Focused on Loss and Claims Reduction

By Lisa A. Tyler
National Escrow Administrator

Kudos to Kansas and Missouri for keeping their associates focused on loss and claims reduction! To increase readership, each month management teams from Chicago Title offices host a Fraud Insights contest. Tom Dulick, metro area manager, and Sue Cowan, residential escrow operations manager, send out questions to their staff regarding the information contained in the current edition of Fraud Insights. The answers are due by 5 p.m. on a designated day. The names of those employees submitting correct answers are placed into a drawing to win $100. You too can create a program like this in your office and get employees involved!

This edition of Fraud Insights contains "True Confessions of a Closer," which gives a personal account of how a woman's life spiraled out of control due to previous bad choices in her career. The reality of how easily the spiral began is alarming because it could happen to any closer who makes unethical choices.

Can a seller sign closing documents under protest? Find out why or why not in "Signing Under Protest," a tale of a seller holding out in an attempt to convince the selling agent to reduce his or her commission.

Also in this edition, find out how a Los Angeles County escrow officer discovered a forged reconveyance document. The story is entitled "410 to Alvarez" and is an exciting account of how an escrow officer's deductive reasoning saved the Company from a $410,000 loss.

Having a quiet summer? Make the most of your down time by honing your settlement skills. The Company has NEW Web-based training modules available at The latest modules cover these exciting topics:

»Deeds in Lieu of Foreclosure
»Relocation Transactions
»Subordination Agreements
»Closing REO Transactions
»The FNF/ExperianSM Program

We also make these modules available to our agents and fee attorneys on CD Rom. To order the entire set of training modules on CD Rom, e-mail your request to



True Confessions of a Closer

A personal account of one closer's demise caused by making the wrong choices in her career. This story ends with an encouraging message from the former closer to all settlement agents about ethics, the loss of freedom and consequences.

It was 8 a.m. and I was sitting in my office, well on my way to conquering the day. A noise came from the front office and I heard the door open. I walked out and gave my enthusiastic morning greeting to the two gentlemen waiting there, but it was not reciprocated. The two gentlemen asked, "Are you Jill?"

"Yes I am," I replied.

"We are with the FBI and we need to talk," the two gentlemen said.

A second later the three of us were in the conference room and numerous copies of some of my best fraudulent work were placed in front of me. "You are a very lucky person, Jill. You are being given the opportunity to cooperate fully with us at this time and maybe you can be fortunate enough to receive only probation or a year in prison – no guarantees. You can go to prison for five years for each one of these offenses. We could have just come to your home and arrested you. You need to make your decision right now," the two FBI agents said. I was so scared. Thank goodness I had the ability to say, "I will cooperate."

Now, let us go back to the beginning. For many years I worked for a different title company and put everything I needed in place so I could have a title company to truly call my own. It required a lot of diligence, hard work and intelligence. Now, "intelligent" is an odd word to describe me when you reflect back. I have been in real estate in some capacity for the past 18 years. I did not have enough common sense to see that everything I did in this industry was easily tracked by a paper trail. Any person in any realm of real estate can say anything they like, but cannot deny what a paper trail clearly shows.

During the past three years I completed about 60 deals that allowed buyers to receive cash back. That is not an issue if a lender approves the deal, but if the lender doesn't approve, it is indeed an issue – an issue that could possibly result with a closer in prison. How it came to be was innocent enough. A valuable loan officer client came to me and asked if I had the ability to make a deal work so a buyer could get some funds back. Very foolishly, I told him it was possible. It was the worst thing I could have ever started for myself, that loan officer or the real estate industry. My actions created an assumption that I would close those types of deals in the future.

It was quite easy to justify my actions in my head when I felt the bases were covered. The buyer was fully aware of the transaction details, the seller knows, the REALTOR® knows, the loan officer knows, etc. Oh wait … that's right, THE LENDER DOES NOT KNOW. Funny how that little detail can just jump past the logical part of a brain?

Now let's make the rules completely clear for those of you working in real estate:

  • The lender must be made aware if a buyer is going to receive money back on a purchase.
  • It is also unadvisable and unethical to put a bogus lien on a property so the seller pays it off at closing on a lender-approved settlement statement, thus sending those funds back to the buyer.
  • The lender must know if a seller writes the buyer a check after closing for any sort of allowance or credit.
  • New ways to go around the system are not alright or advisable. Remember, everything has a paper trail!

Closers must maintain a professional and ethical business attitude, after all, who wants to spend the rest of their life as a convicted felon?

People are driven by a desire to have quality of life, family and friends. That is part of the very reason that so many are in the real estate industry in the first place. Owning a home is a key to most people's financial and personal stability.

It was very tough when I found myself in this situation with the FBI. I could not tell anybody what had happened, or my cooperation agreement would be broken immediately and I'd be prosecuted to the full extent of the law. I could only talk to my husband and the FBI. The FBI asked me questions about loan officers, realtors, buyers, sellers and others with whom I routinely conducted business. I considered many of these people to be my friends and I really cared about them, which made the questioning very tough to undergo.

I became suspicious of everything. Every time I received a phone call with a question, or a call from someone I did not know, I was paranoid. I constantly asked myself, "Am I being tested, taped or set up?" I cannot mention all the things I have had to do for the FBI, but it opened up ideas in my overactive imagination that could be put into a spy novel.

