Protecting against real estate fraud

Several Registers of Deeds in Michigan, including Marquette County, now offer a free Property Fraud Alert service. This will send you an alert any time that a document relating to your home or other real property is filed.

Surprising as it may seem, one of the ways that identity thieves can defraud banks and disrupt the accounts of individuals is to apply for a home equity line of credit in the name of a homeowner, without his knowledge. When a mortgage or other document is recorded, there is no legal requirement that notice given to the landowner that the recording has taken place. (The Register of Deeds will return the document, after recording, to the address as directed on the document itself.)

How often does this happen? The answer is not clear. There are several known varieties of mortgage fraud, and the reports indicate that this one is relatively uncommon. But it has been reported in several jurisdictions. 

If a fraudulent mortgage is given to a lender by a fraudster pretending to be the homeowner, there can be a long delay before it becomes apparent that the damage has been done. The thief will be long gone, and the issuing bank will often have accumulated a number of missing payments, before the issue comes to the attention of the homeowner. The first clue can be the discovery that the homeowner's credit rating has been seriously impaired. The work needed to convince the bank that the mortgage it thinks it holds was not in fact executed by the homeowner can take months.

The Property Fraud Alert service will provide a notice, by email or by telephone, of any filing made in the name of the subscribing participant. This will give him or her early notice and allow for corrective action before the problem grows to unmanageable proportions.

Only 13 of Michigan's 83 counties offer this free service. In the Upper Peninsula, this includes Marquette and Houghton counties.

If you want to find out right now what real estate documents are on file under your name, you can visit the Marquette County Register of Deeds DirectSearch page.

Court confirms creditor protection for life insurance

The Michigan Court of Appeals has issued a decision confirming that all elements of a life insurance policy, including the cash value of a whole life or universal life policy, are exempt from levy by a judgment creditor.

The plaintiff sued the defendant - for what is not disclosed - and recovered a judgment in the amount of $2.5 million. Plaintiff sought a writ of garnishment seeking to have the Prudential Insurance Company turn over the cash value of a policy that had been sold to the defendant. Defendant objected to the request.

MCL 500.2207 protects life insurance policies from claims of this nature by creditors. But the plaintiff argued that this section was intended to protect only the death benefit that is payable to the beneficiaries named by the insured, money that the insured himself does not own and can not reach while he is still alive. The cash value, the plaintiff argued, is fully available to the insured and can be taken out by him at any time, although this would reduce the total amount payable under the policy to the beneficiary after the insured is gone.

The Court of Appeals rejected that argument, ruling that the intent of the Legislature was to protect the entirety of the policy. One important point that it noted was that the cash value, if untouched during the insured's lifetime, will add to the recovery by the beneficiary. Conversely, allowing a creditor to attach the cash value would diminish the amount ultimately received by the beneficiary.

DC Mex Holdings v Affordable Land, LLC, decided July 25, 2017

CFPB resources for clients

The Consumer Financial Protection Bureau is a Federal agency that was established under the Dodd-Frank Act in 2010. Its Ask CFPB page provides information on a number of financial topics and answers to questions that people have asked the agency over the years. If you have a question or issue, this page is often a good source of information that can prepare you before you consult with us about the issue.

Similarly, CFPB's Resources for Older Adults and their Families page provides useful information, including “Protecting against fraud and financial exploitation” and “Tools for financial security as you age.”