fund

MN Dept Commerce Takes Action against Embezzeling Closer

Used with Permission of Robert Franco, Source of Title
The Minnesota Department of Commerce has summarily suspended the real estate closing license, resident insurance producer license and Notary Public commission of Kuntee Singramdoo and charged her with embezzling over $230,000 in real estate closing proceeds and using the money to pay off her own creditors or her family members’ creditors.

Singramdoo, a resident of Lakeville, was an independent closer hired by Walsh Title & Real Estate Services, where she provided real estate closing services, sold title insurance policies and notarized real estate documents. The Commerce Department complaint alleges that Singramdoo engaged in a pattern of misappropriating, converting and/or embezzling settlement proceeds by issuing Walsh Title checks for her own benefit or for the benefit of her family members.

The alleged embezzlement includes at least 184 checks issued between February 2004 and June 2007 to 24 different creditors including $68,109 to U.S. Bank, $48,863 to Wells Fargo, $800 to JC Penney, $4,764 to Macy’s, $6,286 to Goodman Jewelers, $800 to Bloomingdale’s, $6,866 to Honda, $2,734 to American Express and $2,323 to Discover.

Singramdoo admitted under questioning from Commerce Department investigators that she embezzled the funds but at this time has only paid back $10,000 to Walsh Title.

Singramdoo accomplished the embezzlement by entering her own creditors on the HUD-1 mortgage loan form as if the debts belonged to the buyer or seller and subsequently issued checks directly to the creditors in her name. She also changed HUD-1 mortgage loan documents after closings to reflect the fraudulent payments.

“This brazen embezzlement scheme is a warning to everyone to pay close attention to the loan documents you are signing during the closing of a mortgage,” said Glenn Wilson, the commissioner of Minnesota’s Department of Commerce.

What Happens When Your Title Underwriter is Defunct?

A statement in A.M.Best’s special report posted by the freelibrary reports:

Title insurer failures are more bad news for homeowners trying to sell or refinance property in the current down market; as such transactions can trigger a title search and a potential claim. Recourse for policyholders can be difficult and, at best, slow, as very few states cover title insurance under their guaranty funds.

 

With the recent bankruptcy of LandAmerica, Commonwealth Land Title, etal, I wonder what has become of the liability for their title policies? For those who have legitimate title claims written by those underwriters, including lenders in this messy foreclosure and short sale market, what happens? Clearly, the title commitments that are being closed today show many title issues, with judgments, foreclosures and under-water sales commonplace. It seems some of the title problems were missed because of poor search and examination procedures, and lessened searches during a busy market. Anyone care to speak up? 

 

Read the full report here.

Who Has to Sign the Mortgage Documents?

One of the most common sources of confusion at closing seems to be who must sign the mortgage docs. It seems to befuddle even experienced closers of title companies and title agencies. Does the Deed have to match the Mortgage and does the Mortgage have to match the Note? Many are sure that when there is a husband and wife, the closer should prepare the Warranty Deed in both names in joint tenancy, and then prepare the mortgage to exactly match the names on the Warranty Deed. They are not quite sure about signatures on the Mortgage Note, however, because lenders sometimes require others to sign the Note as well.

Truth is, in Minnesota (not necessarily all states) it takes “one to buy and all to sell,” meaning a person can buy real estate without their spouse going into title. There may be good reason for that. Say one spouse has significant financial exposure due to the business she owns. The husband may want to go into title in his name alone, so that should a bad business climate come along and the wife has judgments filed against her, the judgments will not attach to the property.

Also, far as joint tenancy – that may not be the best solution for all spouses. For example, Harry and Mabel, both elderly, have lost their spouses. A winter romance comes along and they decide to be married. They pool their funds and buy a home together. Both wish for their children to inherit their respective halves upon their death. They want to take title not as joint tenants, but as tenants in common.

However, Minnesota, as many states do, has an automatic interest of the spouse in the homestead. Now how do we know if they are living in the property as their homestead? Answer is: we don’t. Therefore, to be prudent, we ask spouses to subordinate any interest they might have, by signing the mortgage. They don’t have to be in title to sign the mortgage. But by signing the mortgage, we have cleared the potential interest.

Best Practice: ALL parties who show in title must sign all mortgages, and rule of thumb is to get their spouses to sign as well. Yes, I recognize that some real estate is unlikely to be homestead, but to be safe, get your underwriter to sign off on not getting the spouse’s signature. After all, that apartment building could also contain the apartment that your client claims as home.

