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Identity Theft

Tackling Title Fraud in Riverside County, California

Thomson Reuters Government  

· 9 minute read

Thomson Reuters Government  

· 9 minute read

In Riverside County, the assessor-county clerk-recorder’s office has teamed up with the district attorney to stop swindlers from stealing people’s houses.

In Riverside County, CA, the district attorney’s Real Estate Fraud Unit receives 20 to 40 calls per month from citizens reporting suspicious or alarming activity regarding property-related fraud.

Of the various forms of tax and property fraud the county experiences, one of the most pernicious and potentially devastating is known as “title fraud,” a scheme in which swindlers either forge property-ownership documents or trick owners into signing over their property rights, then use the bogus ownership transfer to drain the property’s equity. Sometimes, the actual owners are still living in the property and are unaware their equity has been stolen until it’s too late.

Riverside County District Attorney Mike Hestrin has made fighting all kinds of fraud a priority, and has created several distinct units to deal with it. In addition to real estate, his office has created separate units for investigating criminal activity in areas such as cybercrime, workers compensation, auto insurance, welfare, and consumer deception.

“Corruption is human nature,” Hestrin declared shortly after he was elected. “It’s a fact of life that exists. Where it exists, and where we find it, we are going to prosecute it.” He’s even created a Public Integrity Unit charged with investigating complex crimes that require multiple investigators.

In the past several years, Hestrin’s office has worked closely with the Riverside County Assessor-County Clerk-Recorder Peter Aldana and his team to thwart fraudsters and educate the public about ways to protect themselves. According to Michele-Martinez Barrera, assistant assessor-clerk- recorder, instances of real-estate fraud in Riverside County did occur before 2008, but exploded after the real-estate boom then bust, and the ensuing recession when thousands of foreclosures inundated her office with paperwork.

“The volume of paperwork was out of control. We had to carefully manage our resources to deal with it,” Barrera recalls. Grifters and con-artists smelled opportunity in the confusion, and began perpetrating various scams to exploit both the financial distress of homeowners and the county recorder’s case overload.

For Criminals, Foreclosure Means Opportunity
Immediately after the recession, the most common type of real-estate fraud in Riverside County involved people pretending to represent businesses that could help homeowners save their homes from foreclosure. Typically, the scam involves an individual or team of people who present themselves as legitimate brokers or consultants. These people then prey on homeowners in foreclosure by promising a way to keep their house—if the homeowner pays up front for financial relief or signs over the title to their property and agrees to lease or rent it back from the scammers. The fraudsters either take the up-front money and run, or take the con a step further and use the title transfer to liquidate the property’s assets through fraudulent bank loans. In June 2018, a Los Angeles grand jury handed down a 30-count indictment against a man and woman (James Diamond, 68, and Tricia Gruber, 42) who are charged with using this very scam to swindle hundreds of victims over a four-year period from 2010 to 2014, with collective losses of more than $1.5 million.

Foreclosures in Riverside County have dropped dramatically with the improving economy, reducing the pool of potential victims. But that hasn’t stopped criminals from devising new creative ways to steal the equity in people’s homes—and sometimes ruin their lives.

A more complex form of title fraud involves a one-two punch of identity theft and mortgage fraud. In the first step, criminals scour public property records to find properties they can exploit—typically ones with an elderly owner, no mortgage, and a great deal of equity. They then steal the homeowner’s identity by various means, forge new title documents, and leverage those to get bank loans backed by the equity in the home. In December 2016, Hestrin’s task force charged six people in a scheme that involved fraudulent escrow files, bank statements, pay stubs, W2 forms, and forged signatures, bilking the homeowner of more than $200,000.

Similar schemes involve convincing homeowners to sign over their property rights to a bogus trust, or otherwise bamboozling them into signing away ownership under false pretenses. In some cases, the fraudsters go as far as selling the property out from under the homeowner’s nose, or claiming the property as their own.

