A New Option for Protection Against Title Fraud

Title insurance traditionally looks backward. An owner’s policy protects against covered title defects that existed when the insured acquired the property, including a forged deed or mortgage recorded before the policy date. The harder question has been what happens when the forgery or other fraudulent transaction occurs later, after the homeowner has purchased the property and the original title policy is already in place.

For qualifying residential transactions, a Homeowner’s Policy of Title Insurance is an enhanced coverage owner’s policy that already includes protection against certain post policy risks involving forgery or impersonation. Many owners, however, receive a standard owner’s policy instead. As deed fraud and seller impersonation schemes have become more visible, the title industry has responded with additional endorsement options that allow similar protection to be offered in appropriate circumstances without requiring a wholesale replacement of the owner’s policy.

Those options are the CLTA 153 / ALTA 49 and CLTA 153.1 / ALTA 49.1 endorsements. The CLTA 153 / ALTA 49 endorsement, formally titled Forgery New Owner’s Policy Residential, may be issued with a new residential owner’s policy when a Homeowner’s Policy of Title Insurance is not being issued or is not available. It provides prospective protection for covered forged deeds and mortgages recorded after the policy date. The CLTA 153.1 / ALTA 49.1 endorsement is intended for eligible homeowners who already have an owner’s policy and want to add similar protection. For an existing policy, coverage begins on the endorsement date and applies only to qualifying forged instruments recorded after that date.

The endorsements are not available for every property or every owner. They are generally limited to improved one to four family residential property owned by natural persons or qualifying estate planning entities, consistent with the eligibility concepts used for a Homeowner’s Policy of Title Insurance. They also do not erase the distinction between title insurance and identity monitoring, nor do they guarantee that every fraud related loss will be covered. Coverage remains subject to the endorsement language, exclusions, conditions, and the underwriting requirements of the issuing title company.

For real estate professionals, this creates a useful point of education at closing. Buyers should understand which owner’s policy they are receiving, whether a Homeowner’s Policy of Title Insurance is available, and whether the CLTA 153 / ALTA 49 endorsement is an appropriate option when a standard owner’s policy is issued. Existing homeowners who are concerned about deed theft can review their original policy and speak with the issuing title company about eligibility for the CLTA 153.1 / ALTA 49.1 endorsement. Deed fraud cannot be eliminated by one product, but combining careful identity verification, monitoring of recorded documents, and appropriate title coverage gives homeowners more than one layer of protection.