New York bill targets lender payouts in deed fraud cases

State lawmakers in New York have introduced legislation that would block mortgage lenders from receiving title insurance payouts when real estate transactions are later found to be based on stolen deeds.

S.B. 7732 was introduced May 2 and seeks to prohibit title insurers from compensating lenders for losses tied to transactions deemed “false or fraudulent.”

If enacted, the measure would mark a significant shift in how title insurance claims are handled when homeownership disputes arise. It would set precedent to place greater responsibility on lenders and insurers to detect and prevent real estate fraud before loans are issued and properties change hands.

The bill has been referred to committee and awaits further debate. If passed, the law would take effect 90 days after being signed by the governor.

Rise in deed theft

Deed theft, in which criminals forge signatures or impersonate property owners to illegally transfer ownership rights, has become an increasingly visible issue nationwide.

In some cases, homes are sold or nearly sold without the true owner’s knowledge, leaving victims to fight lengthy legal battles to reclaim their property.

One notable instance took place last year when a group orchestrated a scheme to fraudulently sell Graceland — the former home of Elvis Presley — through the use of a fake company, forged documents and false court filings.

Fraudsters claimed that Presley’s daughter, Lisa Marie Presley, had pledged Graceland as collateral for a loan that she failed to repay before her death in January 2023.

Federal authorities in recently warned homeowners to be on high alert as cases of home title theft rise across New England. According to the FBI‘s Boston Division, scammers are increasingly forging property documents to unlawfully transfer ownership of homes.

“Folks across the region are having their roots literally pulled out from under them,” Jodi Cohen, a special agent in charge of the bureau’s Boston division, said in a statement. “They’re suffering deeply personal losses that have inflicted a significant financial and emotional toll, including shock, anger, and even embarrassment.”

The FBI said it has seen a steady increase in these fraudulent property transfers throughout the region. Some homeowners only learn of the theft when it’s too late — after their home has been sold or is in the process of being transferred to someone else.

A study conducted by NDP Analytics found that 28% of title insurance companies experienced at least one seller impersonation fraud attempt in 2023, and in April 2024 alone, 19% of firms experienced at least one of these attempts.

Americans reported losses of more than $145 million from real estate-related fraud in 2023, according to the FBI.