Fraud Insights Quiz

We're taking our Quiz Section on line! The quiz section of Fraud Insights tests your retention of the information learned in this and previous editions. Remember, all previous editions of Fraud Insights can be accessed at the Company's intranet under Internal Publications.

FNF associates can participate in this month's quiz by typing the link below into their Web browser: http://fraudquiz.fnf.com. Answers will be published in the October issue of Fraud Insights.

All quiz entries will be entered to win a Starbucks gift card.

Below are the associates who submitted the correct answers first in their respective time zone for the August Fraud Insights Quiz and as a result received a $10 Starbucks giftcard.

• Amy White, Claims Counsel
  Fidelity National Title Group
  Jacksonville, FL
• Salih Hadzic, Underwriting Department
  Fidelity National Insurance Company
  Jacksonville, FL
• Carol Maier, Legal Assistant
  Fidelity National Title Group
  Jacksonville, FL
• Valerie Russell, Post Closing Specialist
  Fidelity National Title Group
  Richmond, VA
• Cecilia Lawrence, Escrow Assistant
  Chicago Title Insurance Company
  Houston, TX
• Allison Riddle, Human Resources
  Fidelity National Title Group
  Grand Rapids, MI
• Susan Rausch, Examiner
  Chicago Titile Company
  Sycamore, IL
• Chris Ziegler, Title Examiner
  Fidelity National Title Group
  Tempe, AZ
• Amy Nomura, Locator
  Property Insight
  Chatsworth, CA
• Diane Asposto, Escrow Officer
  Chicago Title Company
  Irvine, CA

Side Deals

Loan investors such as Fannie Mae and Freddie Mac have guidelines that must be followed by loan servicers when negotiating a short sale letter. Those guidelines often dictate the maximum allowable payment to any junior lienholders. The investor's guidelines take into account that, without a short sale agreement, the junior lienholder would receive nothing. If the first lienholder elected to foreclose rather than enter into a short sale agreement, the second lienholder would receive nothing. Therefore, the first lienholder, in some cases, limits payments to the second lienholder to no more than $1,000 or sometimes $3,000. As a result, second lienholders are trying to force more money out of the transaction by making side deals.

In this down market, we have seen a number of second lienholders trying to "skirt" the maximum amount allowed by the first lienholder by making side deals with the buyer and real estate agents in the transaction. At first, the second lienholders were blatantly including amounts in the footer section of their payoff letter to be Paid Outside Closing (POC) by the buyer or real estate agents. When our settlement agents began refusing to close with the POC condition in the letter the lender's moved on to other tactics.

In one recent transaction, the short pay letter from the first lienholder, Countrywide Home Loans, dictated no more than $5,000 to be paid to the second lienholder, CitiMortgage. We received a short pay letter from CitiMortgage reflecting the same $5,000 amount. We closed the transaction and ten (10) days later the escrow officer received an e-mail from a loss mitigator employed by CitiMortgage stating the $5,000 wire was being returned and that the lender would be pursuing foreclosure.

The escrow officer panicked since she had closed the file 10 days prior insuring free and clear marketable title to a new owner and a first lien position to a new purchase money lender. She responded to the loss mitigator asking why the funds were being returned. His response was that the buyer and the short sale negotiator had a "side deal" with CitiMortgage to send a wire transfer for an additional $9,141.10 on the date of closing. The buyer faxed an instruction to his bank to send the wire on the date of closing as proof of his concurrence with the "side deal." On the date of closing, however, the buyer rescinded his wire and the funds were never transmitted.

As a result, CitiMortgage notified the escrow officer they were rescinding their short pay letter to Fidelity National Title and initiating foreclosure. The escrow officer notified the seller and the real estate agents. She then turned her file over to FNF's National Escrow Administration.

The escrow administrators sent an immediate response to CitiMortgage quoting the payoff statutes for the State of California – where the property was located and the closing occurred. Here is an excerpt from that response:

The response letter informed the lender we would not accept a return of our wired funds and that if the lien wasn't released within the statutory period, the Company would file a release of obligation, releasing the lien.

Luckily for us, it turned out the loss mitigator was dumb enough to document the entire side deal in e-mails to the escrow administrator. In response to our letter she forwarded the chain of events to the Fraud Investigative Unit at CitiMortgage. After reviewing the chain of e-mails, the Chief Fraud Investigator confirmed the $5,000 would be accepted in exchange for a full lien release and any foreclosure actions would cease immediately.

Moral of the Story
First and foremost, if the parties make you aware of a side agreement, do not proceed to close. Make the first lienholder aware of any side deals and only close when you have conveyed the facts and received the first lienholder's authorization to close.

