10.06.08
Posted in 60 second title work, Education, Industry News, Mortgage and title Fraud at 9:10 pm by Jeanne
A Connecticut Judge has thrown out claims that Hayley Kissel assisted her deceased husband, Andrew Kissel, a wealthy real estate developer, in fraudulently obtaining mortgage money according to a new WTHN news and a Hartford Paper article.
Mr. Kissel was murdered in 2006, leaving an estate that owed more than $20,000,000 to several banks, based on the fraudulent mortgages. Kissel initially took out legitimate mortgages on properties, but then created and recorded fraudulent releases. He would then go to another bank to borrow money, and repeat the process. The lawsuit claims Mrs. Kissel was aware that her husband was forging and recording bogus releases to obtain more funds, but kept quiet to maintain her lifestyle. And, because she did not speak up, Kissel was able to repeat the scam, causing losses to the title companies.
Both Chicago Title and Fidelity National Title Insurance companies, which insured title for the lender’s, are suing Mrs. Kissel. They allege that because she was aware of her husband’s conduct, she was complicit in the activity by not reporting it. The judge disagreed. A jury will now have to decide if Mrs. Kissel, who has significant assets, has been unjustly enriched by her husband’s theft and is therefore responsible for some of the losses incurred by the title underwriters.
Author comment: Granted, I have not seen the documentation, but this appears to have all the red flags signs of perpetrated fraud. Honestly, when is the last time the title person legitimately saw a large mortgage paid off PRIOR to a mortgage closing, as it appears to have been in this case.
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10.04.08
Posted in Education, Industry News, Land Title Technical Stuff at 10:17 am by Jeanne
A recent case out of the U.S. Court of Appeals 11th Circuit (on appeal from the United States District Court for the Southern District of Florida; D. C. Docket No. 07-20494-CV-KMM) is of particular interest to the title insurance industry, abstractors and title searchers. Hon Realty, a Florida Corp., claimed First American Title Insurance Co was responsible, under terms of its title policy, for a money lien by the city. The Lien was not recorded with the respective county.
First American Title searched title, prepared a title commitment, closed the loan, and issued a title policy on the date of closing. An enforcement order regarding a lien for the violated ordinance had been issued prior to closing, but had not been recorded with the Miami-Dade County Clerk of Court until two weeks after closing. The question is whether the term “public records” (as used in the contractual language in the title policy) included information available at the city, but not yet recorded with the county.
First American argued, according to statute, that there a is no constructive notice until a lien is filed with the Clerk of Court. Hon Realty argued that because the enforcement order for the Lien was available at this city it should be construed as public record. The Court of Appeals disagreed, citing Florida statute 695.11, the states recording statute for liens filed against real estate. which says the Lien is not constructive notice until made part of the Official Record.
We believe the circuit court judges made a good decision. By reading the statute exactly as it was written, it is clear what the abstractor and title company are responsible for. The title insurance industry, abstractors and searchers are already burdened with a significant search process, made more complex by the variety of liens and places to search, which vary by state, county, township, and city. Had the city correctly followed the statute and promptly recorded the lien, there would have been no issue and First American would easily have located and paid the lien. Kudos to the 11th circuit
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09.30.08
Posted in Education, Industry News, Money and Finance, Mortgage and title Fraud, RESPA, Regulation of Insurers and Banks at 4:04 pm by Jeanne
Ever since the Enron mess, the government has required banks to give consumers reports that show a truer reflection of the current asset value on their books. This means when the value of a house drops, resulting change in the loan to value the loan will be considered a “bad loan.” Even though the homeowner may be current on all payments, the loan is now reported, on paper, as a bad investment.
For example, let’s say newly married Tom and Mary take out a mortgage with 5% down. So they have a 95% loan to value mortgage on their $200,000 home. So the the house is purchased for $200,000, the mortgage is $190,000, they put $10,000 down. They have conscientiously made all payments on time for the last 3 years. However, in the last three years their home’s value has dropped by 10%, reducing its asset book value to $180,000. The bank (or FNMA/FHLMC) depending on who holds the loan) must now must report the lower asset value on their books. This means they do not show enough value on the books to cover their loan in case of foreclosure.
In reality, if Tom and Mary continue to pay, there’s no problem. Except, it looks bad on the books, and the confidence level of the mortgage holder may wane.
