Report Finds Fraud, Forgery Pose Real Risks With Refinances

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A report commissioned by the American Land Title Association, Washington, D.C., and conducted by Milliman Inc., Brookfield, Wis., found fraud and forgery claims tied to refinance transactions pose a significant concern.

Fraud and forgery claims account for 40.3% of the total claim cost associated with refinance transactions, compared with 19.6% of the total claim cost for purchase transactions.

Moreover, fraud and forgery claims are much larger than other types of claims on refinance transactions. The average reported claim cost–including both loss payments and defense costs–is approximately $207,000 for fraud and forgery claims, nearly seven times higher than the average claim cost for all other claim types.

“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. 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.”

The data reflected in the report includes claims during the 10-year period ending Dec. 13, 2023.