Real Source Title Owner Sentenced
Disbarred Attorney, Jason Fischer, was co-owner of Real Source Title, an agency with offices in: Burnsville and Mahtomedi Minnesota; Hudson, Wisconsin and Illinois. His underwriter was Old Republic National Title. Fischer admitted that he began illegally stealing money from his company’s escrow accounts to himself and other business ventures beginning in 2006 and continuing into 2009. Fischer drained the entire title agency escrow account leaving no funds to pay fifteen mortgages that Real Source Title was responsible to pay. This left the mortgagors with ruined credit and foreclosure issues on loans they thought were paid. Fischer admitted to his theft in Wisconsin State Supreme Court acknowledging that he misappropriated over $2 million dollars from his company’s escrow accounts including nearly $500,000 in a restaurant venture where Fischer had an ownership interest as well as around $350,000 for personal use. Fischer was sentenced to more than four years in federal prison for stealing more than $3 million from a real estate title and escrow company that he co-owned. More at MPLS STAR TRIBUNE
Are Title Insurers Better Prepared for 2011?
In a new article from National Mortgage News, there is a discussion about the relatively immediate future of the title industry – i.e. in 2011 as compared to past years. It should be noted that a contributing author to the articles quoted is the American Land Title Association, certainly providing a skewed perspective, meaning that the ALTA lobbies to put the best spin on the industry. For example the quote
“In addition, while the title insurers could see a very slight increase in expenses in conjunction with increased legal activity involving foreclosures, we believe it will be limited in nature and have no real impact on the bottom line. With respect to actual claims arising from the enhanced scrutiny around the foreclosure process, the title insurers have been clear in their belief that any issues involving the lenders will not result in claims for the industry,” …
This is clearly a one-sided comment. It does not address the real cause of the increase in claims. From my perspective, the real cause of claims is that the quality of the product has declined significantly. Searches of simply the last-record-owner forward to write title policies is commonplace. Indeed it has become the norm, I hear from my students. Getting the product out quicker and cheaper has become much more important than the elimination of potential or even clearly outstanding title issues that used to be the norm. This means the consumer is getting a lesser quality product. Additionally the policies that ALTA has put out cover more and more potential title issues (building code issues, etc) that should cause claims. I also have concern about the quality of those doing the title searches. Sending the work overseas as a cost savings clearly has costs in quality. I am amazed at the effort it takes to stay on top of changes in the marketplace that impact real estate abstracting and examining. I am not sure the title insurers care. It seems to be more important to sign a big agent than the quality of the work the agent can do. Certainly that means claims.
I do think title companies have laid off staff to reach the demand, but as the article points out, hiring competent staff when the market turns will be a significant problem. And as the A.M.Best report says “Loss activity stemming from agent-, consumer- and bank-related fraud activity still remains a concern. Such activity typically goes up during periods of reduced cash flow and generally involves embezzlement of funds held in escrow, potentially resulting in severe losses,” … I hope that we as an industry will work to carefully educate and bring back the quality of title title work the consumer deserves.
Title Insurance and Closing Company $4 Million in Theft
Out of Maryland, another title company default. Some things here, however, are distinctive. Yes, the owner/ operators of the companies involved and their affiliated businesses used $4 million dollars of other people’s money. But much of the money used sounds like just plain bad management. After all, the money was not traced to extravagant homes, cars and the like, but much of it is chalked up to poor management, lots of errors that needed to be covered up, theft by employees, along with likely not cutting expenses fast enough when the market went south. A common error in the Title Insurance Business. Another surprise is the longevity of the companies that were started in the 1980′s and 1990′s. Unusual for most defalcations. However, there are also the standard themes, such as money being short in the escrow accounts for a number of years before claims were brought. Read more here from two local papers:Annapolis paper.Baynet Paper
Watch Out for Equitable Mortgages
When I teach title examination, closing, title abstracting, and other real estate classes, you have all heard me talk about “Equitable Mortgages,” i.e. A deed is given that has specific language in it that lessens the full impact of the conveyance. A typical example might be an owner deeding a lot to a builder who is going to build them their dream home. Such deed might contain the restriction that “this deed is being given as security. ” That language implies that the persons conveying have an expectation to get it back and in fact it becomes equal to a mortgage (equitable mortgage) in terms of closing, laws, etc. Here is a must read new article from Minnesota that points out such problems. Here is a Press Release by 24/7 that gives a couple examples of the complications with such a deed. It is a MUST READ for title people.
Stewart Title Clamps Down on Foreclosures
In an internal memo obtained by The Associated Press, Houston-based Stewart is issuing guidelines to its agents that make it difficult to write policies on property foreclosed upon by four banks whose processes are in question. Those banks are JP Morgan Chase, Bank of America, OneWest Bank or Ally Financial’s GMAC Mortgage unit. See AP article here.
New Systems have Short-Circuited Foreclosures
“The problem with foreclosures is that we have short-circuited all of the legal processes and safeguards that our courts are supposed to provide,” said Matthew Weidner, a real estate lawyer in St. Petersburg. Fla.
It will be interesting to see how each state deals with the foreclosure mill issues where law and order has given way to fast and dirty processing. Clearly it is often unclear as to who “owns” the mortgage, who is foreclosing on behalf of whom, or even has the mortgage been sold more than once to different parties. It is certainly a debacle.
