Letter to the Editor
A Washington State loan officer tries to outsmart one of the Company's finest escrow managers by directly depositing the buyer's down payment and closing costs into the Company's trust account.
The following Letter to the Editor was submitted to Fraud Insights from Sue Moody, Escrow Manager in Lynnwood, Wash.
Dear Lisa Tyler,
I had a "short sale" transaction that was scheduled to close around the end of July 2007. The closing was delayed because I didn't receive the buyer's loan documents. We actually had two buyers, one out-of-state and one in-state. The out-of-state buyer deposited his portion of the closing funds in advance of the closing date. He was not a borrower on the new loan.
When I inquired with the loan officer about the status of the documents, he stated the in-state buyer was waiting for a Home Equity Line of Credit (HELOC) to close on her current home. The loan officer asked if he could loan the buyer the money for the closing, and if I would prepare a note for the repayment. I replied, "No, unless the new lender is made aware of the secondary financing."
As time went on, and still no loan documents, the loan officer asked if he could wire money in on her behalf. I told him if anyone other than our buyer/borrower deposited money with us, it would need to be approved by the lender and we would require third-party deposit escrow instructions.
The loan documents finally arrived, so of course it was a mad rush to close the deal. We sent out closing documents to the out-of-state buyer. When the in-state buyer came in to sign, her Realtor® and loan officer came with her. We provided her with wire instructions and she said that she would wire transfer her down payment and closing funds later that day.
The money didn't show up in our trust account. During the course of the next couple of days, the loan officer lied to the listing agent in an e-mail stating the buyer had wired in the additional funds. Unbeknownst to the loan officer, I had a long relationship (17 years) with the listing agent and I had confirmed that, in fact, no wire had been received.
When caught at his own game, the loan officer called to say the lady was on her way to our office with a cashier's check. Back and forth the story went – wire transfer, cashier's check – we weren't sure what we would get. Finally, the loan officer called and again stated that the buyer was on her way to our offices with a cashier's check.
Then, the next thing I knew, he e-mailed a copy of a bank receipt for an internal transfer. I had no way of knowing whose account the money came from, and I had to wait 24 hours for our accounting department to get confirmation of the deposit and post the funds to our escrow file. I explained that there was a time lapse and reiterated that he couldn't just deposit money into our account. I looked at the buyer's loan application to see if she had that same Bank of America account number listed – she did not.
I was suspicious of this loan officer, so I asked for a copy of a check from that account with the buyer's name on it. If her name and account number were not on the check, the lender's approval and third-party deposit escrow instructions were needed. The loan officer e-mailed a check copy to me, but only the buyer's name appeared in the left corner, with no address. I was really suspicious at this point, so I tried to track down the teller that handled the transfer.
The first two people I spoke to at Bank of America said that they couldn't give me the information for privacy reasons. When I finally reached the teller herself, I explained who I was and that I was just trying to confirm the name of the account holder. She said, "Oh yes, I remember the gentleman – he's a regular customer of ours." I asked if the account belonged to the loan officer in question, and she confirmed the check had indeed been drawn from his business checking account. I asked if our buyer/borrower was on the account. The teller said she was not.
I confronted the loan officer. He didn't deny what he had done. He was mad at the teller for divulging the information to me. At this point I contacted the lender to see if they would allow the deposit from the loan officer. They said that any contributions would have to be approved by underwriting.
Initially I thought that this could be done quickly, but it didn't turn out that way. The lender was a table-funding lender and had funded the loan on July 31, 2007, and by this point it was already Aug. 2, 2007. The lender wanted the wire returned before it would even send the loan back to underwriting for approval. This could take several days. We told the buyer she could bring us a cashier's check with her name showing as remitter, or a wire transfer. She finally wired us the money.
As each day passed, I had to obtain another approval from HSBC on the short sale. On Friday, Aug. 3, 2007, I finally had all of the buyer's money and was ready to close, but I couldn't reach HSBC. The one and only person that could approve the short sale payoff amount was out of the office that day. On Monday, Aug. 6, 2007, I obtained the approval letter for the reduced proceeds on the short sale and extension. I closed the transaction and cut a check back to the loan officer for his "fraudulent" deposit into our trust account.
The not so funny thing is that on Aug. 1, 2007, I was attending the FNF seminar and you talked about short sale transactions. From what I learned during your class, I was willing to bet that the loan officer and buyers were in on the purchase together as a quick investment. Somewhere along the line I learned that one of the delays in the lender getting loan documents to us was that they wanted to treat it as a non-owner occupied loan. The loan officer insisted that it was owner occupied (the in-state buyer) and he was able to push it through that way. I worry that this file will come back to haunt me, but I'm glad that I've attended your classes, read your stories in Fraud Insights and listened to my gut instincts about this loan officer.
Thanks for all that you do!
LPO, Escrow Manager
Chicago Title Insurance Company
We admire Sue's cunning ability to outsmart the loan officer and to protect the new lender in her recent transaction. Sue has received a letter of recognition along with a $1,000 reward as a small token of our appreciation. On behalf of the entire Company, thank you to Sue!