Forged Deed Causes Waiver of Lender Condition

Out-of-office signings pose a threat to unwitting closers. Find out how Tammy Roberts stopped a forgery on a transaction where the documents were supposedly signed and notarized by our insured lender.

It's a fairly common story, one you've surely heard before: a lender draws loan documents for a refinance and demands they be signed that same day. Tammy Roberts, an escrow officer for Chicago Title Agency of Nevada, found herself in that exact situation.

Tammy's transaction was with an out-of-state borrower. The lender e-mailed her the loan document package at Chicago Title in Las Vegas. Tammy worked up the file and e-mailed the documents to one of the lender's local offices in California, assuming the lender had an on-site notary to perform an accommodation sign-up for two large loans. The first loan was for $1,190,000 and the second was for $500,000.

The borrower held title as a married man, and this was his "sole and separate property." The lender required a new spousal deed to be executed by the borrower's spouse, even though one had previously been executed and recorded. This document was included in the e-mail to the accommodating office.

Two days later, Tammy received the executed loan documents. Tammy is thorough and performs page-by-page reviews of all packages signed outside her office in order to verify that all of the pages have been properly signed. When reviewing these particular documents, Tammy compared the new spousal deed to the one previously recorded to confirm its validity. The signatures were not even a close match.

She attempted to contact the notary for more information and discovered that the notary was not an employee of the lender, but rather an outside signer! By way of an invoice for the outside signing service, Tammy was able to contact the signing service for a copy of the signing spouse's identification.

Tammy presented the evidence to the lender that the borrower was a sole and separate owner, and therefore his wife's signature should not be required. Believe it or not, the lender waived the requirement for an interspousal deed and funded the loan. With the help of her managers and underwriters, Tammy was able to close and insure the two new loans without the aforementioned condition once she was able to verify the signature of the actual borrower. The borrower actually admitted to Tammy that the signer had encouraged him to forge his spouse's signature!

Moral of the Story

Under our Company's Document Execution Guidelines, employees of the funding lender (not the mortgage broker) can notarize the borrower's signatures on their loan documents. However, it's incumbent on the escrow personnel to determine that the notary signer is, in fact, an employee of the funding lender and not an outside signer.

More on This Topic…

Some of our nation's largest lenders require a new spousal deed be executed each time a borrower refinances a property. Why is that? Does the spouse magically regain community property after a period of time?

"The community property status doesn't change over time, unless there has been a conversion of the separate property interest into a community property interest," said Jeff Boas, Senior Underwriting Counsel. "For our purposes, that would mean a recorded document showing the property was community property again. For example, an Easement Deed executed by both spouses, or a new Deed of Trust/Mortgage executed by both spouses without some qualifying language."

According to Boas, some lenders will withdraw the requirement when the possible risks are explained to them. "Risks include liens against the non-titled spouse that can technically be attached to the real property if a deed is subsequently recorded, placing ownership with the non-titled spouse for a brief period of time," said Boas.

Dresser Drawer Deeds

A Dresser Drawer Deed, sometimes called a Night Stand Deed or Hip Pocket Deed, is usually a Quit Claim Deed that has been stashed somewhere and mysteriously shows up and/or is recorded after the grantor has died.

According to W. Clark McFarland, a Southern Arizona Underwriter, Dresser Drawer Deeds might be illegal if someone is trying to circumvent the probate court or the rights of heirs to the property. Sometimes, the "seller" will bring a Quit Claim Deed into escrow in an attempt to complete the chain of title, stating that the now deceased owner (usually a relative or significant other) wanted him/her to have the property after death.

Caution should be exercised when someone brings one of these deeds into our escrow office, or if it's found that the grantor in a recently recorded deed had died around the date of signing or recording, which conveys title of the property to our "seller." Believe it or not, this is not proper estate planning!

There are exceptions, such as when a property owner validly executed a deed to a relative, friend or loved one, with instructions for it to be recorded upon his/her death. It could also be a deliberate attempt to avoid the cost and time of probating an estate, or an out-and-out case of fraud and forgery. In any event, if such a deed has not been recorded until after the death of the grantor, the estate might need to be probated.

