Refinance Deals Carry Higher Risk Of Title Fraud And Forgery

A new report commissioned by the American Land Title Association (ALTA) and conducted by Milliman Inc. warns that refinance transactions carry greater title risk than many homeowners assume, with fraud and forgery driving a large share of losses.

The report, which is based on 10 years of claims data through Dec. 31, 2023, reveals that fraud and forgery account for roughly 40% of total claim costs on refinance transactions, more than double the share for purchase loans.

The study also shows fraud and forgery claims on refinances are far more expensive, averaging about $207,000, which is nearly seven times the cost of other claim types.

Defense expenses add significantly to the burden. For refinances, defending a fraud or forgery claim averages nearly $70,000, and defense costs represent more than one-third of total claim expenses across most categories.

The findings highlight a higher risk in refinance deals, where about 40% of losses tied to refinance claims stem from issues that cannot be detected in a public records search, underscoring the limits of routine title checks.

“This study underscores that refinances are by no means risk-free,” said ALTA CEO Chris Morton. “Fraud and forgery, which cannot be detected through a public records search, are actually more common and more costly in refinance transactions compared to purchase transactions.”

Morton continued, “Title professionals and title insurance play a critical role in protecting homeowners and lenders from these risks, leveraging technology and expertise to prevent catastrophic financial losses and create certainty in the real estate market.”