| Real Estate Law
A better way to fight fraud is under your thumb
We should amend our notaries public law to require a journal entry for each attested signature that would include, among other things, the thumbprint of the signatory.
In recent years, the incidence of fraud in real estate and related transactions has risen dramatically. Some have been simple forgeries. Others have been complex, sophisticated schemes with many players. Examples of the former include identity theft, especially harmful to the elderly. After learning facts about the target person, the crook creates false documents and assumes the elderly person's identity. Often the target is in a hospital or nursing home. The crook sells or refinances the property. A deed in the name of the target as grantor to a fictitious third party (the crook or an accomplice) is followed by a mortgage yielding the crook the sale/loan proceeds. More complex schemes include "flipping" properties for ever larger mortgage loans beyond the real value of the land. These crimes employ a larger cast of characters. Some are criminals, while others are simply naïve, greedy, or inattentive. There are scams involving property about to be sold for taxes. If no one is in possession of the land, the crooks create a series of paper transactions, including deeds and mortgages, that makes the land appear far more valuable than it is (perhaps even a vacant lot or derelict structure). Having created an artificial base of value, the crooks approach the lender, whom they induce to lend large sums of money secured by the land. They may use many false or forged documents, including employment verifications, salary histories, appraisals, credit reports, and title commitments. With these inducements, a lender may close and pay out its money. We may be able to thwart these forgeries and frauds, assuming we become aware of the problem and can respond. But insurance may not cover the costs. Financial institutions including banks, insurance companies, and title insurance companies have the money to fight for their interests. But even then, we end up paying higher prices for basic services to cover their costs for legal expenses or actual losses. Efforts aimed at controlling these crimes have focused on apprehending the perpetrators. Given the burdens they bear, law enforcement agencies have found it difficult to pursue these criminals. With limited success, institutional victims have tried prevention through sharing information about known perpetrators and the patterns of their crimes. Ironically, some of the new privacy laws limit even this barebones effort. More personal than a social security number A simple yet effective solution is at hand. We can amend our notaries public law to require creation of a journal entry for each attested signature (or perhaps only those affecting real estate, such as deeds, mortgages, and lien releases). The journal would describe the document, the name of the party whose signature is being attested, and the type of identification used for verification, together with a copy of the document. And finally, it would include the thumbprint of the person signing the document. Ah, a thumbprint. Something unique to each of us that cannot be duplicated by another. A thumbprint is more personal than a social security number or even a picture ID, such as a driver's license or passport. This sounds radical. Has it been done before? If so, has it been effective? The answer is "yes" and "yes." This has been the law and the practice in California for more than 10 years. It is fully accepted. Incidents of fraud have dramatically decreased there. Consumers and other potential victims are at less risk of these crimes of opportunity. The crooks are smart enough to know that if they leave indelible evidence that survives their crime, their chances of seeing the future through bars are dramatically increased. When faced with the inkpad and thumbprint requirement, crooks tend to find an excuse to leave the scene. Perhaps it's just psychologically too close to the booking process at the police station and causes a loss of confidence if not a measure of panic. The bottom line is that it has been proven effective. Two Illinois bills, HB 1234 and HB 2429, were introduced in the 93rd General Assembly that would have addressed at least part of the issue. Both bills ended the spring session in the House Rules Committee. Efforts are now underway to move legislation forward that will implement changes in the Illinois Notary Public Act to protect the public from the costs and pain arising from such forgeries and frauds. It is not the entire solution. But if the past is a guide, it will substantially reduce the incidence of these crimes. James K. Weston of Naperville is vice president and regional counsel of Chicago Title Insurance Company. |