"Jill, we need to charge you now to go forward with the rest of our cases. You need to find a really good criminal defense attorney that specializes in money laundering and wire fraud," the FBI told me. Until I heard the aforementioned statement there was still a glimmer of hope in me that they were yanking my chain a little bit to get the most information they could. I have heard of wire fraud and money laundering before but had no idea that what I had done even fell under those categories.

Less than two weeks later I was in front of a federal judge pleading guilty to money laundering and wire fraud. My troubles went from being a personal issue to public knowledge.

I am pleading with those reading this issue of Fraud Insights to learn from my story and not make the same mistakes I have made. If you have made these mistakes or mistakes like these in the past – stop! It is that simple. In my collective real estate career, the erroneous deals I have made did not make me rich or give me anything of value in my life. The only thing those deals gave me was a permanent stigma – I will now forever be defined as a felon, which will impact every facet of my life.

The next three months to one year of my life will be spent waiting for the telephone call to let me know it is time for my sentencing. If I have to go to prison, I will only get about one month to say goodbye to the people I love so much. There is a possibility I will miss some of the most special moments of my only child's life. Those moments will be lived through pictures and stories from my husband.

I also cannot do mortgage closings, had my real estate license revoked and will have to disclose my criminal history every time I apply for a job. This is why I am urging you to make the right and smart decisions in your day-to-day operations. Choose ethics and freedom over a life dictated for you.


Signing Under Protest!

A settlement agent holds up the closing when the seller proclaims she is signing "under protest." With more and more sellers having to sell under duress and having to bring in additional money to close, it is important to know how to handle these types of scenarios.

An escrow officer recently had a seller inform her she was going to close "under protest." The seller (who was also the listing agent) was attempting to have the buyer's real estate agent reduce his commission so she wouldn't have to add funds at closing.

The escrow officer informed the seller she would not be able to close under protest. The escrow officer said it would be in direct violation of the Company's defense practices under the title insurance policies that would be issued in connection with the transaction.

All title policies have two cornerstones of title insurance in common, whether the policy is a standard coverage or extended coverage policy, a lender's policy or an owner's policy, and regardless of liability. The cornerstones of title insurance are:

  • Forgery
  • Competency of the grantor

Competency does not necessarily mean the seller had to be "crazy" or certified as incompetent by a physician. It can also mean the seller was acting without her free will, unable to freely execute the documents or was acting under duress. It appears in this case the seller was competent as to her ability to function and think; however she expressed to the escrow officer she was under duress or strain of some sort.

As a title insurer, we can not close under protest. If a principal writes "under protest" on the closing documents or verbalizes his or her protest to the settlement agent, the settlement agent has to inform the principal of the need to seek legal counsel. We cannot close or insure until and unless the seller freely agrees to complete the transaction. Of course, if the seller is under a court order, than it is understandable and expected for him or her to be upset.

The escrow officer stood her ground and refused to close. The seller eventually "found" the funds and the transaction successfully closed with an affirmation from the seller that she no longer protested the closing.

The Moral of the Story
It is important to know how to handle these types of scenarios, since they are occurring with greater frequency. The escrow officer in this story handled her situation perfectly.


410 to Alvarez

Who pays off a $742,500 loan in less than a year and three months later wants a hard-money loan for $410,000? This and many other clues gave an escrow officer the ability to uncover a forged reconveyance.

An escrow officer for Chicago Title in Los Angeles was handling a hard-money loan transaction. A hard-money loan is one in which the lender is not an institutional lender, but typically an individual who does not plan to sell the loan. These types of loans are usually offered to individuals who can not qualify for institutional financing. They are high risk loans and have a higher interest rate.

Following are the red flags the escrow officer recognized in her transaction:

  • The title report showed the property as free and clear.
  • Edna Lopez purchased the property on May 30, 2007 for $825,000 with a purchase money loan in the amount of $742,500.
  • On Jan. 8, 2008, Edna Lopez deeded the property to Angela L. Perez Aguilar without consideration and Lopez's signature on the deed did not match the previously executed deed of trust.
  • The purchase money deed of trust and the grant deed to Angela L. Perez Aguilar were both notarized by Elizabeth Rivera, but the notary's handwriting and signature looked completely different on each document.
  • On Jan. 18, 2008, Angela L. Perez Aguilar deeded the property back to Edna Lopez and a Hector Alvarez.
  • A reconveyance of purchase money deed of trust in the amount of $742,500 was recorded on Feb. 1, 2008.
  • Hector Alvarez began using his purported interest in the property as collateral for a new hard-money loan.
  • The loan documents were signed outside of Company offices.

The escrow officer contacted her local title underwriter and the national escrow administrators with the aforementioned facts and asked how she should proceed. The escrow administrators studied the recorded reconveyance document for the $742,500 loan, which was supposedly executed by an officer of Option One Mortgage. The signature and notary appeared valid. The escrow administrators contacted Option One Mortgage and discovered the original loan was still open.

The escrow administrators sent the forged release to Option One with instructions on how to re-securitize their loan. The local underwriters posted a note to the title plant records, so that no other title insurers fall victim to the fictitious reconveyance document. We resigned as escrow holder on this transaction.

Happy Ending
The mortgage broker on this transaction tried to move the transaction to another escrow officer, only to discover we were on to his game. The hard-money lender refused to move the escrow. When all of the facts came to light and the transaction fell through, the hard money lender thanked our team and told us they would be our clients for life!