Summer's Here and Crime Is High

By Lisa A. Tyler
National Escrow Administrator

While a change in the real estate market might cause a "fight for every deal" attitude, closing a bad transaction will only result in a loss of revenue for the Company. Remain aware of the terms of your transaction and act on your instincts if a deal seems bad. Kimberly Sullivan from our Ticor Title office in Portland, Oregon did just that, and as a result has been given a $500 reward by the Company. Read more about her heroic acts to uncover a scam against the elderly in "The Branch That Fell from the Family Tree."

You've seen them before – and here they are again. The Company's "Document Execution Guidelines" are being redistributed through this edition of Fraud Insights to help you avoid forgery claims as you complete your transactions.

"Prison Break" is a detailed account of the steps one of our closers took to investigate a document that was signed by a prisoner, but not notarized in the county where the prison was located. As a result of her investigative efforts, the escrow closer, Betsy Radell, received a $500 reward and a letter of recognition from the Company.

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If you have a remarkable story to share in Fraud Insights, stop procrastinating and please send it in! All you need to do is provide limited details – we'll be sure to follow up with you. E-mail your stories to settlement@fnf.com or reach us by phone at 888.934.3354.

The Branch That Fell from the Family Tree

One of our senior escrow officers takes action on elder abuse in a high liability transaction in which the seller purports to be a family member, but turns out to be nothing but a common criminal.

On June 25, 2006, a real estate investor walked into our Ticor office in Portland, Oregon to open escrow. The investor had purchased and rehabilitated properties utilizing the Ticor offices in the past. He had recently been contacted by a woman willing to sell four houses that were in desperate need of attention. He agreed to purchase all four properties and presented Kimberly Sullivan, a Senior Escrow Officer with the Ticor office, with a purchase and sale agreement for all four houses for one price in a single transaction.

The agreement included a large down payment of $350,000. The seller agreed to carry back the rest, a balance of $250,000. The buyer/investor wanted to close as quickly as possible. This apparently was a great deal and he was afraid of losing the opportunity to purchase these properties if too much time elapsed.

To accommodate our customer, the title department attempted to quickly prepare the preliminary report. A delay occurred when the title department discovered more than sixty city liens and four years of back taxes. The buyer/investor agreed to take title "subject to" the city liens, as long as we quickly closed the transaction. To make matters worse, the preliminary report indicated a male had title to the property, not the woman who signed the purchase agreement and purported to be the owner of the property.

Upon discovering this information, Kimberly questioned the woman who signed the purchase agreement out-of-state. She claimed to be the niece of the man shown on the title and said she had a power of attorney from her uncle and a deed recorded from him to her. She also stated that she was trying to take care of her uncle's affairs before the county foreclosed on the houses for the four years of back taxes. The niece said her uncle was a "crazy" Vietnam vet that lived "in the mountains" and had no means of being contacted.

Meantime, the buyer/investor had already started hiring demolition, remodel and survey crews to divide the land, demolish the "bad" house and start remodeling the "good" ones. He was so excited about this fabulous deal that he wanted to close it fast, at any cost. He did not understand why it was important to have a clear title. He wanted to take it all, "subject to" the city liens. He even stated at one point that he didn't care if we issued title insurance on the transaction, as long as we closed it quickly before his seller walked away from the deal.

Kimberly ordered a copy of the deed that transferred title from the uncle to the niece and saw that it was notarized in Idaho. She had a really bad feeling about the deed and the overall transaction.

She proceeded with the preparation of the seller's document package, getting it ready to send to the niece via overnight delivery for signing, since the niece was in Idaho.

Kimberly asked the niece, "Can your uncle come out of the mountains long enough to sign a new deed?" The niece was instantly irritated and asked why the previous deed he signed wasn't good enough. The niece insisted that Kimberly was "ruining her life."

That evening Kimberly sat in the office staring at the preliminary report and copies of the recorded documents. She examined the deed that transferred title, noticing it was in a "feminine" type of handwriting. Upon closer examination, she realized the grantor's name and signature were spelled wrong!

The next morning Kimberly called the Idaho Secretary of State's office and tracked down the notary in Idaho. Kimberly asked the notary how she verified the signer's identity. The notary said she had taken the niece's ID and notarized the uncle's signature! Kimberly asked her why. The notary responded, "Because she had a power of attorney." The notary worked at a postal service store and didn't know how to notarize a document when signed by an attorney-in-fact. Unbeknownst to her, she notarized a forged signature. The deed that transferred title was phony.

Kimberly pondered the facts and decided to research the uncle's name in the property records system. He owned property just blocks from Kimberly's office; the records stated the property was owner occupied. Kimberly drove to the house and sat outside. Her heart was racing for a long time while she got up the nerve to knock on the door.

The uncle answered the door, invited her in and introduced her to his wife. Kimberly treaded lightly, just wanting him to verify the transaction, and asked if he could sign a new deed since he was local. What deed, he asked? Kimberly started to explain more, not knowing his capacity or anything about him.

As Kimberly recounted the facts of her transaction, the uncle started getting really angry and exclaimed, "She is at it again!" The uncle then told a story about a woman that worked for him years ago who had access to his data and whose husband is in prison for fraudulently selling four other homes of his. He wasn't her "uncle" after all. In no way, shape or form did he authorize, acknowledge or approve of this situation.

