tales from the closing table
JANUARY 2014 n Iowa Mortgage Professional Magazine n
NationalMortgageProfessional.com
28
By Andrew Liput The mortgage closing transaction is the single largest financial transaction in the lives of most consumers, and it is also the riskiest stage of the mortgage process for lenders. While the vast majority of lawyers and notaries and title agents are experienced, ethical and diligent professionals, for some the role of closing agent is too tempting a lure for selfish criminal intent. This monthly column addresses the good, the bad and the ugly … for educational and entertainment purposes. December was an interesting month for mortgage fraud …
Which side of the law are you on anyway? l Two deputies of the Los Angeles County Sheriff’s Department were convicted in federal court for their roles in an $11 million mortgage fraud scheme. l A Kansas City special agent for U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), pleaded guilty in federal court to making false statements to FBI agents in regard to an $800,000-plus mortgage fraud scheme. l A Chicago former police lieutenant who allegedly played a role in a
mortgage fraud scheme pled guilty to making false statements in a tax return.
Hey … that’s not in the script! l Two of the stars of the Bravo television show, “The Real Housewives of New Jersey,” were indicted on 41 counts of bank fraud and loan application fraud. The Office of the Comptroller of the Currency (OCC) joined the Consumer Financial Protection Bureau (CFPB) in announcing a comprehensive vendor management requirement for supervised banks that in some regards exceeds even what the CFPB seems to be expecting. The guidance, which was prompted by recent audits and enforcement actions, reiterates the OCC’s existing expectations for third-party vendor management. The directive, replete with a “risk management triangle” graphic to aid interpretation, is applicable to closing agents. Banks can have their own process; however, third-party oversight of some kind is expected as a quality control (QC) measure. With enhanced vetting and vendor management taking place, mortgage lenders and banks are coming across some disturbing situations. l A title agent, who had been disciplined less than a year ago for falsely issuing a title report on one
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underwriter’s paper, was reported to the agent’s licensing body for discipline, and in fact, was disciplined and fined for her actions. However, this incident did not stop one of the other big four underwriters from giving her an agency agreement where she is writing title today. When the agent’s past was discovered, a lender rejected the agent and required another agent to close the loan. An attorney provided his wiring information. When the account was verified, it was discovered that the account was not a trust account, but was a personal account in the attorney’s name. A title agency claimed that it was authorized to write policies for two major underwriters. However, when their status was checked, one of the relationships had been terminated six months prior. A title agency submitted their insurance certificate. It was discovered that the certificate had been altered to change (increase) the coverage amount. An attorney lost his license in a state, but reapplied for it after a few years and was allowed to be reinstated so that he had a current license on record. An investigation uncovered the original disbarment which was for his alleged participation in a real estate fraud scheme.
ALTA’s best practices program for title agents continues to offer a solid foundation for uniform risk standards for their members. The program creates operational guidelines to be verified by third parties as a reliable benchmark for quality risk management.
Five warning signs that you might need a new real estate lawyer 1. Your lawyer tells you that his last “transaction” was at the ATM in the liquor store. 2. When the real estate agents see your lawyer, they ask for their fees in cash. 3. Your lawyer brings an interpreter to read the loan documents to him so he can explain them to you. 4. Your lawyer takes off her shoes to figure out the totals on the HUD-1. 5. A swarm of FBI agents are waiting outside his office for the closing to finish. Andrew Liput has been a corporate, real estate and banking attorney for more than 25 years He is the founder, chief executive officer and president of Secure Settlements Inc., the first data intelligence and risk analytics firm to offer specialized vendor management services addressing settlement agent risk to mortgage lenders and banks nationwide. He can be reached by e-mail at aliput@securesettlements.com.