Forged Mortgage Discharges
The title insurance industry and its agents are experiencing an increase in fraud claims related to forged mortgage discharges. Claims have been made in which an owner has forged a mortgage discharge and recorded it shortly before a closing. The result is a title search for the subject property which is free and clear of any mortgage. In other instances, the owner has provided at closing a forged discharge of an existing unpaid mortgage and has represented that the mortgage has been paid.
Consequently, we present two Red Flags that should alert you to suspicious fact patterns during the title review and closing process, and suggested actions to take when you discover these Red Flags.
Red Flag No. 1: Your title examination discloses that the property is unencumbered by a mortgage. Upon further review, it is revealed that a mortgage discharge was recorded within the past two years. Also, no sale or refinance of the property occurred contemporaneously with the discharge to account for the payoff of the mortgage.
Red Flag No. 2: A discharge of a currently outstanding mortgage is provided by the owner or owner's representative at closing.
Response: Independently verify that the mortgage has in fact been paid, and the discharge is therefore appropriate.
Such independent verification may include a confirmation of payoff directly from the mortgagee, a credit report from the new lender indicating the prior mortgage has been paid, or other satisfactory documentation evidencing a proper payoff.
If you have any questions or concerns regarding this Bulletin, do not hesitate to contact our underwriting department.