secretary of State corporate records, and then quickly pinpoint vulnerable properties. With just a few clicks and a small fee to “update” corporate information, they generate seemingly legitimate documents that open the door to devastating fraud.
We are at a critical moment where this crime truly has the potential to explode and in a large part it will be due to AI.
Q: Explain how the new legislation in Tennessee aims to prevent or reduce deed fraud. How does this work? How would they verify the filing vendors – and can’t fraudsters still misrepresent themselves? Why does this legislation fall short in terms of prevention?
Dovidio: EquityProtect fully supports the attention the state of Tennessee is bringing to the growing issue of deed fraud. However, the notion that this new law will prevent or significantly reduce the crime may be an overstatement.
Currently, county recorders are often unfairly blamed for deed and title fraud. As previously noted, their role is administrative, not investigative. By statute, if a document appears to meet all legal requirements, including necessary signatures, the Recorder is obligated to record it.
This process leaves little room for discretion or verification.
In reality, this new law seems to shift blame rather than solve the problem. As the Tennessee House Republican Caucus stated, “Filing vendors, not registers of deeds, are now responsible for ensuring records being transmitted are legitimate.” While this shift in accountability is a step in the right direction, the law ultimately does very little to protect homeowners from fraud in the first place.
The legislation places responsibility on notaries, for example – individuals who may have completed a $200 course and purchased a $25 stamp – to validate potentially fraudulent grant deeds. It’s unclear how this approach meaningfully prevents deed fraud.