Legal Question in Real Estate Law in California

Re: grant deed fraud

Possibly. There are cases holding that a forged deed conveys no title at all, not even to a bona fide purchaser, and that one holding no title cannot encumber the property even to a bona fide encumbrancer, without notice and for value. (A mortgagee taking a mortgage without notice that the mortgagor�s deed is void for fraud in the factum acquires no interest. Vaca Valley & Clear Lake Railroad Co. v. Mansfield (1890) 84 Cal. 560 at 566.)

The problem for non-lawyers and some lawyers is in distinguishing between two kinds of fraud - "fraud in the factum" and "fraud in the inducement."

You can get a sense of the difference between the two by putting both expressions into Google searches (see what Wikipedia has to say about fraud in the factum, for example).

Without knowing the circumstances that resulted in a fraudulent deed, I cannot say which kind of fraud was involved and therefore cannot say what the effect will be on an innocent bystander such as the mortgage holder.

Furthermore, the mortgagee (lender) may have been on inquiry notice about title to the house if someone other than the alleged owner was in physical possession of it, so even a fraud in the inducement may be enough to impair the lender's rights.