(Originally published in the March 2019 issue of The National Notary magazine.)
Imagine getting a visit from a local police investigator with questions about real estate documents you notarized a year ago. It turns out the documents were part of a fraud scheme, and the notarization is coming under scrutiny.
It happens more often than you might think.
In December 2018, the Manhattan District Attorney’s office released a grand jury report noting that law enforcement authorities in New York City had received 2,000 complaints of deed fraud in the previous four years. Virtually every case of fraud involved a “faulty” notarization. The fraud problem is so serious that the grand jury called it an “epidemic.”
New York City is not alone. A recent article posted on Philly.com described real estate fraud as an “especially virulent problem.” Kansas City, Chicago and Detroit, among other cities, have been plagued with similar waves of deed fraud. California, Florida and Nevada are among the states hardest hit by mortgage fraud, which often involves a bad notarization.
“This is an everywhere problem,” said Kim McPartland, a Claims Examiner for Merchants Bonding Company. “Getting caught up in a fraud scheme could happen to any Notary anywhere in America.”
In rare instances, the Notary is a willing participant in the fraud. In most cases they are unwitting participants who are tricked by the fraudsters. In other instances, the Notary plays no part at all. Instead, scammers forge the Notary’s signature and seal.
“This report really gives Notaries inspiration to do good in their role as public officers,” said Assistant Manhattan District Attorney Gilda Mariani, who worked with the grand jury. “Notaries are unsung sentinels. By performing their duties carefully, they can prevent a lot of this fraud.”
Criminal Tactics That Put Notaries At Risk
For honest Notaries who are not active participants in frauds scams, there are two key risks.
First, criminals try to trick you into not performing your duties. That typically involves trying to get you to notarize the documents without the signer being present or accepting the bogus ID of an impostor standing in for the property owner.
There are all sorts of strategies to charm, distract, confuse or pressure someone that fraudsters use to trick Notaries into skipping a vital step.
“I’ve seen people try all kinds of tricks,” McPartland said. “‘This is my dad’s ID, but he can’t come into sign because he’s sick.’ Things like that.”
The grand jury report noted cases in which the Notary was duped by someone regarded as a respectable member of the community, such as an attorney or a police officer.
Most states do not require any education to become a Notary, and those that do focus on the law and what a Notary’s duties are rather than how to perform those duties and follow best practices.
Even more disturbing is the second risk: Criminals forging a real Notary’s signature and seal on fraudulent documents.
“Perpetrators have lifted valid Notary commission information from public documents and used it to purchase a phony Notary Public seal,” the grand jury report explained. In fact, an undercover law enforcement officer easily was able to purchase a fake New York Notary seal from an out-of-state online vendor.
Some forged documents don’t come to light for a decade or more. That’s because many of the victims are seniors or seriously ill or are heirs of deceased homeowners. As such, they may not uncover the fraud immediately. In the case of fraud against a family member, it often is not discovered until the property owner dies and the heirs realize their inheritance is gone.
Once the fraud comes to light, the Notary can become ensnared in a legal mess along with the victim, who is desperately trying to recoup their property and any other damages suffered. Notaries who unwittingly performed a faulty notarization could face stiff fines, civil judgments and risk the suspension or loss of their commissions along with other legal consequences. Notaries who had their seals and signatures forged may still be burdened with time, grief and legal costs to prove they did not perform the fraudulent notarization.
How The Real Estate Fraud Works
It is remarkably easy to commit real estate fraud. That was starkly illustrated in 2008 when a reporter for the New York Daily News “stole” the Empire State Building by submitting bogus documents to transfer ownership of the building to the City Register’s office. The transfer was duly recorded, and the title was transferred — a process that took 90 minutes.
The paperwork included the signatures of fictitious people and a fake notarization. Today, real estate fraud remains just as easy. “It can take as little as a forged deed to transfer ownership of real property,” the grand jury report noted. “It is extremely challenging, and sometimes impossible, to undo a fraudulent transfer.”
Many frauds are committed by the relative or caregiver of a property owner. “A lot of the cases I see involve family disputes,” said McPartland, who handles Notary claims for Merchants nationwide.
There are cases of children taking the property of their parents, individuals trying to co-opt inheritances from their siblings and people trying cheat their spouses.
In any case, the scammers create bogus documents — including fraudulent or improper notarizations — to transfer ownership and then head to the nearest property recording office. The notarization is crucial. “If the documents had not been notarized, the City Register’s office wouldn’t have accepted them,” Mariani said.
Once the title is transferred, the swindlers take out a mortgage, sell the property or sometimes even rent it.
Notary Recommendations To Stop Real Estate Fraud
The grand jury report recommended a host of significant reforms, and top on the list was a series of sweeping changes to the state’s Notary laws. They included such things as mandatory education for all Notary applicants — new and renewing; a requirement for Notaries to keep a journal; a requirement for Notaries to obtain a bond and more. The recommendations specifically address New York state’s Notary laws and don’t apply to the rest of the country. But many of the recommendations could apply to other states.
The most important thing Notaries can do is educate themselves. That knowledge can include such things as how to attach a separate notarial certificate to a document, where to place your Notary seal, how to screen signers for willingness and awareness and how to check a signer’s ID.
The next thing Notaries should do is maintain a Notary journal in which they record the details of every notarization when it happens. The grand jury described the journal as “the most important tool of the Notary Public’s trade.”
“Your best defense is an impeccable journal,” McPartland said. “Put in more information rather than less.”
A well-kept journal shows your diligence and demonstrates that you exercised reasonable care whenever you performed a notarization. It also corroborates the integrity of each notarization, helps establish the identity of your signers and can refresh your memory months or years later
This is particularly helpful when your Notary identity is stolen. Without a well-maintained journal, it might be far more difficult to prove that you didn’t perform the fraudulent notarization.
Journal entries also can help law enforcement catch scammers. Such was the case of one New York City Notary who voluntarily kept a journal, according to the grand jury report. “However, the absence of a journal, or any type of recordkeeping, made it difficult, and in some instances impossible, to identify the culprits and their accomplices.”
Underlying the grand jury report and discussions with experts is the simple notion that the best protection for others and yourself from fraud is doing your job the right way every time. That means requiring every signer to appear before you at the time of the notarization; taking care to check their IDs; and keeping a detailed record of every notarization.
As the grand jury report noted, “The Notary Public, one of the oldest continuing professions, is the first line of defense for combating real estate deed fraud.”
Michael Lewis is Managing Editor of member publications for the National Notary Association.