FNF Announces New Program to Curb Mortgage Fraud

By Lisa A. Tyler
National Escrow Administrator

FNF has a new product offering that will help its customers protect against mortgage fraud. A new partnership with Experian Consumer Directsm will offer customers one year of credit monitoring, fraud resolution assistance and a credit report at no cost. Read all about it in this edition of Fraud Insights.

A national homebuilder launches an on-site inspection program to complement our Company's document execution guidelines. Find out the details in "Out-of-State Investors."

Heard of "Payout One," a program that brings buyers and sellers together for a percentage of the seller's proceeds? No Doc – Stated Income loans are risky for lenders, especially when the buyer and seller fail to disclose the existence of a Payout One program. Read about this new real estate trend in "Down Payment Assistance on a No Doc Loan = Dangerous."

Take the guess work out of your next closing! Buyers still need to get into homes, sellers still need to get out of homes and real estate professionals still need to earn a living in a down market. As a result, our escrow settlement employees are seeing some creatively financed transactions that they have not seen before or may not have seen in a long time. Your escrow administrators are standing by to walk you through the closing process while staying in regulatory compliance and in compliance with Company policies and procedures. Contact us at settlement@fnf.com or by phone at 888.934.3354.

The Company realizes turning away business is hard to do in a down market, but turning away bad business that will eventually cost the Company money in claims and losses is fully encouraged. If you have had to turn away business due to high risk or lack of disclosure, we want to know about it. Please e-mail your story to us at settlement@fnf.com. If your story is published in a future edition of Fraud Insights, you will receive a $1,000 reward from the Company.



FNF Announces New Program to Curb Mortgage Fraud

Company partners with Experian Consumer Direct to help protect its customers from identity theft.

"We recognize that mortgage fraud and identity theft are a growing concern not only for our industry, but for our customers as well," said FNF Co-President Randy Quirk. "Our business is protecting the largest financial transaction most Americans make in their lives – buying a house. Now, when our customers purchase title insurance from participating locations of our companies – Fidelity National Title, Chicago Title, Ticor Title, Security Union Title or Alamo Title – they will receive a one-year membership to Experian Consumer Direct's CreditCheck® Basic Credit Monitoring at no cost."

FNF's offering is the first of its kind in the title insurance industry, providing customers with daily monitoring of their Experian credit report, a comprehensive Experian credit report delivered online and e-mail alert notifications to inform them of key changes to Experian credit reporting, including new inquiries, newly opened accounts, delinquencies, address changes and public record items. Also included in the year-long credit monitoring is toll-free support from fraud resolution representatives and educational information.

"Consumers are often most at risk for identity theft after a big transaction – such as buying or refinancing a house," continued Quirk. "Every day, our title insurance providers are doing all they can to combat real estate fraud. Our products protect homeowners' futures by insuring the ownership of their home. It was a natural fit for us to partner with Experian to provide our customers with a reliable product to continue monitoring their credit after the transaction, empowering them to further protect their identity and investment."

"Our credit monitoring products give consumers peace of mind knowing that we monitor their credit report on a daily basis and will alert them of any key changes that could be a result of fraud or identity theft," said Ty Taylor, president of Experian Consumer Direct. "We are proud to join Fidelity in its campaign to protect consumers and stifle mortgage fraud across the United States."

FNF has rolled out this program to California and Texas and is quickly expanding to states where FNF companies offer title insurance. For additional information regarding this program, contact your National Escrow Administration team at Experian@fnf.com or call us toll free at 888.934.3354.


Out-of State-Investors

A national homebuilder has seen an increase in out-of-state investor purchases of its new home inventory. As a result, the builder recognized a simultaneous decrease in final home inspections, causing the builder skepticism and concern.

As new home inventory in Arizona is being snatched up by out-of-state investors, builders are concerned with the lack of physical inspections. The builders realize that without a final inspection prior to close of escrow, their companies are at risk for final punch list items post closing.

This evolution caused a national homebuilder to recognize FNF's document execution guidelines as the perfect platform to launch its on-site inspection program. The homebuilder puts all buyers on notice that the closing must occur at our Company's offices and a final inspection of the property must be performed prior to closing.

Moreover, the builder charges the buyer a $750 penalty to help defray the cost of post closing repairs if the investing buyer does not come and inspect his/her new home. The fee also covers the cost of a Bancserv, Inc. notary (a wholly-owned FNF subsidiary that provides notary signing services throughout the nation).

The homebuilder takes pride in the quality of its products. The new policy coincided with what the homebuilder wanted to accomplish by having the buyer inspect the property.


Down Payment Assistance on a No Doc Loan = Dangerous

First Franklin had underwritten this loan as a "No Doc-Stated Income" loan and as a result did not check the buyer/borrower's accounts for sufficient funds to close. On a "No Doc" loan, the lender only requires whichever bank the buyer states the funds are coming from to be the same bank the cashier's check is drawn from at closing.

Jacalyn Smith, an escrow manager for Chicago Title Company in Hobart, Ind., received a phone call and an e-mail from a principal of Golden Chain, LLC out of Chicago. The principal purported to be affiliated with an organization called "Payout One," an organization that brings buyers and sellers together in real estate transactions. He explained Payout One sets up written agreements wherein the seller will pay a stated amount to their program in exchange for helping sell the property. In addition, Golden Chain charged the seller a $5,000 seller release fee in exchange for its services.

Jacalyn was asked to do a mock HUD of the seller's figures and fax it to both of these organizations on one of her existing escrow transactions. The mortgage broker on the transaction was a good customer so she immediately pulled the commitment and complied with this request.

The principal quoted a fee due to Payout One to be paid by the seller at closing in the amount of $29,125. It seemed illogical to Jacalyn that a seller would pay a fee of this amount instead of listing the property with a Realtor®, but she reserved her concerns until she could see the instructions from the lender and determine if the lender had been made aware of this program.

Jacalyn received the loan instructions on the day of closing and found no reference to the Payout One program. She called the lender's office and asked if it was aware of the program and the office insisted it was not. Jacalyn explained that the settlement statement she was about to fax had a line item in the 1300 section with a seller-agreed-payment to Payout One in the amount of $29,125, as well as a $5,000 fee to Golden Chain for a "Seller Release Fee." Jacalyn asked if the lender wanted to see the documentation provided to her by Golden Chain and Payout One … and the lender did. The lender called about an hour later and stated the closing was not going to happen with the HUD shown as it was.

Jacalyn called the principal from Golden Chain and asked him some questions about the Payout One program. Her questions were in regard to an e-mail he had sent. The conversation went as follows:

"Payout One also requires a preliminary HUD showing their payment on the seller side before they will fund." Jacalyn asked him, "Before they will fund whom?" There was dead silence … She said again, "Fund whom? They should be funding my Chicago Title escrow account … correct?" No response still … then he proceeded to tell Jacalyn that she would need to call Payout One. "Why?," she asked. "They have the documentation regarding the down payment assistance program," he stated. "Where was the money wired to? Was it sent to the buyer's bank account?," she asked. "Yes," he replied.

Jacalyn then told him the closing would not happen because the lender was not aware a down payment assistance program existed. She further explained the loan would need to be resubmitted to the lender for approval to include the down payment assistance program and any down payment assistance funds would need to be wired direct to the Chicago Title escrow account and shown on the HUD as a line item in the 200 section to the buyer. Jacalyn called the mortgage broker and explained what she had discovered in her conversation with Golden Chain. The mortgage broker (her customer) thanked her profusely and then began making the necessary efforts to resubmit the loan.

The lender, First Franklin, thanked the Company as well for being smart enough to smell something fishy and bring it to their attention prior to closing. First Franklin had underwritten this as a "No Doc–Stated Income" loan. They do not verify the buyer's account for sufficient funds prior to closing – they only require that whichever bank the buyer states the funds are coming from, be the same bank that the cashier's check for closing is drawn on.

The deal eventually fell through. Jacalyn's astute ability to recognize the lack of disclosure to the lender and the possible harm of its affects was rewarded by the Company with a letter of commendation and $1,000. Spend it well, Jacalyn, we appreciate you!

Moral of the Story
The lender told Jacalyn its Company will not lend on any transactions involving the Payout One program. Their representative stated the loan documents would not have been drawn if the existence of the program had been disclosed on the purchase and sale agreement or if they were made aware of the program during the underwriting process.

The lender was making the loan with the assumption that the buyer's down payment of more than $26,000 was, in fact, his/her own funds. The Payout One program actually funded the buyer's down payment and closing costs and the buyer had no money in the deal. That is especially high risk for the lender. If the buyer has no money in the house, the buyer is more likely to walk away from the debt if they are unable to make the monthly payments.