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New AI Tools Facilitate Deed Fraud

Published: November 8, 2024 by Alex Lvoff

The advent of artificial intelligence (AI) is significantly transforming the landscape of real estate fraud, enabling criminals to execute complex schemes like deed theft with greater ease. A notable case involves Spelling Manor, a $137.5 million mansion in Los Angeles, where the owner alleges they are entangled in deed fraud. Scammers reportedly filed fraudulent documents that have prevented the owner from selling the estate, thwarting offers from buyers, including former Google CEO Eric Schmidt.

Understanding deed/title fraud

Deed fraud, also known as title or property fraud, occurs when someone illegally transfers ownership of a property without the owner’s knowledge or consent. Typically, fraudsters create fake documents or forge the owner’s signature on a deed to make it look like the property has been legally transferred to them. Once the title is in their name, they may try to sell or mortgage the property, leaving the original owner unaware until it’s too late.

How deed fraud works

  1. Identify a target: Fraudsters often look for properties that appear vulnerable, such as vacant land, unoccupied homes, or properties owned by elderly individuals who may not check their records frequently.
  2. Forge documentation: Using fake IDs and forged signatures, scammers create documents that appear to show a legitimate transfer of ownership. With modern technology, these documents can look highly convincing.
  3. Record the fake deed: Fraudsters then file these documents with the local county clerk or recorder’s office. This officially changes the ownership records, making it seem as if the scammer is the legitimate owner.
  4. Exploit the ownership: Once listed as the owner, the fraudster may sell the property to an unsuspecting buyer, take out loans against it, or even rent it out.

The impact on victims

In the summer of 2024, Elvis Presley’s family got confronted to a forged deed scam. A fake firm, Naussany Investments, falsely claimed Lisa Marie Presley owed millions and used Graceland as collateral. They placed a foreclosure notice and attempted to auction the estate. Riley Keough filed a lawsuit, exposing the firm as fraudulent and halting the foreclosure through a judge’s injunction. Lisa Jeanine Findley, who forged documents and posed as firm employees, was arrested and charged with deed forgery fraud and identity theft. She faces up to 22 years in prison if convicted.

The FBI’s Internet Crime Complaint Center does not specifically monitor deed fraud. However, in 2023, it processed a total of 9,521 real estate-related complaints defined as the loss of funds from a real estate investment, resulting in more than $145 million in losses.

Victims of deed fraud can face severe financial and legal issues. They may discover the fraud only when trying to sell, refinance, or even pay taxes on the property. Reversing deed fraud typically requires a costly and time-consuming legal process, as courts must determine that the transfer was fraudulent and restore the original owner’s rights.

Prevention and safeguards

There are several preventive measures and fraud prevention solutions that can be established to help mitigate the risks associated with deed/title fraud. These include:

For lending institutions:

  • Enhanced ID verification: Implement multi-factor identity checks at the loan approval stage.
  • Regular portfolio audits: Conduct periodic audits to detect unusual property transfers and title changes in their loan portfolios.

For title companies:

For realtors:

  • Training and awareness: Educate realtors on how to spot warning signs of fraudulent listings and seller impersonations.
  • Pre-transaction verification: Collaborate with title companies to validate ownership early in the listing process.

Acting with the right solution

Mortgage fraud is a constant threat that demands ongoing vigilance and adaptability. As fraudsters evolve their tactics, the mortgage industry must stay one step ahead to safeguard homeowners and lenders alike. With concerns over deed/title-related fraud rising, it is vital to raise awareness, strengthen preventive measures, and foster collaboration to protect the integrity of the mortgage market. By staying informed and implementing robust safeguards, we can collectively combat and prevent mortgage fraud from disrupting the financial security of individuals and the industry.

Experian mortgage powers advanced capabilities across the mortgage lifecycle by gaining market intelligence, enhancing customer experience to remove friction and tapping into industry leading data sources to gain a complete view of borrower behavior. Visit our website to see how these solutions can help your business prevent deed fraud.

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