Positive Pay Saves Title Company Millions!

Positive Pay, a service offered by our banks, is one of today's most effective anti-fraud tools for check disbursements.

Our escrow production systems automatically transmit check issuance data (check serial numbers and check amounts) to our numerous trust banks. The trust bank has a system called Positive Pay that matches all checks being presented for payment against our issuance information. Issuance information is updated daily as we issue new checks, void or stop-pay checks and as checks are paid.

When a check is presented for payment the serial number and dollar amount must match that which is documented on an issuance record before the check is paid. If there is a discrepancy in either of these two data elements, the bank reports the check as an exception. Based on employee review of the reported exceptions, our staff instructs the bank to either honor the check and pay it, or dishonor the check and return it.

In a single day, the Positive Pay service was able to stop the payment of a group of checks fraudulently issued in several shopping sprees during a three-day weekend. The checks were signed by an "Elisa Leilani Postal," who used our trust account number on counterfeit checks in the following amounts:

Target® $58.15
JoAnn™ Fabric $314.13
Longs Drugs $192.45
Skechers® Shoe Store $129.43
TJ Maxx® $391.40
Target (again!) $183.46
Burlington Coat Factory $221.04
Toys R' Us® $622.73
Target (again!) $508.75
Lucky's Grocery Store $61.89
DD's Discount Liquor Store $273.95
Orchard Supply Hardware® $390.95
Safeway Grocery Store® $153.07–
Target (again!) $435.57
Lucky's Grocery Store $268.51
Toys R' Us $139.13
Office Max® $730.36
Total $5,074.97

All of these checks showed as exceptions on the Positive Pay report. Once the branch operation received the exception report, they asked for copies of the checks. The checks were photocopied and sent to the escrow branch where it was easy for our personnel to detect them as counterfeit. The most obvious sign was that the issuing bank was shown as "Bank of American," not "Bank of America," and was without a valid address or telephone number.

There are several steps that must be followed for Positive Pay to work. First, the branch operation must provide a list to the trust bank for all the checks issued. The Company's escrow production systems automatically transmit the check numbers and the check amounts at the end of each day. When a check is received at the trust bank, the bank compares the data on the check to the transmitted data on the list. If the check information contains any discrepancies compared to the list, the check is set aside as an exception for review by the issuing branch. Based on the branch's review of the reported exceptions, the branch or accounting center will instruct the bank to either honor the check and to pay it, or dishonor the check and return it.

It is important each branch have a designated person to monitor the Positive Pay report on each banking day. That includes Company holidays that are not bank holidays (i.e.; the day after Thanksgiving). There is a very short window of time to dishonor a payment. In most cases the branch will only have until noon of the same day the exception list was received to respond.

In addition to Positive Pay, the Company has another powerful tool in preventing fraudulent checks – you. When an employee receives a phone call to verify a check, the employee should ask the caller to fax a copy of the check. Fraudulent checks are easier to spot once they are visually inspected.

• Review the check carefully.
• Look who signed the check. Is the signee a current signer on the account?
• Review the address and company name on the check.
• Verify the escrow number, check number, amount and payee all match.

There have been several times where someone has contacted a branch to verify a check. An employee was able to identify it as a fraudulent check and the fraudsters were, as a result, arrested on site. This only occurs when you act quickly.

Who is That Behind Those Foster Grants?

A very suspicious-looking borrower and her boyfriend appeared in one of Fidelity's San Francisco offices for a signing. The borrower would not remove her sunglasses and under scrutiny by one of our employees, she bolted from the office leaving behind a fake driver's license.

A $233,325 cash-out refinance transaction was opened with Anatoliy Pavlishin, an escrow officer with Fidelity National Title in San Francisco. The property owner was an unmarried woman who had purchased the property earlier the same year. The loan documents were delivered to Anatoliy's office approximately one month later. Anatoliy prepared the estimated statement and sent it to the mortgage broker.

Once the broker reviewed the statement she set an appointment for her client to come in and sign it. The mortgage broker could not reach the borrower for a few days. The borrower finally contacted the mortgage broker stating that she got sick, was in the hospital and was wondering if a power of attorney could be used to sign the documents.

Anatoliy informed the broker that the lender would need to approve the power of attorney and the document would still need to be executed in the hospital and notarized by an approved notary. However, since the only document in the loan set that needed to be notarized was the deed of trust, it didn't make much sense to use a power of attorney at all.