As far as the Mortgage Note, it is simply a personal pledge to repay the full amount of the debt. So if son and daughter-in law, for example, need a little assistance in buying their first home, Mom and Dad may help it happen by, in effect, guaranteeing the loan. Mom and Dad sign the Mortgage Note but do not have to go into title (unless the lender demands it.)

As a disclaimer, this is NOT intended as legal advice, and those who prepare legal documents should be careful to seek legal advise to fulfill the intentions of the title holders. This is merely information from a seasoned closer and title examiner who has seen problems crop up due to misunderstanding how it the documentation works.

Ohio Decides Case Against Race Notice Rule

 Printed with Permission from Robert Franco, Source of Title
“It is every title agent’s worst nightmare – a valid second mortgage is missed and the first mortgage is refinanced without paying it off. Then, the new mortgagee forecloses and discovers that its lien may be in second place.  The lender has a claim on their title policy, but all may not be lost… the doctrine of equitable subrogation can put the lender in the shoes of the original first mortgagee that they paid off, saving their priority.  But, should the court apply such a remedy to rectify the negligence of the title agent?  This was the focus of a recently decided case in the Court of Appeals of Ohio, Eighth District in Cuyahoga County – ABN AMRO v. Kangah.
On July 5, 2000 Kangah obtained a first mortgage from First Ohio Mortgage in the amount of $68,916, and a second from the Cuyahoga County Department of Development (“CCDOD”) in the amount of $7,500.  Both mortgages were properly recorded on July 12 with the CCDOD mortgage specifically referred to as the subordinate security instrument.

In May 2001, Kangah refinanced with ABN AMRO (“ABN”) and received proceeds totalling $77,000.  The ABN mortgage was filed on June 19, 2001.  First Class Title Agency failed to discover the CCDOD mortgage and paid off First Ohio, the outstanding taxes, and the fees and costs associated with the transaction.  On November 7, 2001 the First Ohio mortgage was released of record.

On November 8, 2006 ABN filed a foreclosure complaint and, not surprisingly, CCDOD filed an answer and cross-claim asserting that it had the first and best lien on the property.  ABN argued that the doctrine of equitable subrogation applies because it paid off the first mortgage and intended to hold the first and best lien on the property.  And, it was always the intent of CCDOD to hold a subordinate lien.

The general rule in Ohio is that the first mortgage that is recorded has preference over a subsequently recorded mortgage.  “The priority of a mortgage is determined by reviewing the recording chronology.”  However, the court went on to explain the exception to the rule.

In some circumstances, the doctrine of equitable subrogation can overcome the general statutory rule.  Equitable subrogation arises by operation of law when one having a liability or right or a fiduciary relation in the premises pays a debt by another under such circumstances that he is in equity entitled to the security or obligation held by the creditor whom he has paid.  In order to be entitled to equitable subrogation, the equity must be strong and the case clear.

In other words, a third party who, with its own funds, satisfies and discharges a prior first mortgage on real estate, is subrogated to all rights of the first mortgagee in that real estate.  Therefore, if the parties intended, a mortgagee who satisfies the first mortgage steps into the shoes of the first mortgagee.

The court went on to note that the doctrine of equitable subrogation has not been uniformly applied across Ohio.  Some courts have refused to apply it when the party asserting its applicability is negligent in its business practices (i.e., failing to record the mortgage in a timely manner), and the party is in the best position to protect its interests.  A couple of courts have declined to apply it when a title company failed to discover a preexisting and validly recorded mortgage, “in essence, eliminating the doctrine altogether.”  Other courts have allowed the equitable remedy where the title company “mistakenly failed to discover a preexisting and validly recorded mortgage.”

There are two competing policy concerns at issue with equitable subrogation in such a case.  First, the title agency was negligent in failing to discover the CCDOD mortgage.  It searched the title and issued coverage to protect ABM from a loss due to its mortgage not having the first and best lien on the property.  Should the doctrine reward the party who was negligent in performing its duties?

Second, CCDOD had bargained for a second mortgage position.  If Kangah had not refinanced, CCDOD would have still been in second place.  Is it fair to reward it by allowing its mortgage to assume the first priority because of a mistake made by the title agent?

In this case, the court found in favor of ABN and applied the doctrine of equitable subrogation. 