But the financial institution now files its required report, and the investors see that the assets protecting their (mortgage backed) securities are no longer enough to repay the loan in the event of foreclosure. Remember, Tom and Mary are paying their mortgage on time, each and every month- as are the vast majority of people with a mortgage. Yet, if the loan to value is short because the house value dropped, the lender believes it may be in trouble and in need of funds to shore-up his balance sheet for the investors who purchased the securities backed by these mortgages. To some extent, it is a matter of confidence. Just as it is in the stock market. If Tom and Mary make payments, as most homeowners do, no problem. But what if they don’t. The mortgage holder’s confidence wanes. Will Tom and Mary continue to make their payments?
However, it gets worse. When people have taken out second and third mortgages worth significantly more than the property is currently worth, they made bail. This leaves the investor holding the bag, particularly because of the recent change in moving away from Private Mortgage Insurance. For many years PMI protected the lenders against falling asset value, by double checking the likelihood of repayment, and writing insurance against default. But in order to save the money on PMI, many took out first and second mortgages simultaneously (known as piggybacks) in order to circumvent PMI payments. The banks got a slightly higher yield on these loans, but much higher exposure because there is no PMI to fall back on.
There is no doubt that poor lending practices and greed are primary causes of this mess. Consumers lied on unethical and illegal loan applications, lenders were negligent in checking loan applications, financial advisers told the public to take out second and third mortgages to pay for cars and boats, to pay down credit cards, etc., and regulators, they did nothing. All of this has led to a tightening of credit that ought to help alleviate the problem in the future. However, today, tightening credit is a disaster for the average consumer. Because although most of us pay our bills on time, the system no longer trusts us to pay. The system doesn’t have the safety net of enough value in our houses, tightening credit. So legitimate, needed credit will be almost impossible to get. The parents wanting to send their child to college will not be able to pay because they can’t get a loan. The car that breaks down cannot be fixed because the owner can’t afford to fix it and can’t get a loan. The small business that has the cash flow problem and can’t get a loan, will be unable to make payroll, putting people out of jobs.
It’s not over. Our next round will be rise in rates for adjustable-rate home equity lines of credit (HELOC). Because of the dropped value of homes, many of these loans are now subprime. Many of these adjustable rate mortgages are set by the LIBOR. LIBOR went up 50% last week. A tightening of credit. Now, when they go to refinance out of this expensive adjustable-rate product, they will be in trouble because there’s no longer enough equity in their house to cover it. We got ourselves into this one. In order to get new computers, new cars, new boats, and the latest television sets, we all borrowed unwisely. Recognizing that we could write off the interest on that second mortgage, and recognizing that it had a lower interest rate than our credit cards, we bought, and bought, and bought. Those with 2nd and 3rd ARM’s are in trouble. They will have to make some tough decisions. Take a second job, sell the new boat, take Johnny out of that private school? But as consumers, we knowingly put ourselves there. In most cases, we have no one to blame but ourselves. Somehow we believed that the value of our house would always go up, up, up and we could sell it tomorrow for much more than we paid for today.
This will be a difficult lesson for us all. Our parents and grandparents worked hard to pay off the mortgage. Remember the black and white movies where a grandma and grandpa danced as they tore up the mortgage? Where mom and dad saved to buy a new couch or dining room set. It’s a scene from the past. Somewhere along the line we lost the vision to own things free and clear, and the desire to be mortgage free. We saw our home only as an asset to be borrowed against for a new car or TV set. But I believe we are smart people, and that we can learn from hard knock lessons. Let’s hope the government steps up and bales us out from this disaster once again, there is no other way. Let’s hope we all learn from this. We must all pay our own way, as we go.
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09.29.08
Posted in Education, Industry News, Regulation of Insurers and Banks at 11:24 am by Jeanne
by Jarrod Clabaugh, Printed with permission from Source of Title
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Governor Arnold Schwarzenegger signed Senate Bill 133 into law on September 25, 2008. The legislation implements greater controls over the practice of title insurance in California. Introduced by Senator Sam Aanestad in January 2007, the bill focuses on inducements offered by title marketing representatives to real estate agents and brokers in exchange for the steerage of business to their title insurance companies. The bill was supported by both the California Department of Insurance and the California Land Title Association.
The bill provides the department of insurance with significant new powers to regulate marketing practices in the title insurance industry. In particular, the bill creates the first program in the country to register and regulate title company sales representatives.
