Forgery, fraud rampant in tittle claims.

Title insurance companies are reporting an increase in forged deeds and fraudulent titles that have been used to commit mortgage fraud throughout Los Angeles County.

All the major title insurers--Fidelity National Financial Title Group, First American Title Insurance Co., LandAmerica Financial Group Inc. and United Capital Title Insurance Co.--have each seen anywhere from a 25 percent to 100 percent jump in fraud cases in Southern California this year.

"There has definitely been an increase in real estate fraud and an organized attempt to pick high-dollar prospects," said Detective Erin Camphouse, who heads the Los Angeles Police Department's four-person real estate crimes unit.

Several factors are contributing to the increase, including a rise in identity theft, lax underwriting standards, and the availability of property information over the Internet.

It's been estimated that 20 percent of all title claims involve some element of fraud. "It's a common scam that's been around for many years, but the problem now is lax loan under writing," said Jim Maher, executive vice president of the American Land Title Association, an industry trade group.

Title companies complain that lenders are at fault for cutting back on traditional methods of underwriting, the process that determines if a loan is inherently risky or not. Often, title companies and the victimized homeowners are the last to know when a fraud has been committed.

"Unfortunately, this is fairly prevalent all over Los Angeles County and it's only increasing," said Vicki Perkowitz, vice president and regional counsel at First American Title, who said there are not enough police officers to investigate all of the fraud claims.

Sophisticated scams

Many cases turn out to be schemes that involve notary publics or former employees in the title industry. Often a vacant home will be singled out, preferably with out-of-state owners. Older homeowners also are at risk, some from unscrupulous family members who forge the titles on their homes and then claim they were given the property. Roughly one-third of all real estate fraud cases involve a family member.

Usually a forged deed or title to a property is signed by a notary public, although many of the signatures are forged as well. Fake Social Security numbers and W-2 forms are used to obtain a loan against the equity in the home.

When the loan gets approved, the money is wire-transferred to a bank account under a fictitious name. The loan funds are then withdrawn, leaving the title company on the hook. "We see homeowners and title insurers with their jaws on the ground because they've never faced this before," Camphouse said.

(All real estate fraud claims are investigated by the police department in the city where the property is located.)

Few of the cases actually go to trial since most are settled through plea agreements. But it can take anywhere from two to four years for a judge to declare the forged title on a property null and void.

Meanwhile, the title company has to pay out on the value of the loan, typically up to the maximum price of the property. The homeowner has to retain an attorney to freeze the title--during which time he or she cannot borrow against the house or sell it.

Kenneth Dzien, vice president and chief counsel at United Capital Title, said the company has implemented a system to catch frauds and forgeries by sending a letter to each homeowner thanking them for using the title company. Letters from title companies often are the first clue for a homeowner that a deed or title has been forged, and that some identity theft or fraud has taken place.

What to look for

Roger Therien, regional underwriting counsel at LandAmerica, said there are signals to look out for, including the re-conveyance of a deed of trust that has already been paid off or a deed that is not insured by any title company.

"If you're an ordinary homeowner, how often does your house burn down? Not often," he said. "But if you're in the claims department of an insurance company, it happens all the time, it's very typical. This is the kind of thing that comes across our desk daily and it's an uphill battle to detect it and catch it."

Title insurers claim that the widespread use of automated underwriting systems--as opposed to face-to-face encounters--and the introduction of new loan products aimed at stretching to get first time buyers into homes have caused an uptick in fraud and forgeries. Low documentation loans, often called "no doc" loans, allow borrowers to get a loan without listing their income or employer, making it more difficult to trace people when a fraud occurs.

At the same time, speed and price have become the dictating forces behind the refinance and real estate boom.

Sophisticated criminals combine these elements to manipulate the system, using forged documents to push for a quick turnaround on a loan. Many fraudulent loans are processed at the end of the month, which is the busiest time for lenders.

"These days, there's never any face-to-face contact, nobody takes the time to go to the bank and make out a loan application," said Lore Hilburg, a lawyer who investigates frauds and forgeries for all of the major title insurers. "It seems to be more active now and on a much bigger scale partly because of the appreciation of property (values) and partly because there are so many transactions and everybody has cut back on personnel."