You may never have heard of deed fraud, but it is a growing legal issue that is startingly easy to fall victim to, especially for members of vulnerable communities.
Deed fraud — where fraudsters illegally transfer home ownership to themselves — means someone who put years of work and likely thousands of dollars into their home loses it in the blink of an eye to a fraudster whose name they may never know.
Donovan McCarty is an assistant professor at the Michigan State University College of Law, where he is also the director of the Housing Justice Clinic, working with clients facing complex housing legal challenges, including deed fraud.
McCarty explains what deed fraud is, who is most vulnerable to it, how it can be addressed and more.
What is deed fraud and how does it hurt homeowners?
A deed is the legal document that transfers ownership of a home or other real property from one person to another. When a home is bought or sold, a deed is legally drawn up to reflect the transfer of ownership. That deed is then recorded with a county register of deeds, providing public notice of who legally owns the property.
A fraudster can forge the signature of the real owner — sometimes someone who is deceased. They can file a deed that appears valid on its face but isn’t.
They then record that false deed with a county register of deeds, the local government office that keeps public land records and other documents showing ownership, claiming title to property they do not actually own.
How big of a problem is deed fraud?
It’s hard to know exactly how big a problem deed fraud is. The FBI does not track deed fraud, specifically, instead, grouping it into a larger category of real estate crimes.
From 2019 through 2023, 58,141 victims in the U.S. reported $1.3 billion in losses relating to real estate crime, according to the FBI. However, that number is undercounted because many people don’t know where to report it, are embarrassed if they were victims or don’t know yet they have been targeted.
In Detroit, deed fraud may be particularly prevalent because so many housing deals are made in cash and many properties owe back taxes. The Wayne County Mortgage and Deed Fraud Unit has tracked more than 13,000 inquiries regarding deed fraud and has opened over 2,300 cases throughout Wayne County since 2005.
Which communities are most vulnerable to deed fraud and why?
Fraudsters often target vulnerable people and properties, including elderly owners, families dealing with inherited homes, and houses that appear vacant or neglected, such as those behind on their property taxes.
Homes in Black neighborhoods nationwide are systematically undervalued compared with similar homes in white neighborhoods. Black borrowers are also more likely to be denied conventional mortgage loans. Detroit, for example, is about 73% Black, with a median household income of roughly $39,000 and a poverty rate exceeding 30%.
In a market where access to traditional financing is uneven and home prices are relatively low, cash sales accounted for four in 10 sales in February 2024.
Lenders, brokers and title companies act as informal gatekeepers when people buy a home using a mortgage. In cash sales, those actors are absent, and there are fewer chances to detect irregularities in the documented history showing how title passed from one owner to the next.
Additionally, fraudsters are attracted by property tax distress, more common in areas with higher poverty rates. Fraudsters seem to rely on publicly available tax foreclosure lists to identify properties that appear abandoned. They then pay the past-due taxes to remove the property from foreclosure and attempt to sell or mortgage the property using their fraudulent deed.
Finally, the fraudsters may also assume that the owner lacks the resources to wage a prolonged legal fight to recover title if they do uncover their scheme. In many cases, that assumption proves correct and the fraud goes either undetected or unresolved.
Why does deed fraud go undetected?
In Michigan and most other states, recording offices do not have authorities substantively review a deed to determine whether it is fraudulent. If the document complies with technical formatting requirements, such as margin and font size, it must be recorded. Once stamped and indexed, the deed appears legitimate and can easily trick desperate buyers, investors, financial institutions and even police officers, lawyers and judges.
In other words, the recording process is largely administrative, not investigative. The government office accepts and files the document without verifying that the person signing it had the legal right to transfer the property.
That means a fraudulent deed can enter the public record, look valid to the outside world, and remain undiscovered for months or even years.
What reforms would help prevent deed fraud?
Across the country, state legislatures have begun responding. Twenty-one have enacted deed fraud legislation, and 15 more have proposed it. Another common intervention is fraud alert systems, which notify owners when any documents that impact the title of their property are recorded.
Other reforms increase notarial requirements or enhance criminal penalties.
These measures may deter some misconduct, but they do little to reduce the burden on victims once a fraudulent deed has been recorded.
In my assessment, meaningful reforms focus on empowering registers of deeds to substantively review suspicious documents before recording them; simplifying and expediting quiet title proceedings; and expanding civil remedies so victims can recover the costs associated with clearing their title.
Some jurisdictions like Texas and Florida have adopted streamlined procedures that allow victims to initiate quiet title actions using standardized forms with reduced fees. Others permit recorders, prosecutors or judges to act when fraud has already been established.
In Michigan, I am working with lawmakers and stakeholders to develop comprehensive legislation addressing these issues. Bills are expected to be introduced later this year.
At the same time, my clinic has begun exploring how technology can help identify fraudulent deeds already in the record. We are working with computer scientists to evaluate whether artificial intelligence tools could flag suspicious filings and potentially prevent fraudulent documents from being accepted in the future.
No property system can eliminate fraud entirely. Preventive and punitive measures may limit fraud, but they cannot eliminate the incentive to commit it. For fraudsters, the payoff can be substantial.
Conversations about the issue often begin and end with the mechanics of the crime or the procedural burdens victims face afterward.
How is MSU’s Housing Justice Clinic engaging students?
What I love about this work, and what I love about coming to MSU, is the opportunity to take this advocacy to another level and to teach and engage law students. I’m excited to give students a jump-start on all the things that I’ve learned in my time as an attorney, all the different ways that I’ve been an attorney, whether it’s from a big law firm to a small nonprofit.
There are a lot of ways that you can be a lawyer. There are ways that you can really integrate yourself into movements, into communities, let them be the voice and you can just help. What I want to bring to these students is the excitement of these current events and these issues that I’m constantly engaged with.
There are a lot of cases where legal services generally do not touch. They do not have the time or capacity for more complex cases, given the demands of their current caseloads. We actively try to identify these cases and fill this gap. These also just happen to be cases that I feel are perfect for students to learn. Students will get excited and interested when they know what they are doing contributes to a broader goal and moves the needle.
Excerpts are from an article published in The Conversation.
Read more about MSU’s Housing Justice Clinic on MSUToday.