According to the bill, a person is prohibited from being employed as a title marketing representative unless he or she holds a valid certificate of registration issued by the commissioner for a three-year period. Should a person market title insurance without a valid certificate, the commissioner can issue a cease and desist order prohibiting that person from further marketing.
Additionally, under the legislation, title companies must notify the commissioner when a title marketing representative is hired or terminated. It also establishes an application process for the certificate of registration and allows the commissioner to set a fee to obtain or renew a certificate in an amount sufficient to defray the actual costs of processing it. The legislation states this cost cannot exceed $200.
The submitted application must contain several facts about the applicant, including the person’s residential address, principal business address, and the applicant’s mailing address. The applicant must also submit a statement, signed by an officer of the business by whom the applicant is or will be employed, certifying that the applicant will be provided training within 60 days of the hiring date or date of application. The applicant must submit another statement as to whether he or she has previously had a certificate of registration revoked, suspended or denied.
Should a marketing representative violate any terms of the state’s title insurance code, the legislation states that the department can revoke, suspend, restrict or decline to issue a certificate of registration if it determines at a hearing that the representative did violate the law. Additionally, any title marketing representative who has his or her certificate revoked by the department is not permitted to reapply for another certificate of registration with the department for five years from the date of revocation.
The legislation also establishes that it is unlawful for any title insurer, underwritten title company or controlled escrow company to pay, directly or indirectly, any commission, compensation, or other consideration to any person as an inducement for the placement or referral of title business. The actual placement or referral of title business is not a precondition to a violation of this section, whether the violation is or is not a per se violation pursuant to subdivision.
While the legislation sets many guidelines as to what is considered an inducement, one particular aspect that alarms title agents is they can no longer pay for anyone’s food, beverage or entertainment but their own.
“So no more free lunches for clients,” said Greg Knowles, an agent with Lawyers Title in Santa Barbara. “That is a huge change in our business. I am having a hard time thinking I can’t take a good customer to lunch. I can’t take one of them to a baseball game or local sporting event.”
“Competing specifically on the quality of the work we do and the price we charge probably isn’t the worst outcome in the world,” he added. “I do have many close friends in this business that my wife and I may invite over for dinner, is that illegal as well?”
The legislation mandates that representatives can continue to provide parties with promotional items with a permanently affixed company logo so long as each individual item’s value does not exceed $10. These gifts, however, cannot be gift certificates, gift cards or any other item that has a specific monetary value.
The legislation states that the provision or payment of any form of consideration as an inducement for the placement or referral of title business not specifically set forth in the bill will be considered unlawful and is, thus, prohibited.
“Restricting the illegal activities by title marketing representatives is a win for businesses and consumers,” said Steve Poizner, the department of insurance’s commissioner. “By curtailing the practice of real estate agents and brokers recommending a specific title insurer to their clients due to incentives provided by title marketing representatives, competition and transparency are fostered in the insurance marketplace.”
The legislation was the culmination of several years of effort by the department of insurance to address the growing problem of inducements. While such practices are illegal, the department had no enforcement authority over the individuals who used them before this legislation was signed. Now, the department is provided with regulatory oversight of title marketing representatives.
“Senate Bill 133 enhances consumer protection while maintaining the healthy, competitive title insurance marketplace in California,” said Craig Page, the executive president of the CLTA. “The legislation is just the latest example of the industry’s effort to promote consumer choice in the title insurance market. The competitive market in California has led to title insurance rates that are below the national average according to Bankrate.com.”
“Senate Bill 133 is win-win legislation for California,” Aanestad said. “It is pro-business and it is pro-consumer. By curtailing the practice of some real estate agents and brokers who recommend a specified title insurer to clients due to the use of incentives offered by some title marketing representatives, it promotes real competition in the title insurance marketplace. Competition among insurers can transfer into lower rates and a better deal for homebuyers.”
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09.16.08
Posted in E-recording, Industry News, Mortgage and title Fraud, Privacy and Public Records at 4:59 pm by Jeanne
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by Robert Franco, Source of Title
Reprinted with Permission
Website Stripped of Sensitive Information
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The governing board of the Iowa Land Records Website chose to restrict all access to records maintained on the site after a public backlash led to concerns by lawmakers and residents alike. Last week, the site indicated that it would ignore the request of Governor Chet Culver to block access to the records because many contained sensitive information like Social Security numbers.
