Identity Theft and Title Insurance
Here's a horror story for you: I read this weekend that a woman (in the process of selling her home) suddenly discovered that a completely fraudulent mortgage had been taken out on her property without her knowledge. Her "real" mortgage had been discharged, and the identity thief had taken out a new one that was 3x bigger!
How does something like this happen? Well, the first clue to the identity thief that things were happening was a "For Sale" sign on her lawn. The MLS listing for a property gives theives all the information they'd need to make an apparently "honest" application for a new mortgage, as long as they can come up with some valid personal information! The person started by forging the woman's signature on a new mortgage application; then proceeded to discharge the current mortgage in order to take out a new one. After doing so, the thief took the money that she'd collected from the second (bigger) mortgage and ran, defaulting in the process.
Here's the really bad news. As if the whole problem with the (now defaulted) mortgage wasn't bad enough, especially since the bank was threatening to foreclose, the victim of this crime now has to restore her home's title too! On the title of her home, it currently looks as if there is a $300,000 mortgage on her home -- which, of course, is faulty. Here's an owner who has done nothing wrong -- but she's on the hook for thousands in legal fees to defend herself and restore both her home's title and her credit rating.
If you are living in a home and you don't have title insurance, it's not too late. You can still buy title insurance even after you've bought a home. It won't necessarily protect you from things that have happened before you took title of your property depending on the policy you purchase, but it will protect you from the unscrupulous fraudsters that might target your property while you own it. Keep in mind that in many areas, mortgage fraud is now big business -- especially in the "hot" housing markets that can allow a fraudster to capitalize on the large and fast increases in property values.
Now I'm not generally a fan of insurance; I figure you should only have the minimum amount of insurance that you need to really protect yourself -- no more and no less. But we have title insurance and I'm glad we've got it. Between that and shredding everything -- even an envelope -- that has our names on it, I'm hoping we've made it tougher for anyone who wants to pull our house out from under us.