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Bill Extends Life of D.A.'s Unit Targeting Realty Fraud : Law enforcement: But under pressure from business group, Legislature halts a pilot program meant to alert county residents to deed forgeries.

October 23, 1995|MYRON LEVIN | TIMES STAFF WRITER

Police and prosecutors have retained one state legislative weapon but lost another in the fight against real estate fraud in Los Angeles County.

A bill signed last week by Gov. Pete Wilson will extend the life of a special real estate fraud unit within the Los Angeles County district attorney's office. With the exhaustion of its start-up grant, the unit had been threatened with extinction.

But the California Assn. of Realtors persuaded the Legislature to end a pilot program designed to alert county residents when title thieves record forged deeds to their property.

Approval of funding for the fraud unit is certainly "better than nothing," said Los Angeles Deputy Dist. Atty. Don Tamura, who heads the team of three prosecutors and three investigators.

But Tamura said that with the loss of the notification program, some people will learn too late that their property has been fraudulently transferred or pledged as security for loans.

Struggling to cope with violent crime, local law enforcement agencies have sometimes been accused of doing too little to combat real estate fraud, which often hits low-income homeowners the hardest. Aggravating the problem are the large commitment of time needed to investigate and prosecute fraud cases as well as recent cuts in legal aid programs that go to bat for the poor.

The real estate fraud unit was launched last year with a $500,000 grant from a consortium of mortgage-insurance companies and the Federal Home Loan Mortgage Corp., also known as Freddie Mac. But the grant ran out in August, and the unit had no source of continued funding until passage of the recent legislation.

Sponsored by state Sen. Teresa P. Hughes (D-Inglewood) and signed by Wilson on Oct. 15, the bill will exact a fee of $2 when certain types of real estate instruments--including deeds of trust and reconveyances--are recorded with the Los Angeles County Registrar-Recorder.

The proceeds, expected to top $1 million per year, will be divided between the real estate fraud unit and local police and sheriff's detective squads involved in investigating real estate scams.

Joseph Hew Len, legislative assistant to Hughes, said the bill "was one of the most important things we thought that had to be done to curb real estate fraud."

The measure passed after the California Assn. of Realtors dropped its opposition. But the influential group, which represents 100,000 California realtors, played a key role in blocking extension of the program that notifies residents that their properties are transferred.

With hundreds of thousands of deeds filed with the county recorder each year, officials have no way to check if signatures are authentic. That allows title thieves to record phony deeds and quickly sell or borrow against the stolen property. The real owner may be none the wiser until the lender forecloses for non-payment of the loan. The owner may be forced to spend thousands of dollars in legal fees proving the deed was bogus.

Launched in February, 1994, and due to expire at the end of this year, the pilot program is an early-warning system. Whenever a deed is recorded, the owner of record is mailed a post card informing him or her of the transfer.

Although a high percentage of such recordings are legitimate, officials said homeowners have been alerted to numerous instances of fraud. A survey of property owners who were mailed notices showed that "the public was very enthusiastic about the program," said Dennis McCraven, manager of document recording for the county registrar-recorder.

Even when transfers were legitimate, people "still were grateful that . . . we would notify them," McCraven said.

State Sen. Diane Watson (D-Los Angeles) sponsored legislation to continue the program beyond the end of this year.

But the initiative has been financed by a $7 fee for each deed recorded. Here, the realtors drew the line.

Alex Creel, vice president for governmental affairs with the realtors' association, said the group fought the bill because it opposes "adding more cost and more burdens on the right to freely transfer property."

Creel said the fee is but one of many expenses that add to the cost of real estate transactions. "It's the culmination of all those different little charges that makes it difficult for the buyer . . . to buy," he said.

"We're absolutely against real estate fraud," Creel said. "The question is, how do you deal with it?"

Creel also questioned whether the program is cost-effective, but Tamura, of the district attorney's office, disagreed.

"The key was early detection, because the problem we're having is many people were finding out almost a year later that someone had put a grant deed or deed of trust on their property without their knowledge. And that's why this program was very valuable," Tamura said.

Creel noted that lawmakers did salvage a portion of the county notification program and have extended it statewide.

Besides the mailing of post cards, the pilot program required notaries to take a thumbprint of anyone deeding property in Los Angeles County. With a thumbprint as potential evidence, authorities hoped crooks would be less likely to impersonate property owners and forge their signatures on deeds.

Under legislation signed earlier this month, thumbprinting will be required statewide.

That is "a greater deterrent than the post-card notice," Creel said. "The deterrent is when the bad guy has to put his thumbprint down."

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