Doug Cornelius .com

The New York Daily News tried to show that it is easy to “steal” property by filing fake deeds. The story is rather foolish, but if you want to read it: It took 90 minutes for Daily News to ‘steal’ the Empire State Building.

The reporters think that by filing a forged deed, they somehow could control the building and get a mortgage. Sure it is possible to try to steal money by going through this exercise. Of course you are just leaving a paper trail that makes it easy to figure out what happened and get caught. I could also jump into a car and drive off. That is stealing too.

What is wrong with the story? The property manager is unlikely to turn over the bank accounts to some unknown person just because they have a deed. Tenants are unlikely to redirect rent payments without more evidence of a transfer. A mortgage lender is not going to turn over loan proceeds based on mere deed. One reason to insert lawyers into the real estate conveyance process is to prevent scams like this.

Mortgage lenders demand lots of documentation because they try to avoid scams like this. Mortgage lenders get title insurance to protect against fraud and scams.

It was a stunt and created an interesting headline. However, someone is likely to pay a fine or go to jail for it. I am not a New York lawyer but I would guess that there is a law against filing fake documents.

Disclaimers
Image is by David Shankbone from Wikimedia Commons

The American Land Title Association (ALTA), recently approved three new form closing protection letters. These new forms took effect on January 1, 2008.

• Closing Protection Letter
• Closing Protection Letter – Limitations
• Closing Protection Letter – Single Transaction Liability

Jon Anderson, Senior Title Counsel for CATIC wrote an article on these new forms and how they clarify the underwriter’s liability.

The Closing Protection Letter is the broadest form. The Closing Protection Letter – Limitations imposes a specified dollar limit on the liability, although this limitation is not applicable to mortgage loan transactions for individual one-to-four family residential properties. The Closing Protection Letter – Single Transaction Liability is limited to a single transaction with funds not in excess of a specified dollar amount.

I always ask for a closing protection letter when using an agent to issue the title policy and handle funds (as opposed to using an officer of the the title company.)

The trouble with these new forms is that they limit the protection to damages relating to the status of title to an interest in the land or the validity, enforceability or priority of the lien of the mortgage. You are protected if the deed or mortgage is not recorded.

With these new forms, you are not protected for the closing or settlement services being provided by the title agent. Clearly, an over-funding of the purchase price will not fall under the protection of these new closing protection letters.