Our Son Did What?

In the valley below Lookout Mountain a first mortgage was insured on a single-family rental property for $85,000. The borrowers were Clifford and Jerry who were also partners in a local nightspot. The proceeds of the refinance were deposited in their business bank account.

After several months, payments ceased and the lender sent out foreclosure notices to the borrowers.

It was then that the lender received a letter from an attorney representing Clifford's parents. The parents claimed to be the true owners of the property and , according to them, the recorded deed showing title in the name of Clifford and Jerry, purportedly signed by them, was a forgery!

The parent's filed suit to stop the foreclosure and Clifford entered a substance abuse clinic in downtown Chattanooga.

Between Clifford and Jerry, all the loan proceeds vanished. Clifford admitted to forging his parent's signatures to the suspected deed. Jerry denied any knowledge of any forgery and claimed that Clifford embezzled money from the partnership business.

The title insurance policy paid $89,500 to purchase the insured mortgage. After pleading guilty to criminal charges, Clifford was sentenced to fifteen years probation and ordered to pay restitution of $50,000. Even if Clifford makes restitution, the title insurance company will still be out almost $40,000 plus legal expenses.

LENDERS TITLE POLICY: This loss is a covered risk for the lender.

STANDARD OWNER'S POLICY: This is a post policy matter and is not covered. The parents were on their own to defend their title and pay their attorney's fees.

EAGLE PROTECTION OWNERS POLICY: Post policy forgery is a covered risk. The parents legal expenses would have been paid and any loss covered.