New York looks to strengthen deed theft laws

Members of the New York State Legislature introduced two bills looking to strengthen existing legal protections against deed theft.

"Victims of deed theft are often older adults and people of color who are asset rich but cash poor," state Attorney General Letitia James said in a press release. "This legislation will provide real and necessary changes to our civil and criminal laws to stop the perpetrators of these crimes and provide the protections and remedies needed to keep people in their homes."

In December, James brought charges against five people, including a mortgage loan officer, accusing them in a 30-count indictment where if convicted the top charge has a maximum jail time of 15 years.

The New York City Sheriff has recorded 3,500 complaints of deed theft since 2014, with more than 1,500 of those coming from Brooklyn and 1,000 from Queens.

But in the press release, James noted that deed theft in and of itself is not a crime. In a 2021 case brought by James, the allegations included residential mortgage fraud, possession of stolen property, falsifying business records and scheme to defraud.

One of the bills establishes that deed theft is a criminal act, creating two new felonies: a Class C crime for the theft of one real property; and Class B offense that covers a single residential property or two or more real properties.

If convicted of the more serious charge, deed theft in the first degree, the mandatory sentence is one-to-three years in prison, with a maximum of 25 years.

The bill also gives the state attorney general the ability to prosecute without receiving a referral from another agency. For example, in the December case, Attorney General James could only act because of a referral from the Department of State.

"Too often, state government has been unable to prevent or prosecute this destructive crime," said State Senator Zellnor Myrie, D.-Brooklyn, the sponsor of this bill. It does not have a counterpart in the state Assembly at this time.

Under the second bill, good faith purchaser protections, which would normally protect third parties not involved in the scam, are voided in certain circumstances. That includes situations where the mortgage was neither transferred nor paid off.

It would also stop scammers from evicting the rightful homeowner. Housing courts normally do not consider whether the person initiating the proceeding is the legitimate owner of the property, the Attorney General's office said.

"This type of fraud often takes advantage of the most vulnerable New Yorkers, literally ripping their homes away from them and profiting greatly from the equity seized," Assemblymember Helene Weinstein, D.-Brooklyn, the sponsor of this particular piece of legislation. "I have sponsored deed theft legislation in the past, but it is clear that the Attorney General and our District Attorneys need better tools to stay ahead of the fraudsters."

Weinstein was the Assembly sponsor of a 2019 bill signed into law by then-Gov. Andrew Cuomo that provided greater deed theft protections for homeowners in default or foreclosure.

The second bill has a State Senate counterpart sponsored by Brian Kavanagh, D.-Manhattan/Brooklyn, chairman of its housing committee.

James recently spoke at a Consumer Financial Protection Bureau hearing in Brooklyn regarding another form of equity grabbing by investors that purchase zombie second liens from piggyback loans made over a decade ago. Those investors have been threatening foreclosure for nonpayment.

Deed fraud is just one of the critical issues the American Land Title Association has its eyes on, the group noted.

"Our team is reviewing the bills that have been introduced and we're encouraged leaders in Albany are joining in the effort," Diane Tomb, the group's CEO, said in a statement. "Our members have been actively involved in serving their communities to tackle fraud on several fronts."

Title insurance policies come in two portions, one that protects the lender and the other is for the homeowner, and some of them could be used to help protect consumers from deed theft, according to the ALTA executive.

"We encourage homebuyers to talk with their title company about an enhanced owner's title insurance policy that provides coverage for this type of forgery," Tomb said. "Homebuyers also should sign up for a free alert service offered by their county recorder whenever a document is recorded against the property."