The findings underscore that strategy is no walk in the park
Fraud and forgery claims tied to mortgage refinances have surged, now representing over 40% of all title insurer losses and expenses, according to a new Milliman Inc. study commissioned by the American Land Title Association (ALTA).
The report, which analyzed nearly 162,000 claims from 2014 to 2023 and covered more than 90% of the industry’s annual premium volume, found that the average cost of fraud and forgery claims on refinances has climbed to $207,000. That's almost seven times higher than other claim types.
“These findings underscore that refinances are by no means risk-free,” ALTA CEO Chris Morton said.
“Fraud and forgery, which cannot be detected through a public records search, are actually more common and more costly in refinance transactions compared to purchase transactions. Title professionals and title insurance play a critical role in protecting homeowners and lenders from these risks, leveraging technology and expertise to prevent catastrophic financial losses and create certainty in the real estate market.”
The study highlighted that, while purchase transactions also face fraud and forgery risks, these claims account for just 20% of total losses in that segment.
In contrast, the share for refinances has doubled, reflecting a growing vulnerability as fraud schemes become more sophisticated and digital closing processes expand.
Defense costs have also become a significant burden. For refinance transactions, defending a fraud or forgery claim now averages nearly $70,000, with total defense costs representing over one-third of the total claim cost.
“Even the average defense cost of roughly $11,000 for other causes of loss would be a significant financial burden for the average homeowner, who would be responsible for loss payments as well as defense costs should they not have a title policy,” the Milliman report stated.
Claims involving elder financial exploitation—classified as competency claims—incur defense costs four to five times higher than typical claims.
The report further revealed that about 40% of refinance-related losses and expenses stem from issues that cannot be identified through public record searches, up from 29% in previous years.
Lender title policies, meanwhile, provided critical protection against hidden risks, with nearly half of all reported losses on lender policies arising from fraud, forgery, and lien priority disputes.
Industry experts have long warned that the perception of low risk in refinance transactions is misplaced.
As the mortgage industry continues to digitize and fraudsters adapt, title insurers remain a crucial backstop for both lenders and homeowners.
The data shows lenders and homeowners must stay alert and keep strong title insurance in place, especially as refinancing rises and falls with changing interest rates and economic shifts.
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