In the title world, we deal with all kinds of property fraud — fake deeds, forged signatures, shady LLC transfers — but one form that’s quietly gaining traction is homestead mortgage fraud. It’s not as flashy as wire fraud or as obvious as a forged deed, but it’s just as damaging. And if you work in title, escrow, or underwriting, it’s something you definitely want on your radar.
So, What Exactly Is Homestead Mortgage Fraud?
Most states give homeowners a “homestead exemption.” It’s designed to protect a person’s primary residence from certain creditors or reduce their property taxes — basically, a way to keep people from losing their home over debt or hardship.
The problem? Some people have learned how to game the system. Homestead mortgage fraud happens when someone lies about where they live or manipulates their homestead status to score financial perks, dodge creditors, or get lower mortgage rates.
It’s the real estate equivalent of calling in sick to work while posting beach photos on Instagram — except instead of an awkward meeting with HR, it could land someone in court.
How People Pull This Off (and Why It’s a Problem)
Here are a few ways fraudsters — or sometimes just “creative” homeowners — pull homestead tricks that cause big headaches down the line:
Fake “Primary Residence” Claims
Someone applies for a mortgage claiming a rental property is their main home to get a lower interest rate or better terms.
Example: An investor with three properties says all of them are “owner-occupied.” That’s not just dishonest — it’s mortgage fraud.
Double (or Triple) Homestead Exemptions
A couple owns homes in two states and each claims one as their “primary residence” for tax breaks.
Example: One files in Texas, the other in Florida — both states with generous homestead protections. The savings might be tempting, but it’s flat-out illegal.
Dodging Creditors with a “New” Homestead
When someone senses financial trouble coming, they might transfer property to a relative or file a homestead claim right before bankruptcy to shield assets.
Example: A homeowner “gifts” a property to a family member just before a lawsuit hits, then claims it as a homestead to keep it out of reach.
Fudging the Mortgage Application
Occupancy fraud happens when a borrower lies about how they plan to use a property.
Example: They tell the lender they’re moving in, but actually plan to rent it out on Airbnb. The lender thinks they’re financing a primary home; in reality, it’s an investment play.
Why Title Companies Should Care
Homestead mortgage fraud might sound like a lender problem, but title professionals end up cleaning up the mess. When someone misrepresents homestead status, it can create major confusion and legal issues, like:
- Lien priority disputes (some liens can’t attach to a true homestead)
- Hidden judgments or tax liabilities due to false exemptions
- Voided or disputed title coverage if the property wasn’t properly classified
- Closing delays when underwriters find conflicting homestead filings
In other words — what starts as a small “white lie” can snowball into a full-blown title nightmare.
Real-Life Examples (and Lessons Learned)
- Florida’s Dual Homestead Problem: Florida counties have uncovered cases where snowbirds claim homestead exemptions both in Florida and up north — costing taxpayers millions.
- Texas Tax Shenanigans: Auditors in Texas have caught property owners using relatives’ names to hang on to multiple “homestead” exemptions.
- California’s Asset Protection Trick: Some homeowners have tried transferring ownership to family and filing false homestead declarations just before creditors come knocking. Spoiler: the courts don’t look kindly on that.
Red Flags Title Pros Should Watch For
When reviewing records, keep an eye out for things that just don’t line up. Some telltale signs:
- More than one homestead exemption filed by the same person or couple
- Quitclaim deeds between family members with no money exchanged
- A mailing address that doesn’t match the claimed homestead
- Sudden homestead filings before lawsuits or bankruptcies
- Borrower documents that say “owner-occupied” — but the owner lives elsewhere
Even a quick cross-check of property tax records, driver’s license addresses, or mailing info can catch inconsistencies before closing.
Why This Matters More Than Ever
Homestead mortgage fraud might not grab headlines, but it’s part of a bigger trend — people getting creative with property loopholes in a high-cost, high-stakes housing market. As affordability tightens and AI makes it easier to falsify documents, title professionals have to stay a few steps ahead.
This isn’t just about catching bad actors; it’s about protecting the integrity of ownership records and keeping public trust in the system.
Bottom Line
Homestead mortgage fraud is one of those issues that lives in the gray area — where financial desperation, misunderstanding, and manipulation collide. For title pros, awareness is key. The more we understand how these schemes work, the better we can flag inconsistencies before they become post-closing problems.
Because in today’s market, the line between “clever tax strategy” and “criminal fraud” can be thinner than ever — and it’s our job to spot where it’s being crossed.
Please note: Any opinions discussed in this article belong solely to the author, Marissa Berends, and do not necessarily reflect the views of Capitol Lien.
About the Author
Marissa Berends is a Certified Abstractor and Industry Relations Coordinator at Capitol Lien, a nationwide due diligence and risk mitigation services provider. Since joining the company in September 2021, she has earned abstractor certifications in Minnesota, Nebraska, and North Dakota. She is pursuing her Wisconsin Title Examiner certification, which is expected to be completed in Fall 2025.
Marissa is involved with the following groups: Wisconsin Land Title Association’s (WLTA) Convention Committee & Young Title Professionals; Nebraska Land Title Association’s (NLTA) Convention Committee; Property Record Industry Association (PRIA) National Education Committee; Illinois Land Title Association’s (ILTA) Inclusion, Diversity, Equity & Acceptance (IDEA) Committee; and the National Association of Land Title Examiners and Abstractors (NALTEA).
About Capitol Lien
Capitol Lien empowers real estate and title professionals with trusted public record research and due diligence services nationwide. With 35 years of experience, Capitol Lien specializes in fast, accurate property and title searches, lien reports, and document retrieval that help title agents, underwriters, and legal teams operate their businesses with confidence. The Capitol Lien team takes the hassle out of title research with local experts and innovative tools that make it easier to mitigate risk, stay on schedule, and keep your closings moving smoothly.
Learn more at capitollien.com. Ready to simplify your title research? Send your next order to Capitol Lien and experience the difference trusted diligence makes. Stay in touch with Capitol Lien on LinkedIn for industry updates and information. Reach out! contact@capitollien.com or 800-845-4077.