In the case at hand, we find that the doctrine of equitable subrogation applies because ABN intended to hold the first and best lien on the property, CCDOD agreed to its subordinate security interest, ABN’s title company’s failure to discover CCDOD’s mortgage lien was a mere mistake, and CCDOD was not prejudiced by its inferior position.”

There are two relevant issues conspicuously missing from the court’s analysis, however.  First, there is no mention of the amount of the First Ohio payoff.  At best, if the doctrine does apply, it would only protect ABN up to the amount that was owed on that mortgage – ABN could receive no better rights than First Ohio had at that time.  Of course, depending on the amount the property sold for at the sheriff’s sale, this might be a moot point.  However, the court should have indicated that ABN’s priority lien was limited by this amount.

Second, the court really didn’t discuss the issue of whether CCDOD was prejudiced by the application of the doctrine.  It merely assumed that since it bargained for a second position, it was not prejudiced by the subrogation.  This may not be entirely correct.  If the CCDOD mortgage had been found, the refinance could not have taken place unless CCDOD was paid off or it agreed to voluntarily subordinate its lien.  This would have given CCDOD the opportunity to evaluate its position and insist that it be paid off in 2001. 

Furthermore, Kangah borrowed about $8,000 more with ABN than it had with First Ohio.  Depending on the terms of the loans, this could have created more of a hardship for Kangah than he had under the First Ohio mortgage, making it less likely that CCDOD would be paid.  For example, if the terms of the ABN mortgage were such that the rate and payment increased more than it would have under the First Ohio mortgage, it could have been a contributing factor to Kangah’s default and eventual foreclosure.  (Was the ABN loan a variable rate sub-prime loan?)

Equitable subrogation is, as the name implies, an equitable remedy.  Its application should be determined on a case by case basis and applied with caution.  It is difficult to say in this case whether the court got it right – it very well may have.  However, courts should be cautious to make specific holdings in such cases and thoroughly evaluate the equities at issue. 

Robert A. Franco
SOURCE OF TITLE 

Secret Service Investigates Misappropriation of Closing Funds

“The mission and of the United States Secret Service is to safeguard the nation’s financial infrastructure and payment systems to preserve the integrity of the economy, … “ And that statement is being put to use in another instance where a Title Company appears to have absconded with funds from the public. This time, Pennsylvania’s Priority Search, Inc. is being investigated by the Secret Service for allegedly not appropriately disbursing settlement funds. After Priority Search, Inc was recommended by a local real estate agent, the transactions moved forward, and at first seemed normal, but according to Pennsylvania’s Times Leader newspaper: (see full article)

Michael Bogdon borrowed more than $170,000 to buy a house in Rice Township, and the cash was given to Priority Search around the time of the Aug. 22 property closing.

Bogdon gutted and remodeled the home since then and was in a state of disbelief when the seller showed up at his doorstep about two weeks ago to inform him that Priority Search had never turned over the money.

Some of the funds were supposed to pay off the sellers’ old mortgage, and now the sellers – who are retirees – have outstanding mortgages on both their former and new houses, Bogdon said.

After the secret service investigation announcement was made public, the number of others stepped forward with similar missing funds problems having to do with Priority Search, Inc.  This was clearly not an isolated incident.  But misuse of closing funds happens not only in Pennsylvania, misuse of closing funds seems to have become a weekly occurrence across the country.  Many title insurance and land title professionals are now concerned with this state of affairs.  Specifically, a number of professionals are currently working on, or have recently completed, state legislation to licensed settlement agents.  All seem to agree it would be a good idea to know who is handling the settlement funds, and what their background is.  It is unfortunate that the industry hasn’t such problems, that kudos to those were working toward a solution.  I believe licensing is in the best interest of the public, and of the title industry. 

Why did the chicken cross the road? Clean & fun Political Humor

I’m not sure where this came from, but it crossed my e-mail and is worth repeating.   It is a hysterical read in these political times!

Why did the chicken cross the road?

