Forgery, Fraud, and Foreclosure: Lender’s Title Insurance in Action

Can a lender’s lien be invalidated when a borrower’s signatures are forged?

A lender issued a $1.4 million refinance loan secured by a borrower’s home. The borrower and his wife had purchased the property several years ago with a $574,000 mortgage. Years later, after the borrower’s default and death, the lender began foreclosure only to discover a serious issue.

The borrower’s wife claimed that her signatures on the refinance mortgages were forged. She testified that she never signed those documents, knew nothing about the loans, and never received any proceeds. A handwriting expert supported her claim, and both closing attorneys could not credibly confirm her involvement.

This is where title insurance proved its worth. Throughout the years-long litigation process, First American continued to defend the lender’s interests and manage the complex legal proceedings under the terms of its Lender's Policy. Without this coverage, the lender would be fighting a multimillion-dollar dispute alone, bearing all legal costs and potential losses.

While the investigation and litigation remain ongoing, evidence suggests the signatures may not be genuine, meaning the insured refinance mortgage may not create a valid lien on the property and instead indicate a potential failure of title.

This case underscores why title insurance is essential. Even when real estate documents are properly notarized and recorded, hidden defects like forgery or fraud can surface years later. Navigating these lengthy and costly cases can place millions of dollars at risk for lenders. But with a First American Lender’s Title Policy, lenders don’t have to face those challenges alone on matters covered by the title insurance policy.

First American stands beside them on matters covered by the title insurance policy providing legal defense, financial protection and peace of mind.

Disclaimer:

As with any insurance contract, the insuring provisions express the coverage afforded by the title insurance policy and there are exceptions, exclusions and conditions to coverage that limit or narrow the coverage afforded by the policy. Also, some coverage may not be available in a particular area or transaction due to legal, regulatory, or underwriting considerations.

Please contact a First American representative for further information. The services described above are typical basic services. The services provided to you may be different due to the specifics of your transaction or the location of the real property involved.