Yet, officials indicated that its previous actions had failed to reduce fears of identity theft and privacy concerns and, thus, suspending access to the records was necessary.
Visitors to the site discover a statement from the operators indicating that “…until further notice all document images are restricted and cannot be accessed through this Website.” Phil Dunshee, one of the site’s project managers, said in a press release that access to the records would be suspended indefinitely.
“Recorders sincerely regret the disruptive impact this will have on people in the real estate industry,” Dunshee said. “It’s really the last place they wanted to go, but at this point, I don’t really think they have any further choice.”
Despite providing useful information to real estate professionals, many expressed support for the actions undertaken by the site’s operators.
“As mortgage lenders, we are seeing more and more identity theft on credit reports, so it’s imperative that Social Security numbers be redacted from those old documents,” said Christy Allison, the president of Iowa Mortgage Association, in an interview with The Des Moines Register.
Culver and Michael Maurro, the secretary of state, both had their Social Security numbers listed in documents that were maintained on the Website. After learning this, Culver asked the site to remove his information and block access to documents containing people’s private information last week. The site attempted to block access to thousands of records that contained sensitive information after receiving his request, but apparently failed to adequately do so. Thus, the operators decided to shutdown all access this week.
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09.04.08
Posted in Industry News, Privacy and Public Records at 5:18 pm by Jeanne
From the Source of Title Blog, used with their permission.
Maybe you’ve never heard of B.J. Ostergren, but she knows a lot about you. She knows where you live and how much you pay to live there. She has your driver’s license number, your signature, credit card and bank numbers and she has your Social Security number. Likely as not, she has the goods on your parents and children as well. She gathered it all from government websites.
The Virginia Watchdog wants the state to stop displaying your private data online but a new law in Virginia says government agencies have an exclusive right to display private data contained in public records online. Now Ostergren is taking her battle to federal court.
Ostergren has gleaned from online government records the Social Security numbers of many prominent people — Jeb Bush, Colin Powell, Porter Goss and Tom DeLay among them — and posted the documents on her own Web site to demonstrate government’s failure to protect individuals’ privacy.
“I’m not going after the little guy, I’m going after people of prominence that could have some power to do something about this,” Ostergren said.
Ostergren’s website, TheVirginiaWatchdog.com advocates against making personal information available on the Internet. The website includes public records obtained by Ostergren from government websites that include the Social Security Numbers of public officials. By posting these documents, Ostergren hopes to illustrate the type of information available on government websites, and to prod officials to take action.
Perhaps most offensive to Virginia officials are the links Ostergren posts on her site that document just how easy it is to find documents containing Social Security numbers and other private data belonging to Virginia’s own legislators, judges and county officials.
In March, Virginia legislators reacted to Ostergren’s website by amending a state law prohibiting anyone except government agencies from posting private data online. Under the previous law, individuals were prohibited from disclosing Social Security numbers obtained from private sources, but millions of public records containing Social Security numbers and other private information are available in Virginia on the state’s own websites.
Government websites have become a rich source of data needed by terrorists, identity thieves and stalkers.
Experts say terrorism and identity theft go hand in hand. The al-Qaida training manual US troops found on a laptop computer in Afghanistan includes provisions for trainees to leave camp with five fake personas, says Judith Collins, an identity theft expert, who uses a copy of the manual to train law enforcement officials. Terrorists are regularly schooled in the art of subsisting off credit card fraud while living in the United States, Collins says. The manual also instructs would-be terrorists on the easiest way to find the information they need.
According to former Secretary of Defense Donald Rumsfeld, speaking on January 15, 2003, the al Qaeda training manual tells its readers, “Using public sources openly and without resorting to illegal means, it is possible to gather at least 80 percent of all information required about the enemy.”
The concept of document security by paid or free subscription to government websites has also proven deadly for at least two young women. Amy Boyer and Rebecca Schaeffer both lost their lives as a result of stalkers accessing their information through government websites. The 1989 murder of TV actress Rebecca Schaeffer resulted in the often-ignored National Driver Protection Act which makes it illegal for companies to buy driver records from state governments. Cases abound of government websites failing to protect constituents when publishing private data contained in public records online.