Partners Against Crime
In order to protect the citizens of Riverside County from becoming victims of real-estate fraud, the Riverside DA’s office teamed up with the county recorder’s office to devise ways to prevent criminals from exploiting cracks in the system.

To begin with, the Riverside County DA’s office set up a toll-free Real Estate Fraud hotline and online complaint form that can be accessed through the county’s website. In 2011, the assessor-county clerk-recorder’s office also began sending out courtesy notices to homeowners whenever a deed, deed of trust, or other property-related transaction is recorded.

“The courtesy notice was the first step we took,” explains Barrera. “In it, we explained how we use the assessor’s records to make sure that the current owner of record is getting notified that a document was recorded on that property. If they were the people who recorded that document, everything was good. But if they weren’t, we’d give them the DA’s phone number.”

But there were still some other cracks to fill. During and after the recession when so many properties were going into foreclosure, fraudsters were scouring public records for properties with a “notice of default”—the first step in foreclosure—and targeting those homeowners.

“A notice of default is the first document that needs to be recorded when a foreclosure is going to happen,” says Barrera. “When we were having a lot of foreclosures, unscrupulous parties were coming out of the woodwork and telling people they could help save their home if the homeowner paid large fees for their services up front.”

By law, however, legitimate financial service providers cannot collect until after they’ve performed the services they have promised. To alert the public, additional notices and a press release were issued informing homeowners in foreclosure to be wary of anyone who asks for payment up front.

Sometimes, Delay is a Good Thing
One hiccup in the process is once a fraudulent title is recorded and ownership is transferred, the “homeowner of record” is actually the perpetrator of the fraud themselves. The true owner may never see it.

To ensure that the true homeowner of record receives the proper notice, the assessor-county clerk-recorder’s office began using knowledge of its own processes to thwart potential fraudsters. Starting in 2011, the county began using a procedural gap in their recording protocol to send a courtesy notice to homeowners alerting them to any filings related to their property, and reiterating warnings about the potential for fraud.

“There’s a delay between the time the document is recorded and the time the assessor changes their records,” Barrera explains. “We use that time-frame delay to get a notice to the current owner of record before the assessor has a chance to change their records based on the fraudulent document.” If the owner suspects fraud, they are urged to contact the DA’s Real Estate Fraud Unit.

Experience Counts
Another line of defense is the recorders themselves. Though recorders are bound by law to process approved documents, they will notify the DA if they suspect any wrongdoing. And though they are not specifically trained to detect fraud, an experienced recorder’s eye can sometimes be the difference between a criminal’s success or failure.

“A recorder can often tell when something isn’t right with a document,” Barrera says. “We work closely with the DA’s office, and they give us support. If we think something is off, we can notify them.”

Since Riverside County’s safeguards went into effect, instances of suspicious activity have dropped from a daily occurrence to something that arises once every couple of weeks. The assessor-county clerk-recorder’s office also does frequent public outreach at town hall meetings and other public events to reinforce the message that they are there to help.

One bit of good news for victims is that if the people who defrauded them are convicted, homeowners can get their deeds remedied for free. It may be a small consolation, but it’s a meaningful one for victims of title fraud whose trust in “the system” has been understandably shaken. Fortunately, because of the coordination between the county’s assessor-county clerk-recorder’s office and the district attorney, life is getting easier for property owners and fraud victims in Riverside County—and much, much harder for anyone who wants to commit title fraud.

A Word of Warning About Title Insurance
People often assume that if they have title insurance they are protected from fraud. And they may be, but not all title insurance is the same. Most basic title insurance protects homeowners from fraud that may have occurred before they purchase their home, but not necessarily after. Often, after-purchase protection is a policy enhancement that costs extra. For consumers, one indication that something may be amiss in a real-estate transaction is if the sellers don’t have title insurance. “Sellers who don’t have title insurance are a big red flag that something might be wrong with a sale,” says Mindy Hartman, a business process analyst with Riverside County.

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