After a few days the mortgage broker contacted Anatoliy stating that her client and her boyfriend should be at his office at 2 p.m. that day to execute the loan documents. The broker mentioned she suspected the borrower was delaying the signing on purpose in order to shop the loan for a better interest rate. Promptly at 2 p.m. that day a woman walked in, wearing sunglasses that completely covered her face, with a man who took charge of communicating with our office staff.

Anatoliy walked into the signing room and asked for her driver's license and noticed that the woman appeared to only be about 35 years old, when according to the driver's license, she was 50! A closer look at the driver's license gave Anatoliy a gut feeling something was wrong. He walked out of the signing and looked at the driver's license up close – the picture seemed to be bigger than normal and in general it looked and felt wrong.

Anatoliy took the license to his manager. He could see the signing room from his manager's office and as he glanced toward the woman, he noticed she was bolting out of the office. Her boyfriend was still there and approached the manager's office, but stopped short when his cell phone started ringing. He took the call and also disappeared, leaving behind the driver's license.

After a close examination, Anatoliy and his manager determined the driver's license to be a very good fake. Suspiciously, about 10 minutes after the clients left, Anatoliy received an e-mail from the mortgage broker stating her client had called and informed her that she wasn't feeling well and couldn't finish the signing. Upon further conversations with his manager, Anatoliy decided it would be best not to close the transaction.

For Anatoliy's keen sense of awareness and for saving the Company from a loss due to forgery, he has been rewarded $1,000 and a letter of recognition from the Company.

In a situation like that above, what should be done with a fake driver's license?
The license should be copied front and back for our files. A copy should be sent immediately to the lender. The original should be sent to the Department of Motor Vehicles via some traceable means with a letter stating the identification is suspected to be fraudulent and was left in our offices.

Accommodation Signer Learns Material Facts

Our nationwide network of offices offers consumers a wide selection of convenient locations in which to sign their documents in the presence of one of our employees. However, in this transaction, the buyers share information with the accommodation signer that jeopardizes their loan.

From first glance it appeared to be a typical sale transaction. The buyers were a husband and wife getting a new loan to purchase a home. The buyers asked their escrow officer, Sally, if they could close at an office that was more convenient for them. Sally contacted Jane, an escrow officer at a more convenient location, to make arrangements for the couple to sign there. The appointment was set and Jane received the closing package. While reviewing the loan documents Jane noted that the property would be owner-occupied.

Then the story took a turn. Jane received a call from the borrower's daughter, who told Jane that she would really be the one living in the property and asked Jane if she would be willing to prepare a deed to add her to the title after closing. Jane declined and immediately contacted Sally.

Sally said that she would not prepare a deed either. Jane and Sally both wondered if they should contact the lender and inform them of the phone call and ran the scenario by the National Escrow Administration team to be sure of proper action.

Jane and Sally were right. Even though Jane was not the escrow officer named on the file, it is still her duty as an employee to make sure that any material facts that may be important to the lender be brought to their attention. Here are a couple of excerpts from the lender's closing instructions:

C.2 Material Facts
Settlement Agent has knowledge of any material fact that may have an impact on lender's decision to not make the loan. A material fact includes, but is not limited to, any information on changes in the value or title of the Property, changes to the sale contract (if a purchase), changes to the financing, bankruptcy, enforcement of creditor's rights, or any knowledge or indication of suspicious activity. Lender is relying on Settlement Agent to communicate any of these or other material facts.

C.18 Non-Occupied
Settlement Agent has knowledge or a belief that Borrower owns and occupies another residence not subject to this transaction and does not intend to occupy the property.

The named Settlement Agent is the entire Company, not an individual. This is why it is important that any employee who becomes aware of a material fact bring it to the attention of the Escrow Officer handling the file so she can properly notify the lender.

Sally contacted the lender and told them what the daughter had said. The lender contacted their borrower. They discovered that the borrowers were getting ready to file for divorce and that the subject property would be the husband's after the divorce was finalized. Now that the lender had all the facts (thanks to Jane and Sally), the lender decided they would still lend to the borrowers, but with a few changes. The lender redrew the loan documents and the transaction closed.

This story only emphasizes how important it is that we share all the facts with the funding lender. Jane and Sally worked together to protect the Company and the funding lender.