Secondly, if the lienholder refuses to release their lien post-closing, get the seller involved immediately. In other situations like the one in the above article we have opted to get the consumer involved by having them call the lending institution and inform them of their intent to notify the OCC and other federal regulators of their deceptive practices. Often times, the lender will listen to a consumer over the settlement agent and will reverse their decision to refuse payment. Also, some states require the lender to release their lien within 30 days or suffer penalties to the consumer for non-timely release of their lien.

Should you have a scenario arise like this one, please do not hesitate to contact your national escrow administration team for assistance and guidance. They can be reached 24/7 by e-mail at settlement@fnf.com and by telephone at 949.622.4425.

Imposter!

A seller with a very common name uses a stolen identification to sell property and abscond with the property owner's proceeds.

The year 2009 has definitely sparked some interesting stories. In three different issues we have published stories illustrating the desperate attempts buyers have made to purchase properties by counterfeit means. The January issue included an example of a Bonded Promissory Note and the story of the all cash buyer. In the August issue we shared the story of the buyer who kept bringing in fake checks for his earnest money and closing costs. You might remember the made up checks even had the same check number. Lastly, this issue provides you with another use for the Fraud Fighter machines which included tips and tricks on how you can detect fake or washed currency.

An all cash transaction was opened selling a piece of vacant land with a quick closing date. The seller came into our office to sign his closing documents. He was a Doctor from a neighboring state. He explained to his escrow officer he needed some cash quick which was the reason he was letting the property go for such a low sales price. The escrow officer reviewed his identification which included placing it under the UV light in her Fraud Fighter machine. The hidden image appeared just as described in her ID checking guide. Everything seemed to check out and the escrow officer closed and disbursed her file.

A few months later, a claim was filed by an attorney representing the true property owner. The attorney stated the person who represented himself as the seller was an imposter. How could this have happened? The escrow officer herself identified the seller. Turns out the seller had a very common last name, Lee. The individual who represented himself as the seller used a valid, but stolen driver's license. The license was for someone with exactly the same name as the true property owner and the physical description was also very similar.

Hindsight is always 20/20. Knowing what she knows now – surely the escrow officer would have scrutinized the identification even closer comparing the picture and signature, as well as the physical description, but was there something more she could have done? Tech Memo 45-2005 entitled Opening Letter for Fraud Alert was issued to assist in catching this type of fraud before it is too late. In a nut shell, it states when a transaction is opened a letter should be sent to the seller or borrower at the same mailing address for the tax bill if different than the address provided at the opening of escrow. A sample letter is provided in the tech memo.

Moral of the Story
There is no guarantee we can catch all forgeries. This particular gentleman was very brazen. He came into our office, met face-to-face with the escrow officer and even had a believable story. Regardless, do not lose sight of the Company's policies and procedures. They are usually the result of a claim or situation just like this one.

Counterfeit Cash

As a company we rarely accept cash into our files, but we are seeing an increase in this practice – especially in small dollar amounts. We are also participating in auctions wherein potential buyers might bring cash to the auction which we must accept to keep the business. So with this increasingly common practice, we all need to be more aware of new tricks fraudsters at large are attempting to perpetrate.

The nation has seen this increase occurring not just in small cash amounts, but has also witnessed a strong increase in the amount of cashier's checks and traveler's checks as well. Here is a look at a new scheme the U.S. Department of Homeland Security has put out as a warning:

Counterfeit $100 bills have been circulating now at a higher rate across the country. U.S Secret Service Resident Agent in Charge of the Office in Albuquerque, Richard Ferretti, said "it is apparent the suspects are bleaching off the picture and the number "5" on each $5 bill and replacing them with the number 100 and the $100 bill's picture." If you are just using a marking pen to check the bills you will be losing money. The suspects are using a real $5 bill and changing it into a $100. So the marking pen shows it is good because it is a good bill, but of course, it is not a $100, it is a $5 bill.

How to tell a counterfeit $100 bill

• The only difference you can see quickly is that the ink smears off. The ink is smearing off because the suspects are using a desktop publishing printer with the inexpensive toner, rather than the ink from the Intaglio printing process the bills undergo at federal printing plants.
• Color-shifting ink (ink which appears to change color when the bill is tilted) was added to $100 bills in 1996, $5 and lower bills do not yet have this feature.
• The fibers (embedded) in the paper are different between the $5 and the $100. If you hold up the $5 bill to an ultraviolet light, the fibers are blue. If you hold up the $100 bill to the ultraviolet light, the fibers are pink or red.

The Secret Service believes every company that handles cash should invest in a portable ultraviolet light for their employees. The Secret Service also has noted the most common counterfeited bill is the $20. Below are some pictures of what you would be able to see when looking at a counterfeit bill under a UV light.

Remember! Accepting cash may require the filing of IRS form 8300. For a detailed explanation of the reporting requirements view our Web-based training module on Cash Reporting or refer to Tech Memo 34E. If the local policy is to not accept cash for any transaction, then continue to adhere to that policy.