State of Delaware Sues MERS
In a new twist, the State of Delaware is suing MERS under the Unlawful and Deceptive Trade Practices Act (UDTPA.) The suit claims that MERS has left for borrowers “no public trail by which anyone can identify the principals or verify the propriety of the (mortgage) transfer.” The private and obscure nature of their database makes it difficult for consumers “to know of or challenge inaccuracies in the MERS System” i.e. – who the heck holds the mortgage and who the heck has the right to foreclose? Read more at Delaware Online
Counties Look at Lawsuits Saying they were Cheated Out of Mortgage Fees
An article from Bloomberg says that Bank of America is among a group of lenders that may face a host of lawsuits claiming that counties were cheated out of millions of dollars by MERS, a system used for more than a decade to register mortgages.
Dallas County District Attorney Craig Watkins said state attorneys general and county officials across the U.S. have expressed interest in his lawsuit against Mortgage Electronic Registration Systems Inc. and Bank of America, filed in Texas state court on Sept. 21. Dallas County could be owed as much as $100 million in filing fees, he said. Counties across the U.S. are financially strapped, and this would help bridge the gap in much needed revenues.
Mamouth US Supreme Court Case for Title Insurers
From The Supreme Court Blog comes an interesting and important title case. The case began in Cleveland and is scheduled to be argued before the U.S. Supreme Court this fall. The outcome could determine whether lawyers can file a new sort of consumer lawsuit against title companies on behalf of those who haven’t actually suffered any actual title damages or even a financial loss .
The lawsuit, First American Financial Corp. v. Edwards involves a homeowner named Edwards, who bought a house in September 2006 and paid for a title insurance policy from First American Title. A few years before that, First American had paid the firm that closed the transaction $2 million for a minority stake in the company and they made an agreement to exclusively sell First American title policies according to reports at Forbes.com. First American claimed there were no financial damages to Edwards.
However, the case appeared to violate RESPA laws, which prohibit title insurers from paying kickbacks or anything of value for referrals. The Supreme Court will review the case and its decision could mean that any violation of the RESPA law, regardless of injury or financial damages, could subject title underwriters who have practiced co-ownership with agents to enormous class action lawsuits.
Owner of Three Title Companies Sentenced to Jail in $2.2 Million Federal Fraud Case
Because his businesses slumped badly during the economic downturn, Jonathan Boxman diverted clients’ title and recording fees to pay operating expenses and salaries at his firms. He said he sought to avoid layoffs and keep his companies afloat. Boxman said he also put more than $1 million of his own money into his businesses, which at one time employed 250 people.
However, instead of paying the required fees and safeguarding the escrow money, the defendant is said to have transferred the cash into accounts for his businesses, court papers said. Boxman paid his failing companies’ operating expenses with the funds and also covered prior thefts with them, prosecutors allege. He then directed employees to cover up the embezzlement. More at SILive
Comment: I have always said that I believe most embezzlement of funds in this difficult time for the title industry is caused by those who believe that “if I just borrow funds for a little while, the market will return, and I will pay it all back.” Moral of the story: embezzlement is still embezzlement.
Owners of Abstracts Unlimited Arraigned on Charges
Mary Ann Palladino-DeVito, 41, and her husband Joseph, 39, owners of the now-defunct Abstracts Unlimited, have been arraigned on charges that they embezzled more than $1 million from homeowners seeking to clear property titles. “As part of this mortgage fraud scheme, these defendants are alleged to have victimized new homeowners … by accepting payment for mortgage fees, mortgage taxes, customer fees, real property filing fees, and escrow account funds and then misappropriating the funds for their own purposes,” District Attorney Donovan said. More at SILive
County Recorder Says Merging Clerk and Recorder Offices a Bad Idea
A County Recorder, Rose Bogardus, who ran for office saying a merger of the Clerk’s office with the Register of Deed’s office was a good idea, has changed her mind. Apparently after working in the office and seeing the variety of duties, she feels a merger would hurt the County. Read more at MLive.com
Ms Bogardus stated she has studied merged clerk-register offices elsewhere in Michigan and fears her office would take a backseat in a consolidation even though it provides critical services recording deeds and mortgages.
She criticized commissioners for not pushing to reduce the number of board members when the county Reapportionment Commission was considering the issue last month and said she has no personal interest in what happens because she will not run for office again after this term.
Read more at MLive.com
State Takes up Question of Mortgage Inspection Reports
The Oklahoma State Board of Licensing for Professional Engineers and Land Surveyors is considering a position statement. The Board has been reviewing ways to alleviate the public misunderstanding and misuse of Mortgage Inspection Reports. The problem originates with homeowners who receive copies of these reports at closing and then rely on them to build improvements (even though there is disclaiming language on the drawing itself.) The report appears to mislead homeowners into thinking they can rely on the information shown thereon. Read more on this at The American Surveyor
MN Commerce Commissioner Wants to Send Message to Title Insurers
The Minnesota Department of Commerce has charged three title insurance companies and mortgage originators for alleged offenses ranging from misappropriating funds to charging fees for services not provided.
Albert Lea Abstract Company, sister companies Meredian Financial Corporation and Fortis Title Solutions Corporation, and New Millennium Title Group received enforcement actions last week that outlined alleged abuses and violations of Minnesota Law.
“We want to send a clear message today that companies doing business in our state must act responsibly and abide by our laws,” Commerce Commissioner Mike Rothman said in a statement. “These scams and swindles not only hurt consumers, but threaten healthy competition in the marketplace.” Read more at the Twin City Business Magazine
No Investors Allowed at Homeowner Auction
Responsibility for reselling FHA foreclosed homes falls to HUD, who has a policy of giving traditional buyers at least 30 days to bid on new listings before opening them up to investors to bid. Accordingly, HUD contracted with BLB Resources, an asset-management firm based in Irvine, CA, to dispose of some foreclosed FHA-backed homes in the Phoenix area. BLB said there were several thousand HUD foreclosed homes in the Phoenix area, and that it had been offering them online at hudhomestore.com . But BLB decided on an experiment, a live auction that featured 150 HUD homes, and they did not allow investors to bid.
“It turned out to be phenomenally successful, attracting about 600 attendees, said Crystal Wright, spokeswoman for Phoenix-based auctioneer Hudson & Marshall, which conducted the auction on March 26th.”
A very proud 23-year-old solar panel-installer Aldo Reyes of Phoenix, was the winning bidder of a three-bedroom, 2,700-square-foot home in built in 2008. His winning bid on the HUD home was $82,500.
FEDERAL REGULATION OF TITLE INSURANCE – WHY NOT?
There has been much discussion about regulating insurance, including title insurance at the federal level.
Of all the lines of insurance, none are as inexorably entwined in state and local laws as title insurance. Local practices regarding real estate vary from state to state and even county to county within a state. The abstracting, examining and underwriting of title insurance involves a review and assessment of these state and local-specific records, so that title policies can only be properly issued in connection with inherently understood local transactions. I believe it would represent an enormously burdensome and expensive undertaking for a federal agency to establish federal regulations that would reflect variations in the real property law of all 50 states. State regulators are much closer to local practices and can respond to changes in the marketplace more quickly. Therefore, I believe state regulation remains the most effective form of supervision for our industry.And since when is a “bigger government agency” better than local government?
Home Closing 101: An Educational Initiative of the American Land Title Association
