Debt Elimination Schemes Still Exist
One of the most widely known perpetrators of debt elimination scams was the Dorean Group. Its "debt elimination" process brought these types of scams to the forefront. The principals were found guilty in a federal court of 35 counts of fraud, ranging from mail fraud, bank fraud and conspiracy to commit mail fraud, wire fraud and bank fraud, and to contempt of court. The principals of that group were sentenced to more than 21 years and are serving time in federal prison.
How do debt elimination schemes work? The Dorean Group had a six-step process. First, the group charged homeowners an upfront fee. The charge was on a per-loan-eliminated basis, starting at $1,000 and going up to $3,000. Once paid, the Dorean Group would form a trust and act as trustee on behalf of the borrowers. The homeowner would record a Quitclaim Deed to transfer title into said trust.
Then, the Dorean Group would mail a packet to the lender claiming to act on behalf of the borrower, demanding proof of the validity of the lender's loan "to the unilateral satisfaction of them" within 10 days. If not met, the Dorean Group would act as the lender's agent and attorney-in-fact to the loan and the secured property.
After 10 days had elapsed, the Dorean Group would prepare a Substitution of Trustee, or Power of Attorney (POA), to also be recorded. The document would appoint someone within the Dorean Group as agent and attorney-in-fact on behalf of the lender, even though they were not authorized. Following that, they would record a full reconveyance or satisfaction of mortgage. The principals of the Dorean Group signed the documents as trustee or POA.
Finally, the Dorean Group would instruct the homeowner to apply for a home equity loan. And because the property appeared free and clear, the homeowners could borrow all the equity in their home. The borrowers were instructed to split the proceeds of the loan with the Dorean Group as payment for services rendered.
Why the history lesson? There are other groups and individuals out there trying to perpetrate similar schemes on the lenders, and ultimately, the title company. Underwriting has repeatedly reiterated the importance of carefully reviewing the chain of title when risky circumstances exist.
Patt Khalili A.V.P., Production Manager of Ticor Title in Tustin, Calif., recently uncovered two very interesting chains of title. The title orders came in from an independent escrow company in Nevada. The orders were for the sale of two properties located in Los Angeles. There weren't any real estate agents listed, only a mortgage broker who was also located outside of Nevada. According to the order sheet, the seller was the same for each property, but the chains of title proved different.
The seller acquired the first property in September 2005. There were two Deeds of Trusts put on the property. Then in January 2006 the owner deeded a 40 percent interest in his property to another person. The deed was an uninsured deed and stamped on it was this statement: "This is a bonafide gift and the grantor received nothing in return, R & T 11911."
In August 2007 a Notice of Default was recorded. In the same month the new co-owner executed another Deed of Trust in favor of her employer for more than $19,000. The Notice of Trustees Sale was recorded in November 2008. Here is where it gets more interesting:
The borrower, now a 60 percent shareowner in the property, recorded a Notice of LAT Pendens against his property indicating he was suing his lenders and the servicing companies. In June 2008 the lender foreclosed and the Trustee's Deed was recorded.
So, the question is, "Why was the previous owner trying to sell the same property in October 2008?"
Seventeen days after the Trustee's Deed was recorded, the previous owners executed and recorded a Quitclaim Deed. However, it was a not a typical Quitclaim Deed. Here is what it read:
The Definition of "Las" as used in this document is "Land" is not restricted to the earth's surface, but extends below and above the surface. Nor is it confined to solids, but may encompass within its bounds such things as gases and liquids. Ultimately, "Land" is simply an area of three dimensional space. Land is immovable, as distinct from chattels, which are movable; it is also, in this legal significance, indestructible. The contents of the space may be severed, destroyed or consumed, but the space itself, and so the "Land," remains immutable. Peter Butt, Land Law 9 (2nd ed 1988) Reprinted in Black's Law Dictionary, Seventh Edition.