Read more at ABC News
Mortgage Fraud Years Away from Investigation
National Mortgage News reports that the high levels of fraud have created a tremendous backlog in investigation of fraud cases by the FBI. Cases currently being investigated go back as much as 5 years and with the continuing flood of foreclosures and foreclosure problems the FBI investigators are overwhelmed. Of particular concern are title companies, who have enlisted ill-prepared staff. Read more at National Mortgage News
Ally Financial, fka GMAC Halts Foreclosure Evictions
Washington Post Staff Writer
Monday, September 20, 2010; 9:20 PM
Ally Financial, formerly GMAC, the troubled lender that received a massive federal bailout, has temporarily halted evictions on foreclosed homes in 23 states, a company spokesman said Monday. The moratorium was due to “an important but technical defect” in the company’s court filings for individual foreclosures. Ally spokesman said that in a number of cases the legal documents in support of the foreclosure proceedings “may have been executed without direct personal knowledge stated in the affidavit” and were not signed in the presence of a notary public.
But attorneys said the suspension of evictions came after lawsuits filed against Ally Financial suggested that tens of thousands of foreclosures across the country were signed without reviewing the documents.
In a deposition, an employee stated that when he put his signature on case files, he did not know what information the file contained other than the borrower’s name, that he did not inspect the exhibits he was supposed to, and that the notary who supposedly witnessed his signings was not in the room.
Thomas Cox, a lawyer in Portland, Maine, who took the deposition while representing homeowners, said in a phone interview that it’s clear that this employee “doesn’t know what he’s talking about.”
“We’ve established that in these foreclosures GMAC hasn’t proven its case,” Cox said.
Cox said the Maine attorney general’s office is investigating the matter. The GMAC employee’s name also came up in several mortgage foreclosure cases in Florida that are being disputed. The attorney general there is investigating at least four law firms that process foreclosures there, saying that they may be fabricating information or presenting misleading documents in cases.
Ally declined to respond to specific questions on the pending litigation, but emphasized that the “sum and substance” of the company’s foreclosure filings were correct. And an internal review has found that there were no “factual misstatements or inaccuracies” about the mortgage holders or the delinquency of their loans, he said. The vast majority of cases will be resolved in the next few weeks. Some, however, will require “court intervention.”
The suspensions will give the company time to review files across the 23 states, which span the country from New York to Florida and Hawaii. These states follow a judicial procedure that requires a court order to approve a foreclosure. A bank representative must sign off on the validity of a foreclosure filing after checking that the correct mortgage holder is named and that he or she is truly in default, among other things.
In an internal memo dated Sept. 17 and marked “urgent,” brokers and agents of the company’s GMAC mortgage unit were ordered to immediately halt evictions. Ally, the nation’s fourth-largest home loan originator, may “need to take corrective action in connection with some foreclosures” in the affected states, the memo said. More at the Washington Post
$7.5 B Lawsuit Filed Against MERS
A RICO class action lawsuit against MERS and one of the Country’s largest foreclosure law firms, David J. Stern PA has been filed, demanding a Jury trial. See ABA article here.
The court case alleges that MERS was created “in order to undermine and eventually eviscerate long-standing principles of real property law, such as the requirement that any person or entity who seeks to foreclose upon a parcel of real property: 1) be in possession of the original note and mortgage and 2) possess a written assignment giving he, she or it actual rights to the payments due from the borrower pursuant to the mortgage and note”
It also alleges that “part of the scheme was the use of words in ways inconsistent with their traditional meanings, and the creation of new terms which could be used to blur important distinctions between parties and their interests…” making it difficult to determine who had the right to receive payments and foreclose.
The 24 page lawsuit details a hilarious deposition by the attorney’s assistant who acknowledges signing documents as “assistant secretary,” and as “vice president” of MERS taken in the Defendant Firm’s office. He inquired of Ms. Samons how she could possibly have acted on behalf of MERS, and the meaning of the label “Assistant Secretary:” Part of the suit reads as follows:
Q: The question was you have no job duties as an assistant secretary of MERS, correct?
A: I do not have any job duties other than signing the assignments and mortgage. Does that help?
Q: Yes. Here, I’ll try to rephrase this. Do you attend any board meetings at MERS?
A: No, sir.
Q: Do you attend any meetings at all at MERS?
A: No, sir.
Q: Do you report to the secretary of MERS?
A: No, sir.
Q: Who is the secretary of MERS?
A: I have no idea.
[ . . . ]
Q: Where are the MERS offices located?
A: I can’t remember. Q: How many offices do they have?
A: I have no idea.
Q: Do you know where their headquarters are?
A: Nope.
Q: Have you ever been there?
A: No.
Q: How many employees do they have?
A: I have no idea.
She testified that her signatures on “these assignments,” which from all indications were and are at least several thousand in number, were in no way attestations that the statements contained therein were accurate or truthful. She further testified that she was the person with the most knowledge about the subject assignment…
To arrive at the estimated damages of $7.5 billion, plus costs and attorney fees, the suit claims that the measure of damages “is the average of the accelerated amounts demanded from the [Plaintiffs] in the subject complaints to foreclose.” Read the full suit here.
Familiar Minnesota Title Company Owner Charged in Theft of Escrow Funds
Linda Tuttle-Olson, owner of Albert Lea Abstract Company was charged this week with 13 felony counts in a theft that has left at least a dozen victims out more than $1 million. Most of those victims had placed tens of thousands of dollars in escrow accounts overseen by Tuttle-Olson’s company. According to the criminal complaint, Tuttle used a chunk of that money for gambling.
People “don’t think twice” about putting money in escrow accounts, said Albert Lea Police Chief Dwaine Winkels. “There’s just disbelief among the victims that this could happen and that there’s not much regulation or protection for people. These businesses are entrusted with large sums of money.”
More at the StarTribune.
Home Closing 101: An Educational Initiative of the American Land Title Association