What should you do when you suspect a Dresser Drawer Deed has been given to escrow or recently recorded?

Contact the Escrow Administrators by phone at 888.934.3354 or by e-mail at settlement@fnf.com and notify your title officer immediately. Do not proceed to record the deed. We need to make a chronological study of events - specifically the date of death as relating to the execution and recording of the deed. We might need to see a certified copy of the death certificate. Chances are we'll also need a Will to back up the intent of the deceased to leave the property to the grantee under such a deed. If there is a Will, the property still has to be probated. As the insurer, our Company might require evidence that the deceased doesn't have any heirs who might later file suit for recovery of the property or proceeds from the sale.

Another concern is the state of mind of the grantor at the time the deed was executed. Was he or she mentally competent, or under duress at the time? We want to make every effort to determine that there was no fraud or forgery in the execution and notarization of the deed. One way to do this is to try to find another document of record signed by the deceased grantor and compare that signature to the signature on the Dresser Drawer Deed. We might even want to investigate the notary on the Dresser Drawer Deed.

Some states' statutes allow for a Succession to Real Property instead of probate. Certain criteria must be met, such as there must be no more than $50,000 of equity in the property and the person(s) filing the affidavit must be a child, spouse, parent or sibling of the deceased. In any event, transactions involving such a deed in the chain of title should be reviewed and approved by Underwriting. Escrow should never record such a deed without due diligence on our part and approval from Title Underwriting and Escrow Administration. Lastly, do not give legal advice when faced with a Dresser Drawer Deed – only urge the would-be "heir" of the property to hire a probate attorney.

Rent a Family!

Is that your wife? Are those your children? Sometimes asking uncomfortable questions at closing can protect the Company and its lender customers from potentially expensive real estate fraud.

Jackie Parkinson, from Chicago Title's Vernon Hills, Illinois office, recently conducted a signing for borrowers attempting to cash-out more than $60,000 of equity in their home. The loan officer (mortgage broker), the borrower, his wife and two children all attended the signing. Jackie requested identification from the husband and wife.

The wife's identification stated she was 50 years old. However, Jackie suspected that the woman was younger than she claimed. The woman was holding two babies. In an attempt to confirm her suspicions, Jackie asked her, "Are those your babies?" The woman replied, "Yes."

Jackie then asked the husband, "Is that your wife?" He and the mortgage broker squirmed under her line of questioning. The man finally responded that his wife was actually in Mexico and he didn't think anyone would know the difference if this lady filled in for her.

Jackie pulled the mortgage broker aside and declared that the appointment was over and she would not be able to proceed with the closing of this transaction. The mortgage broker denied having any prior knowledge of the fraud.

Jackie went one step further – she posted the incident, the property information and the borrower information to the Company's computer system, so that no other offices would be duped by this mortgage broker and borrower. As luck would have it, the order did open with another branch of Chicago Title in downstate Illinois. However, the closer saw Jackie's posting and cancelled the transaction before the borrower came in with a newly "rented family."

There is a somewhat sad ending to this tale. Out of curiosity, Jackie continued to monitor the public records for the subject property, only to notice that six months after her run-in with the borrower and mortgage broker, another title company closed and insured the deal.

Moral of the Story

Reviewing borrowers' identification is required by our notaries and employee witnesses at the signing of closing documents. Taking the next step to investigate questionable aspects of the identification is crucial to protecting the Company against forgeries. Jackie suspected the "wife" was not the true spouse in her transaction and asking a few uncomfortable questions gave her cause for canceling the signing appointment, which derailed an expensive case of mortgage fraud.

We know that going the extra mile to protect the Company from fraud and forgery is not easy, and can sometimes be quite time-consuming. We appreciate the efforts of all of our employees to protect our Company, and the public it serves, from crimes such as these. For Jackie's successful efforts in protecting the Company, she was rewarded $500.