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Notary Bulletin

Battling Real Estate Fraud: What You Can Do

Notaries play an important role in the real estate closing process, ensuring that the people who signed a particular document are properly identified and fully aware of the implications of the document they are signing. In this role, Notaries serve the important function of gatekeeper as well, acting as a barrier to those who would commit fraud.

The U.S. Treasury Department reports that identity theft now is the second most common element in real estate-related fraud. As lenders tighten their underwriting standards and scrutinize loan applications more carefully, criminals seem to be turning even more to using bogus or stolen identities to bilk financial institutions. But as long as the Notaries follow the highest, fundamental standards of care, they will go a long way toward curbing this type of fraud.

Personal Appearance
Requiring personal appearance is where a Notary’s job starts — for every signer of every notarized document. It’s also the law in most states. But people offer all kinds of excuses for why document signers are absent from the notarization: they’re stuck in traffic, they’re sick, they’re out of town, it would be too inconvenient. None of these excuses are acceptable and all open the door to fraud. It is impossible to verify the identity, willingness and awareness of an absent signer.

Satisfactory Evidence Of Identity
By properly identifying every signer, Notaries make it much harder for criminals to commit fraud. State laws vary regarding what constitutes acceptable identification. The most common is a government-issued identification document — such as a passport, driver’s license or identity card — that includes a photograph, a physical description and signature of the individual. Many states also permit Notaries to use their personal knowledge of the signer as satisfactory evidence of identity. For signers without proper ID, a third option is to use credible identifying witnesses.

If there is any doubt about a signer’s identity, Notaries should ask questions about the details on the ID. It’s also a good idea to ask for a supplementary ID, such as a social security card or credit card. Credit cards, for example, are considered as very good supplementary IDs because criminals often do not get credit cards to go along with the fake or stolen ID.

There is an additional way to combat fraud: thumbprints. California and Illinois currently are the only two states that require Notaries to take signers’ thumbprints or fingerprints for certain real estate transactions. But it is a recommended best practice to always record signers’ thumbprints in a journal entry because criminals often will be reluctant to leave evidence of their true identities.

Whatever method is used to identify signers, it also is a good idea to keep a complete record of the notarization. That protects Notaries, their employers, signers and the general public. It also can provide law enforcement with valuable information if questions arise about a particular transaction.

Beyond Identity Theft
Bogus identities aren’t the only potential fraud threats Notaries may encounter. Many criminals falsely claim that to have a power of attorney to act on behalf of a borrower or property owner. When a signer claims to have a power of attorney, Notaries should ask to see it. Also as soon as they find out a power of attorney is being used, Notaries should notify the bank, title company or other organization that is responsible for the closing.

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