In California and throughout the country a substantial number of people have found themselves saddled with adjustable rate mortgages that have reset to interest rates significantly higher than at loan origination. In many cases the borrowers cannot afford the new payment amounts. Also, in many cases, the borrowers really didn't know what they were getting into.

It is a common, and not altogether inappropriate, reaction to such situations to think or say, "Too bad. You shouldn't have signed something if you didn't understand it." But what if the borrower claimed that the documents are forged? Well, you'd think that would be an easy claim to refute, especially if the signatures were notarized.

But the forgery claim might not be as easy to dismiss as it appears. This is because forgery can occur even when the signature on the document is authentic. A recent opinion in the case of The People v. Paul Stephen Martinez (California Fourth Appellate District, Division Two) is instructive in this regard.

Defendant Martinez had offered to help Ruth Michiel when she ran into financial difficulty. She feared that two houses that she owned might go into foreclosure. At Martinez's direction, Ms. Michiel signed a number of documents. Later, she discovered that a trust deed in the amount of $25,000 and secured by one of the properties had been recorded in favor of Martinez. The trust deed bore her signature. At trial, Ms. Michiel did not deny signing the trust deed, but she denied doing so knowingly.

Among other things, Mr. Martinez was found guilty of forgery. The decision was appealed. His defense against the forgery charge was that "there was no evidence that her signature was not genuine and no evidence that he used any affirmative misrepresentations … to procure her genuine signature." The court disagreed with his claim regarding misrepresentation. Testimony had showed that he provided her "with a number of documents to sign to try and help [her] with [her] financial problems." But, more importantly, the court held "he could be convicted of for gery even in the absence of any such affirmative representations." [my emphasis]

The court referred to an earlier (1967) case, People v. Parker, where defendents had been found guilty of forgery even without any misrepresentation. The defendents in that case had been sellers of aluminum siding. The documents that they gave buyers to sign included a trust deed on the property. The defendents had not misrepresented the trust deeds; they simply included them, without disclosure, in the documents to be signed. That court said, "The crime of forgery is committed when a defendant, by fraud or trickery, causes another to execute a deed of trust or other document where the signer is unaware, be reason of such trickery, that he is executing a document of that nature."

In fact, there are a number of other California decisions that would tend to support the ruling in People v. Martinez.

We haven't heard anything about similar forgery claims in sub-prime mortgage situations. But, in light of the ruling in People v. Martinez, it would be no surprise to learn that such charges are being filed against some lenders.

Published: December 30, 2008

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Bob Hunt is a director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .