Mortgage Payment Acceleration Program (MPAP)

After a loan officer charges homeowners for the program, he fails to enroll them post closing. A Fidelity escrow officer is instrumental in prosecuting the loan officer.

J. Anthony Hansen, a loan officer for Country Homes in Vancouver, was charging $600 at closing as an enrollment fee in the Mortgage Payment Acceleration Program (MPAP) for each of his borrowers. The program involved bi-weekly payments wherein a borrower authorizes a third party to debit his or her bank account electronically every two weeks. The money is transferred into an account controlled by the payment company. When the company has debited the borrower's account twice, it has enough to make a full payment, which it sends to the mortgage servicer.

The magic of bi-weekly payments is based on the fact that there are 52 weeks in a year. When the borrower's bank account is debited every two weeks, they make 26 half-payments a year – equivalent to 13 monthly payments.

An extra payment a year makes a big difference. For example, someone who borrows $100,000 at six percent interest for 30 years would pay a shade under $600 a month principal and interest. Let's say taxes and insurance bring the monthly payment to $1,000. By making an extra $1,000 payment every year, a borrower would pay off the mortgage in 22 years and two months, knocking almost eight years off the loan and saving about $34,000 interest.

The program offered by Hansen was expensive to enroll in, however not unheard of since the cost of the program is typically based on what the market will bear. The crime was that Hansen pocketed the money and never enrolled homeowners in MPAP.

A notary that worked with J. Anthony Hansen on many of his transactions was suspicious during one of the signings. The borrowers were not aware of the MPAP enrollment fee and it seemed strange they wouldn't know about the fee. The notary reported her suspicions to Hansen's employer, who then turned Hansen in to the Department of Financial Institutions.

The Washington State Department of Financial Institutions launched an investigation and discovered Hansen used Fidelity exclusively as his escrow agent. The investigators contacted our FNT offices in Vancouver and were permitted full access to files involving Hansen as the loan officer. Jenifer Walton, Branch Manager of the Fisher's Landing office in Vancouver, was Hansen's escrow officer on most of his transactions. She closed more than 69 transactions involving Hansen and never suspected him of wrong doing.

When she was informed of Hansen's criminal investigation, Walton went above and beyond to help with the investigation. She assisted the investigators by reviewing each file with them and fully explaining the closing process.

Walton also assisted the investigators in developing a chart that would be used as evidence to help prosecute Hansen. The chart boiled everything down to five documents to help piece together the crimes for the jury: the broker demand, estimated HUD, Loan Closing Instructions, Final HUD and the Check Register.

When the five documents were explained to the jury it was clear what Hansen was doing. He was sometimes telling his customers about the MPAP fee and sometimes hiding the fee. At first the lender's instruction required escrow to reflect the MPAP/packaging fee in the 800 series on the settlement statement, and in later transactions the lenders required the fee to be shown in the 1300 series or on the front page as payment to a third party. The fee always went into an account controlled by Hansen.

Walton served as the expert witness at the trial, spent massive amounts of time preparing the case, and also spent a day and a half in court explaining the crime in detail to the jurors. According to Becky Jacobsen, Assistant Attorney General in Washington, "Jenifer was definitely instrumental in getting a conviction against Hansen."

Hansen was sentenced to 68 months in jail – a significant sentence because his sort of crime normally renders a sentence of less than 57 months. However, in Washington, prosecutors can ask for what is called an exceptional sentence if the jury determines certain aggravating factors exist. The aggravating factors the jury had to pick from were:

• The offense involved multiple victims or multiple incidents per victim
• The offense involved attempted or actual monetary loss substantially greater than typical for the offense
• The offense involved a high degree of sophistication or planning, or occurred over a lengthy period of time
• The defendant used his position of trust, confidence or fiduciary responsibility to facilitate the commission of the current offense

The jury did not have to say which aggravating factor(s) it found – just that the jury determined beyond a reasonable doubt that at least one of the four existed.

The court also ordered restitution in the amount of $70,600 and a fine in the amount of $10,000. Hansen was convicted on one count of first degree theft (a class B felony), 67 counts of second degree theft (a class C felony) and one count of money laundering (a class B felony).

