New York lawmakers have introduced Senate Bill 7732 as a response to the growing crisis of deed fraud — a real and rising threat to property owners across the country. On the surface, the bill looks like reform. But a closer look reveals what it really is: a convenient liability shield for title insurers.
If passed, the bill would prohibit title insurance companies from paying out claims to mortgage lenders when a real estate transaction is later found to be fraudulent. The stated goal is to increase accountability among lenders and encourage better fraud detection. But in practice, this legislation shifts financial risk away from the very parties who are supposed to safeguard the integrity of property titles.
Let’s be clear — title insurance exists to ensure that a property’s title is valid, enforceable, and free from defects at the time of sale. It’s not just a piece of paper; it’s a promise backed by due diligence. If insurers can now deny claims in cases involving fraud — precisely the kind of risk they are paid to protect against — then what exactly is the value of the policy?
Yes, lenders have a role to play. Strong underwriting and fraud detection at the loan level are essential. But title insurers are supposed to be the first line of defense, not spectators in the process. Shifting accountability to lenders while insurers continue collecting premiums for a service they may no longer be fully obligated to deliver undermines the product’s purpose.
Even more concerning: the bill does nothing to help homeowners who are the actual victims of deed fraud. There are no provisions for restitution, support, or improved detection mechanisms. The law simply rearranges who gets left holding the bag when fraud occurs — and it’s not the insurers.
Deed fraud is a deeply personal and financially devastating crime. Victims often spend months — or years — trying to reclaim what was taken from them through forgery and impersonation. If we want serious reform, it should begin with reinforcing the responsibilities of those paid to verify ownership and protect buyers, sellers, and lenders alike.
S.B. 7732 doesn’t solve the problem. It just gives title insurers a new way to sidestep it.
References:
New York Senate Bill 7732 text Link: https://www.nysenate.gov/legislation/bills/2023/S7732