Under the authority of the assigns named in the United State of America "Las Cienegas Grant" receipt of which is hereby acknowledged, "CANDACE RADCLIFF" and "JEFFREY BRADSHAW" (Grantor(s)) (a Trust(s)) as the holder of all relevant title secured rights to the Land and property below described, does bring said Land and property out of Equity status together with all the rights, privileges, immunities and appurtenances of whatsoever nature, thereunto belonging and, does hereby remise, release and forever quitclaim the same to Candace Radcliff "Grantee" (a sovereign Woman), in her private natural "At Law" states as Land and property owner. Said land is described as:
This Deed serves as notice to all that may have concern that the above described Land is secured and protected under said "Land Patent" all relevant documents are certified and in the private possession of "Patentee" and are only viewable by appointment.
Immediately following the Quitclaim Deed a Declaration of Acceptance was recorded. This is what it read:
DECLARATION OF ACCEPTANCE OF LAND PATENT ASSIGNMENT UNITED STATES OF AMERICA "Las Cienegas Grant"
KNOWN ALL MEN BY THESE PRESENTS that, Candace Radcliff (a sovereign Women), does hereby certify and declare as follows. That she accepts the assignment of all Rights pertaining to the described Land and property including but not limited to the Land Patent secured rights within the United States of America "Las Cienegas Grant."
(1) The Land Patent Secured Land The Character of said Land and property so secured by said Land Patent together with all the rights, privileges, immunities and appurtenances of whatsoever nature thereunto belonging is here legally described and referenced as: "Those portions of Land within "Las Cienegas Grant."
(2) NOTICE AND EFFECT OF A LAND PATENT "A grant of land (Land Patent) is a public law standing on the statue books of the State, and as notice to every subsequent purchaser under any conflicting sale made afterward. Wineman v. Gastrell, 53 FED 697, 2 U.S. APP 581. A patent alone passes title to the Grantee. Wilcox v. Jackson, 12 PET (U.S.) 498, 10 L Ed 264. All questions of fact decided by the General Land Office are binding everywhere and injunctions and mandamus proceedings will not be against it. Litchfield v. Register, 9 Wall (U.S.) 575, 19 L Ed 681. Where the United States has parted with title by a patent legally issued and upon surveys legally made by itself and approved by the proper department, the title so granted cannot be impaired by any subsequent survey made by the government for it own purposes. Cage v. Danks, 13 L.A ANN 128.
(3) LAND TITLE AND TRANSFER. The existing system of land transfer as a long and tedious process involving the observance of many formalities and technicalities, a failure to observe any one of which may defeat title, even where these have been traced to its source, the purchaser must but at peril, there always being, in spite of the utmost care and expenditure, the possibility that has title may turn out bad. Yeakle Torrens System 209.
If said assignment of related Land Patent is not properly challenged within sixty days (60), in a court of law, it stands as a certainty, because no other party has followed the proper steps to secure lawful title. The final certificate or receipt acknowledging the payment in full by a homesteader or Preemptor is not in legal effect a conveyance of land. U.S. v. Steenersten, 50 FED 504, 1 CCA 552, 4 U.S. App 332. Wherefore, said Land Patent secured Rights stand as assigned forever secured in accord with the terms set in said Land Patent signed and sealed under the signature of the President of the United States of America.
Lastly, they recorded a Rescission of the Trustee's Deed and two Substitution of Trustee and Full Reconveyances, one for each loan. Then they listed the properties for sale. Once they found a buyer, they opened escrow.
Obviously these documents are not valid. Only the U.S. government – not the general public – issues and records U.S. Land Patents. Additionally, title investigated the other parties involved in the transaction. As it turns out, the mortgage broker company on the file was non-existent. There was no record of their company being domiciled anywhere. We promptly resigned from insuring these transactions. Patt and his department did an excellent job recognizing this risky transaction and detecting the invalid documents in the chain of title ultimately preventing us from insuring title.
The next wave of real estate scams involves filing deeds on foreclosed properties sitting vacant and moving homeless people into the properties in order to claim squatter's rights. By filing deeds that claim title to a property, individuals can obtain free shelter and hold the property ransom by demanding cash from the banks. The banks are faced with a tough decision as they want to avoid the delay and expense of an eviction process, which can take 60 days or longer.