Moral of the Story
Retaining the broker demands, lender instructions and copies of all estimated and final settlement statements in the escrow file were critical in piecing the crime together as well as proving the number of instances the crime against consumers had been perpetrated. Our escrow officers should all take note that our files should reflect a complete history of the financial transactions.

The Company should always cooperate with authorities and provide evidence from our files when requested. The protocol should involve contacting the Company's compliance officer prior to meeting with the authorities.

The Company is proud of Jenifer Walton's professionalism and expertise. Jenifer displayed the Highest Standard of Conduct (our Company's sixth precept) in the courtroom and is commended for her efforts.

Can an Employee Serve as a Witness at Signing?

From time to time we receive documents at closing that require the signature of a witness in addition to notarization.

Some documents require a witness, with or without a notary acknowledgment. In such a case an employee of the Company can certainly act as the witness. Witnessing a signature is an important function; it comes with responsibility and liability, and should not be taken lightly. The witness cannot be a party to the document or involved in the transaction. In other words, the witness should be neutral and unbiased. The employee should treat the act of witnessing with as much care and consideration as he/she would a notarization of a document – ask for identification, validate the identification and confirm that the signer knows what is being signed and is doing so at free will.

A witness should not be the same person as the notary on the same document when a document calls for both acknowledgments. The witness should read any statement on the document that is a part of the act of witnessing. For example, some Power of Attorney forms include this statement to which the witness must attest:

If the witness' statement contained in the document is not accurate, or if the witness is uncomfortable with the validity of the statement, witnessing of the document should not take place.

If for any reason the witness is uncomfortable with the state of mind or identity of the signer, he/she should not proceed. Instead, find a diplomatic means of exiting the signing, discuss the situation with the Notary and obtain guidance from the loan manager on how to proceed.

Deposition Reveals Forgery

Escrow officer admits to forging the signatures on an authorization to provide a payoff statement.

In 2005 Mr. and Mrs. Harris agreed to sell their property to a savvy investor for $185,000. The purchase price was to be paid $56,890 in cash at the time of transfer, $28,110 to be paid at the time the investor re-sold the property and the balance of approximately $100,000 was taken "subject to" existing financing. The existing financing was to be paid at the time of transfer according to the purchase agreement. However, the loan was still of record at the time the Harris' conveyed the property to the investor.

There was no escrow and/or title company involved in the initial transfer from Harris to the investor. Less than twelve months later the investor sold the property for $270,000, making an $85,000 profit. The investor's sale of the property to Mr. Michaels involved new financing with Argent Mortgage. An escrow transaction was opened and a title report was ordered.

The Harris' existing loan was to be paid at the time of closing and the escrow officer proceeded to order the payoff statement. The existing lender routinely required borrower authorization to release payoff information to a third party, in this case the escrow/title company.

The loan was in the name of the Harris', however the Harris' were not a party to this transaction between the investor as the seller, and Mr. Michaels as the buyer. The escrow officer had no contact with the Harris'. In order to obtain the payoff, the escrow officer forged the signatures of Mr. and Mrs. Harris on an authorization to the existing lender.

Little did the escrow officer know, but the Harris' were commencing litigation against the investor for breach of contract. Once the Harris' attorney discovered that the escrow officer facilitated the transfer of the property to Mr. Michaels, he immediately deposed the escrow officer.

The escrow officer and title company were subpoenaed to appear and present facts of the transfer and nothing else. However, when the escrow officer began to present the facts in her sworn testimony, she was asked how she obtained the signatures of the Harris' on the authorization to release payoff information.

She admitted to committing forgery at the urging of the investor who had falsely stated that the Harris' were fully informed of the subsequent transfer of their property and were glad their obligation to the existing lender would be satisfied. The investor also provided the Harris' social security numbers, enabling the escrow officer to obtain a valid payoff statement.

Upon admission of her wrong doing, the deposition ended. The legal counsel representing the Harris' filed new complaints enjoining the title company and the escrow officer in the suit for punitive damages.

The escrow officer was dismissed from her duties and her employment was terminated with the title company.

Moral of the Story
Creatively-financed transactions that leave the seller liable for liens that are not paid at time of sale leave escrow officers in a quandary for needed authorizations and social security numbers required to obtain payoffs. The quandary, however, does not relieve the escrow officer from the responsibility of obtaining legitimate authorization to obtain payoff information. Forgery is a crime, no matter the degree or circumstances under which it is performed.