Bulletin: NL000003

Dear Associates:

Title Companies can sustain huge losses occasioned by alleged forged releases appearing in the chain of title.

Example: A land owner placed a mortgage on the property involved, followed in a few months with a release of such lien, after which appeared in a few weeks another mortgage, and on down the line. All releases were dated prior to the new deed of trust. Normally, the release of the former mortgage should be dated subsequent to the new deed of trust because the funds from the new loan are used to pay off the former mortgage before obtaining the release. In one instance, there were six liens placed on the same property and five forged releases within a period of five years. Aggregate indebtedness created by such liens were $840,000.00. Payments on all liens (where releases were forged) were kept current. Different loan companies, title companies and closers were used. In most instances, several loans and several releases were used in a short period of time. Such forgeries are amazingly accurate and complete as to forms, seals, signatures and acknowledgments.

Preventive Measures

• In a transaction involving the issuance of a loan or mortgagee policy in excess of $100,000.00, company policy requires that the last lienholder executing a release within one year of the current transaction be contacted to confirm that such mortgage is paid and such release is valid. Inform your appropriate personnel as to this policy and the reason therefor.
  
  
• Alert all examiners and title officers to watch for unusual circumstances as described in the Example and if anything looks suspicious or unusual to telephone the prior mortgage holder to see if it actually received the money. Escrow officers are normally unaware of instruments in the chain of title. You will have to depend on examiners and title officers to watch for this.