Donald Ector, a title officer from Fidelity's Inland Empire operation, discovered a "wild deed" in the chain of title when performing a date down or bringing the title to date just prior to recordation. The wild deed was for no consideration, handwritten and conveyed title to "Sovereign Solomon Brothers Archbishop Corporation Sole." The deed also contained an exhibit entitled "Notice of Forfeit." Suspicious about the deed, Donald presented the issue to his advisory title officer, Jerry Johnson.
Jerry was aware of rights enforced for people in possession of the property – only by inhabitance – often referred to as "squatters." The individuals are not entitled to the property and call for an inspection of the property to find out if it is in fact vacant. Squatting in vacant homes is typically the lifestyle of derelicts and the homeless who stay a few nights and leave quickly when they are discovered. The legal standoff between the property owner (bank) and the "squatter" is the work of an organization that is seizing foreclosed houses in Riverside County by producing deeds that look legitimate because they have been notarized and filed with the county recorder.
Jerry was also aware of a similar deed recorded on a property where a man refused to leave the property claiming he had legal documents allowing him to stay. Neighbors said he showed up late one night and unloaded his belongings from a small trailer. He even filled the empty swimming pool and spa and had cable hooked up to his wide-screen television!
The organization claims to be a religious corporation and to have "sovereign" immunity from federal and local laws. The Nevada based organization is currently under investigation by local authorities. It is headed by a self-proclaimed archbishop, King Solomon, II, who describes himself as a sovereign who claims he is not required to pay rent, taxes or homeowner association fees.
The dynamic duo of Ector and Johnson saved the Company from a potential claim by detecting the wild deed and calling for the property inspection. They both realized a squatter on the property could represent adverse possession and a potential future claim by the buyer. For their efforts, they have received $500 each and letters of recognition from the Company.
Moral of the Story
If someone had occupied the property and we had closed and insured the transaction, the new buyer could have faced the adverse possession rights the squatter had by occupying the residence. The adverse possession could have been a challenge to the insured's title and was likely covered under his owner's policy. The acts of our extraordinary title officers saved the Company from an eventual claim of up to $483,000, or the sale price of the subject property.
Approved Notary Causes Loss
A northern California escrow officer set up a signing appointment with a regionally approved notary who ultimately cost the escrow branch $2,400. Discover the risks associated with using an approved notary versus a BancServ notary.
An escrow officer in northern California referred a sign-up to an approved notary (not a BancServ notary) who did an unsatisfactory job. The notary kept talking about inconsequential and inappropriate topics during the signing and, as a result, the borrower and the notary missed several documents that should have been initialed and/or signed. The lender refused to fund without completely executed documents and the end result was due to the errors in the signing, the lock expired and the mortgage broker demanded the escrow branch pay to re-lock the loan because the escrow branch had hired the notary signer.
The escrow branch took a loss and paid $2,400 to re-lock the loan on behalf of the borrower. The escrow branch then submitted a claim for reimbursement of its loss to the notary's Errors and Omissions (E&O) Insurance Carrier. The insurance carrier's response was that because the notary was acting both as a notary and as a signing agent, the errors were not in the notarizations but in the act of being the signing agent. In short, the policy did not cover the claim. Now the escrow operation is faced with suing the notary in small claims court to recover the amount lost.
Moral of the Story
BancServ is a nationwide notary company. Notarization is all BancServ does. Its notaries go through a rigorous screening process to evaluate the notaries' levels of expertise. And it doesn't stop there. BancServ carries a $15 million E&O policy covering all its notaries. As a wholly owned FNF Company, BancServ operates under the same precepts as the rest of the Company, giving it the autonomy to make quick business decisions if a PR issue arises, even when its E&O Company denies a claim. Had the notary in this story been a BancServ notary, the local operation would have the ability to work with BancServ on a resolution. Surely, the outcome would have been much different.
Another Moral of the Story
Referrals from our sister companies only strengthen our position in the market. Our ancillary companies never take those referrals for granted. BancServ is one such company. It carefully screens its mobile notaries to determine their expertise, experience and neutrality. Had this same scenario occurred using BancServ, the operation would have had several additional options to remedy the situation.