   BARACK OBAMA: The chicken crossed the road because it was time for change! The chicken wanted change!
   JOHN MC CAIN: My friends, that chicken crossed the road because he recognized the need to engage in cooperation and dialogue with all the chickens on the other side of the road.
   SARAH PALIN: That road the liberal media claim that chicken crossed? Well that is the Road to Nowhere, and I told Congress "Thanks but nothanks" to that.  So there isn't any road for that chicken to cross and any reporter who says otherwise ought to be fired.
  HILLARY CLINTON: When I was First Lady, I personally helped that little chicken to cross the road. This experience makes me uniquely qualified to ensure right from Day One! that every chicken in this country gets the chance it deserves to cross the road.. But then, this really isn't about me.
   GEORGE W. BUSH: We don't really care why the chicken crossed the road. We just want to know if the chicken is on our side of the road, or not. The chicken is either against us, or for us. There is no middle ground here.
  DICK CHENEY: Where's my gun?
 COLIN POWELL: Now to the left of the screen, you can clearly see the satellite image of the chicken crossing the road.
 BILL CLINTON: I did not cross the road with that chicken. What is our definition of chicken?
  AL GORE: I invented the chicken.
 JOHN KERRY: Although I voted to let the chicken cross the road, I am now against it! It was the wrong road to cross, and I was misled about the chicken's intentions. I am not fItor it now, and will remain against it.
 AL SHARPTON: Why are all the chickens white? We need some black chickens.
   DR. PHIL: The problem we have here is that this chicken won't realize that he must first deal with the problem on this side of the road before it goes after the problem on the other side of the road. What we need to do is help him realize how stupid he's acting by nottaking on his current problems before adding new problems.
  OPRAH: Well, I understand that the chicken is having problems, which is why he wants to cross this road so bad. So instead of having the chicken learn from his mistakes and take falls, which is a part of life, I'm going to give this chicken a car so that he can just drive across the road and not live his life like the rest of the chickens.
  ANDERSON COOPER, CNN: We have reason to believe there is a chicken, but we have not yet been allowed to have access to the other side of the road.
  NANCY GRACE: That chicken crossed the road because he's guilty! You can see it in his eyes and the way he walks.
 PAT BUCHANAN: To steal the job of a decent, hardworking American.
 MARTHA STEWART: No one called me to warn me which way that chicken was going. I had a standing order at the Farmer's Market to sell my eggs when the price dropped to a certain level. No little bird gave me any insider information.
 DR SEUSS: Did the chicken cross the road? Did he cross it with a toad?  Yes, the chicken crossed the road, but why it crossed I've not been told.
 ERNEST HEMINGWAY: To die .   In the rain.  Alone.
 JERRY FALWELL: Because the chicken was gay! Can't you people see the plain truth? That's why they call it the 'other side.' Yes, myfriends, that chicken is gay. And if you eat that chicken, you will become gay,too. I say we boycott all chickens until we sort out this abomination that the liberal media whitewashes with seemingly harmless phrases like
'the other side.' That chicken should not be crossing the road. It's as plain and as simple as that.
 GRANDPA: In my day we didn't ask why the chicken crossed the road. Somebody told us the chicken crossed the road, and that was good enough.
 BARBARA WALTERS: Isn't that interesting? In a few moments, we will be listening to the chicken tell, for the first time, the heart warming story of how it experienced a serious case of molting, and went on to accomplish its lifelong dream of crossing the road.
 ARISTOTLE: It is the nature of chickens to cross the road.
 JOHN LENNON: Imagine all the chickens in the world crossing roads together, in peace.
 BILL GATES: I have just released eChicken2008, which will not only cross roads, but will lay eggs, file your important documents, and balance your checkbook. 
 ALBERT EINSTEIN: Did the chicken really cross the road, or did theroad move beneath the chicken?
 COLONEL SANDERS: Did I miss one?

Beware, Title Companies, of Fake email regarding Wired Funds

Beware, title insurers who handle wired funds on a daily basis. The Federal Deposit Insurance Corporation (FDIC) has put out an FDIC alert to consumers that handle large sums of money, saying that FDIC has received numerous reports of a fraudulent e-mail that has the appearance of being sent from the FDIC.

The subject line of the e-mail states: “Funds wired into your account are stolen.” The e-mail tells recipients that the proceeds of identity theft crimes have been wire-transferred into their bank account. The e-mail then directs recipients to open and review an attached copy of their bank account statement. to confirm. The attached file is actually an unknown executable file and is likely a malicious attempt to collect personal or confidential information, some of which may be used to gain unauthorized access to on-line banking services or to conduct identity theft.

The FDIC does not issue unsolicited e-mails to consumers. Financial institutions and consumers should NOT open the executable file attached to the fraudulent e-mail.

 

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association