Imagine that after spending decades buying and renting properties you’ve accumulated a small portfolio of properties, including eight homes, without ever having to take out a mortgage. Then you meet a slick businessman who convinces you to invest in properties with him.

He forges your signatures and takes out loans on the properties that you own free and clear, saddling you with millions of dollars of debt on mortgages you didn’t even know about. When the guy is arrested and sent to prison for bilking somebody else, those mortgages go into default.

But because you didn’t sign any of those loans, the lenders can’t foreclose on you, right? Forgery invalidates a lien. You assume that the lenders will have to talk to the title insurer, who’s supposed to cover losses on the loans arising from forgeries and other defects.

But say the title insurer claims the title agent and lawyer who handled the closings were not their agents or employees. Say the title insurer has sued the agent, claiming she breached her duties at more than two dozen loan closings, issuing title insurance without the proper loan documentation.

The title insurer agrees to return three of your properties, but sides with the lenders on 12 remaining loans it had insured for $8 million. If the lender prevails, you not only lose your properties, but could face up to $5 million in deficiency judgments, your lawyer says.

This tangled story is reality for a Miami Beach couple, Ivor Rose, 79, and Rita Starr, 63, who have been locked in a five-year legal battle with Stewart Title, Gretchen Morgenson reports for the New York Times. A spokesman for Stewart Title told Morgenson that the cases the company settled benefited the couple significantly, but would not comment on the dispute over the 12 other loans. Source: nytimes.com

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