How a small agency deals with the big problem of fraud.
As a small, three-person office, Asbury Land Title is no stranger to collaborating on difficult challenges. “We all work together in getting things done,” said Jessica Taylor, Closing Officer at Asbury Land Title. The agency’s employees are also no strangers to trusting each other’s intuition. When someone has a “gut feeling” that a transaction may not be entirely legitimate, for instance, the entire team pitches in to conduct necessary research and follow-up.
This potent mixture of collaboration and intuition proved instrumental when Asbury Land Title recently was confronted with a fraudulent transaction. They successfully stopped the bogus deal and earned recognition from Alliant National’s Crime Watch Program.
Trusting your gut
In the beginning, nothing appeared amiss with the transaction. “It was a single-family home in a nice neighborhood,” said Taylor. But as with many illegitimate transactions, it didn’t take long for red flags to emerge. The first warning sign was the buyer’s address, which was in Canada. Then, there was the issue of earnest money, which was much higher than the normal range. Finally, the transaction order itself raised concerns, such as the signatures and dates appearing in different fonts. These details were more than enough for Taylor to intuit that greater scrutiny was warranted.
Sleuthing out the truth
After deeming the transaction suspect, Taylor began collaborating with the rest of her team to verify whether it was truly fraudulent or not. They looked up the buyer’s address on Google Earth, which returned what appeared to be a restaurant. Reviewing the result, the team thought there might be “an apartment above the restaurant but couldn’t be sure.” Spotting a REMAX office on the same street, they thought about contacting the business to see if they could verify whether it was indeed an apartment above the restaurant and to potentially “make contact with the buyer in person.” However, before they could reach out, new information emerged about the seller.
Stopping the “seller”
While hunting down information on the buyer, Taylor was also simultaneously working to verify the seller. “I had originally found the property on a ‘for sale by owner’ website and had sent a message to the seller asking them to please contact us.” She also noticed that information about the seller’s wife was missing. Additional research revealed that the seller’s wife’s mother had passed away recently, which gave Asbury Land Title another lead to pursue. They called the funeral home, which eventually put them in touch with the actual seller and allowed them to terminate the transaction.
An emotional journey
This transaction had a positive resolution, in addition to a few lessons applicable to anyone working in title insurance. First, finding the truth required Taylor and the Asbury Land Title team to trust their instincts and leave no stone unturned while conducting additional research into the transaction.
The story also highlights the emotional impact agents can make when they take all necessary steps to protect their transactions from fraud. As Taylor explained: “The seller was grateful to us for tracking him down. And I was excited as well. It was like solving a puzzle. Once that final piece was found, we were able to glue it together.”
Having that type of effect at your work is a rare thing indeed. While stopping fraud can be challenging and require additional effort, the payoff at the end of the day makes it work well worth doing.
Would you like to learn more about the Alliant National Crime Watch Program or submit your own experience for consideration? Find out more here.
By Martin R. Ufford Member Hinkle Law Firm,LLC Wichita, KS
I’ve had the privilege of representing title insurance companies and their insureds for the past ten years.
Each claim represents a unique challenge. With the benefit of hindsight, I have reached some conclusions that may assist agents and local counsel in avoiding claims.
Looking to avoid title claims related to unpaid mortgages and deeds of trust? We offer 4 tips
Our Claims Team has received various claims related to unpaid mortgages and deeds of trust. Here are two scenarios we have seen arise in the context of a claim:
Scenario One
The agent receives a payoff statement from the seller. The seller sends an email requesting the payoff from the lender and copies the agent on the email.
The agent relies on the email and the payoff statement to wire funds to the lender.
Later, it is discovered that the email address for the lender is fake, and the bank account receiving the payment was held by the seller, not the lender.
Scenario Two
The agent reaches out to the lender for a payoff statement. However, the closing date is approaching, and the lender has not responded.
The seller provides the agent with a printout showing a zero-balance owed on the account. The agent contacts the lender once again for a payoff statement.
The lender confirms over the phone that a zero balance is owed. The agent closes the transaction based on these representations.
Later, it is determined the original lender confirmed a zero-balance due because the loan had been sold to another lender.
An assignment of the mortgage had been recorded, and the current holder of the notes filed to foreclose.
Here are 4 tips to help you avoid these types of claims:
Always obtain a payoff statement directly from the lender. Do not rely on payoff statements provided by other parties. Your request for a payoff should include a letter of authorization from the borrower, the loan number, the property address, the borrower’s name and your fax number or email address.
Only rely on a payoff statement sent by the current holder of the note. Check the MERS system, (if the mortgage is a MERS loan), and the public records for the last assignee.
Obtain separate payoff statements directly from each lender with an interest in the property being sold or refinanced. Do not rely on representations from the borrower or other institutions regarding the balance of a loan.
Many lawyers representing creditors record their money judgments and let escrow companies collect the judgment amount for them when the debtor sells real property.
But after a recent published opinion in Arizona applying its homestead protection laws, that practice may soon come to an end if the real property is protected by the homestead statutes.
In Pac. W. Bank v. Castleton, No. 1 CA-CV 17-0667, 2018 WL 6815531 (Ariz. Ct. App. Dec. 27, 2018), the Arizona Court of Appeals considered the effect of a $5.2 million recorded judgment on a subsequent conveyance of a personal residence by the judgment debtor to a third-party buyer.
After the close of escrow, the judgment creditor sought to collect its judgment against the buyer by filing a judicial foreclosure complaint.
Such action triggered coverage under a title insurance policy (not an Alliant National policy!) because the judgment was not listed in Schedule B.
The Arizona Court of Appeals had to decide the purely legal question: Is a recorded judgment a lien that encumbers homestead property? If so, the insured would lose its property.
In our continued effort to keep our agents and escrow officers apprised of trends in the Title industry, our claims counsels and administrators have provided the following claim summaries. It is our goal to share these stories and help you avoid similar scenarios in the future. In this article, we will focus on Naked Releases.
A naked release is a release of a lien or mortgage that is not done in connection with a sale or refinance transaction. These releases are a red flag and merit further investigation. Naked releases often involve forgery which are expensive to resolve and cause significant losses.
