Mortgage Fraud

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.

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. 

Title Underwriters Sue Widow to Recoup Money from Fraudulent Mortgages

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.  

Iowa Stops Access to Online Public Land Record Documents

by Robert Franco, Source of Title

Reprinted with Permission


Website Stripped of Sensitive Information

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.

Minnesota Mortgage Fraud Improves A Bit

Good news for Minnesota – or at least a bit better than last year… Minnesota moved DOWN on the list of the WORST states for Mortgage Fraud. The Mortgage Asset Research Institute issued information on the Top 10 states for mortgage fraud that was reported on single-family home loans in 2007 versus their rank in 2006. The latest results are as follows:

    State 2007 rank/ 2006 rank

Florida 1/1
Nevada 2/6
Michigan 3/3
California 4/ 2
Utah 5/11
Georgia 6/4
Virginia 7/14
Illinois 8/8
New York 9/9
Minnesota 10/5

The Annual Real Estate Institute is coming

The MN Bar Association will host more than 1300 real estate professionals this year for its annual Real Estate Institute. The event, offered Friday through Saturday, November 9th and 10th at St. Paul’s RiverCentre, is in its 25th year, and will have a host of topics relevant to Abstracting and Title Professionals, including:

Updates on important real estate suits, including Collier
Changes in Homestead Levies
Mortgage Fraud
Choice of Entities (Corporations, LLCs, etc.) in your Business
Pitfalls in Mortgage Foreclosures
and many, many more…

For more Info and/or to Register for the Real Estate Institute, click here

MN AG’s Predatory Lending Report – A Request for Ethical Conduct.

Because prevailing mortgage rates have been low over the last several years, the desire for high interest rate mortgage securities is higher than ever. In the steady search for those higher yields, lenders are screaming for securities that contain high yields. This means the market is actively seeking subprime mortgages because they carry interest rates 1-2-3% higher than traditional loans and frequently carry a hefty prepayment penalty as a double-whammy.
Mortgage securities buyers say the lending standards on these “exotic” loans has become so negligent, that it is almost an invitation for borrowers and lenders to commit mortgage fraud and it would appear these subprime exotic loans are playing a significant a role with significant mortgage fraud, leading to skyrocketing delinquency rates.

The Attorney General Report
I suggest you read the Predatory Lending Report,

The study shows that “..the number of home foreclosures soared in 2005 and 2006 at a rate without precedent in the modern era.” The report goes on to say “The most important fact driving the problem of predatory lending is the extraordinary growth of subprime lending over the last decade.”

The proposed legislation that comes out of the report is no more than a request for ethical conduct and common sense. The old fashioned “do unto others Golden Rule.” It merely asks for Lenders to use prudent and appropriate lending practices in helping customers select a loan that is appropriate to their circumstances; and to disclose the potential outcome scenarios of the sub-prime loans. For example (similar to the Truth in Lending Law) is asks for “disclosing the maximum possible payment that could be due during the first seven years of the loan term,, which amount shall be calculated with reference to the maximum interest rate allowable under the loan, assuming no default…” Seems reasonable to me.

The report also suggests that a law be passed so that a loan officer could not use “churning,” which it defines as arranging for a refinance which provides NO BENEFIT TO THE BORROWER (but obviously provides benefit to the loan officer…)

Read the report, it would be good law for all of us in the mortgage and title industries, as well as the public.

Eagle First Mortgage CEO leaves Final Words

“As most people know I have agreed to shut down Eagle First Mortgage. The Department of Financial Institutions was gracious in allowing loans not yet closed to continue closing so as to not hurt the borrowers. We will be officially closed on March 14, 2007. I want to thank the thousands of clients that have done business with Eagle First Mortgage over the years.
Sincerely, David Sanchez, CEO Eagle First Mortgage”

Sanchez started Eagle First in 2003, quickly growing the company to 75 offices.
The company franchised itself out to the point that “there was no control over the branches,” said Felecia Rotellini, superintendent of the state financial institutions department. “That’s a recipe for loan officers being tempted to engage in mortgage fraud,” she said. Regulators described more than 100 illegal money transactions, loan activities and hiring practices. See full article at Eagle First.

BasePoint Releases Impressive Mortgage Fraud Study

BasePoint Analytics, a provider of scientific fraud anaysis and consulting services, announced the results of a new scientific study which found that up to 70 percent of early payment defaults (EPD) on mortgages can be linked to significant misrepresentation on the original loan application. The purpose of the study was to investigate the link between fraud and payment trends during the early life of the loan.
The study concluded that loans with gross misrepresentations were five times more likely to default in the first six months than others. More importantly, the study concluded that models could be used early in the loan process to help lenders predict those loans likely to default within the first six months. This would allow loans to be rejected pre-funding. According to BasePoint, its product, called FraudMark product could accurately identify approximately 40 percent of consumers who, if funded, would stop paying within the first six months.
To read a more complete article, see BasePoint Analytics Article.

Info On Home Closing

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