WE’RE HEARING from the great state of Illinois. In the Illinois Legislature a bill (HB 2832) has overwhelmingly (103 to 11) passed the House which is designed to reduce the filing of fraudulent documents with the county recorder of deeds. The bill is now in the Illinois Senate where it was referred to the Judiciary Committee. The legislative findings introducing the bill indicate that the filing of fraudulent documents is a rapidly growing problem throughout Illinois.
The documents referred to in the legislative findings are not just your ordinary run-of-the-mill fraud (fake deeds for example) which we can generally classify as stealing. There are also other classes of fraudulent filings to be concerned with. For example, there are fraudulent documents designed to cloud (mess up, screw up, etc.) title and in some cases uncloud title. By uncloud title I mean where someone files a document like a mortgage discharge or satisfaction when in fact the mortgage has not been paid off.
The bill allows a recorder of deeds to establish a fraud referral and review process whereby a suspected document would be sent to an administrative law judge (ALJ) for review. Then the recorder of deeds places a notice of referral in the public records identifying the suspected document. The last owner of record of the property is also to be notified. The ALJ is supposed to schedule a hearing within ten business days of the referral.
At the hearing if the judge determines by the preponderance of the evidence that the document is fraudulent then a judgment to that effect will be recorded with the recorder of deeds. The judgment would also state that the fraudulent document may not affect the title to the property in any way. Next time someone asks you why they need title insurance and why it costs so much feel free to refer them to this story.
The bill goes on to identify 19 different factors that a recorder of deeds may take into consideration as to whether to suspect a fraudulent document and send it to an ALJ for review. Some of the more interesting factors include whether the document to be recorded asserts a fine that does not exist under current law or that requires payment in gold or silver. How about a document that is meant to harass or defraud someone or a governmental official? Obviously some folks have been up to monkey business in Illinois.
The Illinois Real Estate Lawyers Association has expressed concerns that the bill if enacted, although well intentioned, may result in some damaging consequences for the recording process in Cook County and may impede the closing of real estate transactions. My observations are that getting to the closing table will take longer at first until the title industry figures it all out.
Real delays will be encountered if the title search on a deal you are trying to close reveals a document red flagged as possibly fraudulent. On the other hand once the process is up and running the filing of fraudulent documents should be reduced. This should result in the removal of delays to get to the closing table. Just ask someone who is trying to clean up a title problem that a fraudulent document has caused.
Of course the real stress will come into play with interest rate lock-ins that are about to blow up. Eventually rates will have to rise. If your customer is sitting on a rate lock and the closing gets delayed you can expect some nervous phone calls. Fortunately this problem will not be the lender or loan originator’s fault.
Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at email@example.com.