Throughout 2019, our articles have been about problems that could have been solved or were solved because of title insurance. We are continuing the theme in 2020. As you read our articles, keep in mind that while some issues cannot be avoided, there are many that can be prevented.

A buyer enters into a contract to buy a lovely home from a seller. The buyer is provided with a title search of the property which discloses the seller as the owner of record. There are no liens on the property because the seller acquired the property from Fannie Mae, who received a judicial deed through a foreclosure action. The transaction closes, the buyer receives the owner’s policy from the title company and takes possession of the home.

Subsequently, the buyer is notified that he is trespassing on property owned by Fannie Mae and served notice to leave the property. Confused the buyer contacts his attorney, she advises him to file a claim with the title company.

Upon closer inspection, it turns out that the seller had recorded a forged deed to themselves from Fannie Mae, and then sold the property to the buyer. Luckily, the buyer had title insurance, and was financially compensated. But could this have been prevented?

The title company did a valid search on the property and confirmed that the foreclosure had been done properly. The judicial deed to Fannie Mae was a valid conveyance. However, if the title company had looked more closely at the deed from Fannie Mae to the seller, they would have seen that it was notarized by the same party that notarized the seller’s signature on the deed to the buyer. This may have led the title company to question the notary, and if they had looked up the notary, they would have seen she was not a valid notary. Additionally, their suspicions could’ve led them to do a grantee search on the seller, in which they would have found several deeds to the seller, all from different grantors whose signatures were notarized by the same person, and all properties that were owned by lenders.

Hindsight is 20/20 and it is very difficult to clearly see the flaws in a transaction in the moment. Questions, attention to detail, training and experience can be our best weapons at avoiding losses caused by fraud.