The "uncle" called the police and reported the incident. Kimberly in turn sent a message to all local title companies warning them of the happenings in her transaction. A few days later, the niece attempted to open escrow with another title company and with another unwitting buyer.

Due to Kimberly's follow-through with the other title Companies in her local area, no subsequent transactions closed and the "niece" is being prosecuted to the full extent of the law. Kimberly cancelled her transaction and returned the deposited funds to her investor client, who was thankful that she had saved him from a bad deal.

Moral of the Story

Investors have high expectations for fast service and sometimes request that we take shortcuts in closing their transactions. It's important to communicate to investors that you will apply your skill to deals they have entrusted you with and like Kimberly, you will take the necessary steps to investigate a deal that has warning signs of fraud.

Congratulations, Kimberly. Enjoy your $500 reward – you've earned it!

 

Document Execution Guidelines

The Company has noted an increase in escrow claims resulting from forged releases and deeds. Forgery claims can be avoided by following these guidelines in all transactions.

Basic steps can and must be taken to protect the Company from escrow claims attributable to forgery. The most important step is verifying the identity of persons executing documents. Subject to state law, adhering to one of the following procedures for all documents accepted into our transactions will aid in the prevention of a future claim or loss:

  1. All document signings must be conducted in the presence of an authorized Company employee, regardless of who performs the actual notarization. The Company employee must require the production of proper identification and personally examine it to verify the identity of the executing parties. Even if the notary is not an employee of the Company, it is the responsibility of the employee to ensure the notary follows industry standards in conducting the signing.
  2. The document signings must be conducted through Bancserv, a brand neutral FNF Company that is covered by a $15 million errors and omissions policy, which extends to all of the notaries it retains. Information on Bancserv can be obtained from its Web site at www.bancserv.net or 800.721.5558. Your favorite notary may sign up with Bancserv and continue to work with you.
  3. The document signings must be conducted by a notary or signing service that maintains errors and omissions insurance of $100,000 or higher, and is approved in writing by your regional manager. Errors and omissions coverage is available for inexpensive premiums through the National Association of Notaries at www.nationalnotary.org.
  4. The document signings must be conducted under the supervision of attorneys actively licensed in the state where the document signings take place.
  5. The document signings must be conducted in accordance with a procedure approved in writing by a regional manager (this option allows for local custom and practice to be followed).

Documents accepted into your transactions are exempt from the above guidelines, if one or more of the following apply:

  1. The document was executed in accordance with existing guidelines for foreign individuals, entities and military personnel.
  2. The document was executed directly with the insured lender (not the mortgage broker).
  3. The document was provided by an independent escrow or closing service approved by the regional manager.
  4. The document was executed for commercial transactions in an amount of $3 million or greater.

Forgery claims occur in two basic forms:

  1. A third party forges a release and then forges a deed conveying the property to another party; or
  2. The current owner forges a release and then attempts to sell or mortgage the property as if it were unencumbered.

Both instances can be avoided by following the Company's Document Execution Guidelines.

 

Prison Break

Our escrow closer goes the extra mile to determine whether a prisoner had a visitor on the day he executed (no pun intended) a marital waiver that required notarization or if his signature had been forged.

During a closing with a customer, Betsy Radell, a closer for Chicago Title in Lenexa, Kansas, asked a borrower if she was married.  The buyer "hemmed and hawed" before finally admitting she was married, but didn't know where her husband was.  Since this was a purchase money mortgage, we typically would not have required the spouse to sign, but Betsy called the lender regardless to see if the lender had any specific requirements.

The lender required the spouse of the buyer to sign a marital waiver.  Betsy passed this requirement on to the buyer and the buyer's loan officer, but was again told that no one knew where Mr. Buyer could be found.

A couple of hours later, a marital waiver was faxed to Betsy's office from the buyer's work fax number.  Betsy's antenna went up and she shared her suspicions with her manager.  She and her manager discussed the fact that Mr. Buyer had not signed the document in front of a notary approved by Chicago Title.

Betsy had a hunch that something fishy was going on and she decided that she needed to find the husband to verify his signature and make arrangements to re-sign the document in the presence of a notary approved by the Company.  Betsy called Mrs. Buyer's work number and asked if the person who notarized the document worked there. Betsy was right! The notary did work at the same company.

Betsy took the next step and put all parties on notice that there would be a delay in the closing. Upon hearing this, the seller of the property, who was acquainted with the buyer, told Betsy that Mr. Buyer was in prison.  Betsy called the prison and was informed that Mr. Buyer had no visitors the day this document was executed and notarized. The document was not even notarized in the county where the prison was located.  Was there a prison break?

Betsy called the lender and said we would not accept this document because it was not signed by the husband. The lender withdrew the loan, but was still willing to make the loan at a future date, as long as we could verify that Mr. Buyer actually signed the document. 

Moral of the Story

Document forgeries are sometimes hard to detect. Betsy is to be commended for following her gut instincts when she suspected a forgery and for adhering to our Company's Document Execution Guidelines.

For her efforts in protecting the insured lender and the Company against possible future claims by the imprisoned spouse, Betsy received a reward of $500 and a letter of recognition from the Company.