In an advisory dated August 8th, 2006, Ken Schrad, Director of Virginia’s Division of Information Resources announced that the State’s Bureau of Insurance Website published the Social Security numbers of every insurance agent licensed in the state. He advised the state’s 202,000 agents, many of whom sell identity theft insurance, to watch for any unusual activity on their bank or other financial accounts that might result from the massive breach.
Under the new law, Virginia citizens are prohibited from repeating the state’s mistakes by publishing copies of public documents containing Social Security numbers on private websites or Blogs. But the law allows Virginia’s “official” websites to continue trafficking in identities with almost complete abandon. Virtually anyone– anywhere in the world with an internet connection and twenty five dollars for a subscription to the county website may be granted remote online access to your Social Security number and other private data.
Earlier this month, the American Civil Liberties Union of Virginia filed a lawsuit on Ostergren’s behalf in federal court in Richmond. Ostergren is challenging the law that targets her website on grounds it violates the First Amendment’s protection of freedom of speech.. She has launched a federal lawsuit that questions who if anyone, has the right to distribute your private/public papers online for the entire world to see. At issue is who has the right to traffic in your identity.
When Virginia Governor Timothy M. Kaine signed the bill on March 11, he and others touted the bill as an effort to curb identity theft, suffered by an estimated 9 million Americans each year. But even the lawmaker behind the bill (Sen. R. Edward Houck) acknowledged that stopping people like Ostergren from publishing the Social Security numbers — not protecting Virginians from identity theft — was the true goal of the legislation.
Ostergren says her tactic of bringing bold and personal awareness to elected officials has worked in other states, such as Vermont, New York, New Mexico, California, Ohio and Florida, where she has fought to get personal information removed from online records. Only in her home state have lawmakers responded by unanimously passing legislation making Ostergren’s tactics illegal and punishable by a $2,500 civil penalty.
Ironically, the questioned statute takes effect on July 1, the same date by which circuit court clerks across the state are required to make all land records available on the Internet. Land records consist of deeds and mortgage documents, but may also include legal judgments, such as divorce decrees and probate, that often contain Social Security Numbers and other personal information. The ACLU is seeking an injunction prohibiting the state from enforcing the law against Ostergren.
“The ACLU is an advocate for laws that prevent the government from allowing Social Security Numbers to appear on publicly accessible websites,” said ACLU of Virginia Executive Director Kent Willis, “but when the government puts records online that do contain the numbers, it can’t then turn around and prevent the public from disseminating them.”
“Instead of the Virginia General Assembly dealing with the real problem of Social Security numbers being put on Web sites by circuit court clerks, they decided to target me because I posted theirs,” Ostergren told the Washington Examiner.
“This is a wrong-end-up law that attempts to conceal the fact that Virginia’s lawmakers have failed to prevent Social Security Numbers from being placed online in the first place,” added Willis. “If Social Security Numbers were removed from public records when they are placed online, there would be no need for this law.”
While Virginia already has a law requiring Social Security numbers to be redacted from documents posted on the Internet, the legislature failed to fund the privacy statute. Redaction efforts in other states have proven to be largely ineffective and extremely expensive.
The ACLU lobbied against the passage of Virginia’s new law prohibiting anyone except the government from posting Social Security numbers online and asked the Governor to veto it.
When she found out in 2002 that every locality in Virginia would begin posting personal information online, she started The Virginia Watchdog from her Hanover County home.
The lawsuit, which alleges that the law violates Ostergren’s First Amendment rights, points out that shutting down Ostergren’s website will do nothing to protect Social Security Numbers, since all of the documents on the site are also available on government websites. In the 1989 case The Florida Star v. B.J.F., the Supreme Court observed that “where the government has made certain information publicly available, it is highly anomalous to sanction persons other than the source [government websites] of its release.”
Today millions of people from all over the world routinely search and seize our most sensitive documents from government websites. The records can then be used by international criminals to take your property, homes - even your life. Surely this wasn’t what the framers of the constitution had in mind when they promised in the Fourth Amendment, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated…”
ACLU of Virginia Legal Director Rebecca K. Glenberg is providing legal representation to Ostergren. A copy of the ACLU’s complaint can be found online at http://www.acluva.org/docket/pleadings/ostergren_complaint.pdf.
Interested parties can Contact Kent Willis or Rebecca Glenberg at 804/644-8022
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