After Paying Off Your Mortgage: Ensuring Long-Term Homeownership

Our legal system operates on a foundation of good faith, which can sometimes be exploited by unscrupulous individuals. Let’s delve into the mortgage process as an example. You begin by applying for a mortgage with a lender, who then dispatches an appraiser to assess the property. Subsequently, you meet with the lender or a settlement agent to sign various documents, one of which is recorded or filed with the local real estate documentation office.

In the initial step, the lender collects your application, which should contain sufficient information to associate your name with the property in question. The loan officer utilizes this data to request various documents in your name.

Next, an appraiser visits the property, gaining access to assess your home. Using this visit, the appraiser determines the property’s value. Following this, the lender or settlement agent requires you to present identification to verify your identity when signing the loan documents. Finally, the document that places a lien on your property must be recorded or filed.

How could a fraudster infiltrate this system? Each step would require a malevolent actor to falsify documents, provide false identification, and claim to be you in order to obtain the loan. Additionally, you wouldn’t let an appraiser into your home without recently accepting an offer to purchase the property.

So, how can you protect yourself in this scenario? Firstly, sign up for notifications from credit reporting agencies that alert you to changes in your credit history or new credit applications. These email alerts enable you to monitor any unusual activity related to your credit.

Another protective measure is freezing your credit with the credit reporting bureaus. This prevents any potential bad actors from using your name to obtain credit. When a lender checks your credit, they receive a notification that the credit file is frozen, preventing them from making lending decisions based on your credit history.

Additionally, you can purchase credit monitoring products that instantly notify you of changes to your credit history. Some online companies offer similar products for free as they sell your data to creditors and other merchants. Your bank may also offer free credit monitoring if you use their credit card. Frequent notifications about your credit history are a wise move. Don’t forget to monitor the dark web as well, as monitoring your email address and personal information there is crucial for preventing cyber theft.

Regarding real estate, many government agencies that record or file real estate documents provide free notification services when any document is recorded against the title of your home. These notifications allow you to promptly identify any filings against your property title. If you’ve paid off your mortgage and the lender has filed the release of the mortgage, you’d receive a notification of this positive development. Conversely, if a new mortgage is filed against your home, you’d be alerted to potential fraud, allowing you to inform the lender.

Currently, the properties most vulnerable to fraud are vacant homes and vacant property lots. In these cases, a bad actor can falsely claim to be the owner, and a lender might fall for this scheme. When an appraiser visits a vacant lot or home, they might conduct the appraisal without the real owner’s knowledge.

To safeguard against fraud, live in your home year-round, regularly monitor your credit history, freeze your credit, and sign up for any alerts provided by your local recording office. Keeping a home equity line of credit (HELOC) open won’t make a significant difference, as bad actors can still exploit your lender by requesting a payoff of the HELOC at the fraudulent loan closing, often leaving you with significant losses in home equity.

Therefore, it’s prudent to remain vigilant with your personal finances, credit history, and property. Continuously monitor any recordings or filings associated with your property title, which is often accessible online and often at no cost in most jurisdictions.