Bryan Ryan, Notary Public
An astute title officer detects two forged reconveyances by tracking down the notary and discovering the notary's commission had expired a year before the documents were executed.
Roy Boyles, a title officer for Lawyers Title in Burbank, Calif., opened a title-only order for a sale transaction in the amount of $399,000. The initial title report reflected two unpaid loans secured by purchase money deeds of trust from 2007. The first deed of trust was in the amount of $475,000. The second was in the amount of $89,250.
A little more than a month later, the independent escrow agent handling the settlement called for an updated report because the seller paid off the two loans secured by the subject property. Roy brought the title to-date to prepare the new report and discovered two recorded reconveyances. Roy pulled copies of the documents and discovered they were not executed by the correct entity. They were executed by California First Capital Lenders, even though the beneficiary of both deeds of trust was Bank of America.
Roy looked closely at the documents and discovered the reconveyances were signed and acknowledged on the same date by the same person in front of the same notary. The reconveyances were also recorded concurrently on the same date.
Roy contacted the independent escrow agent to let him know he could not remove the outstanding deeds of trust from his report. The escrow agent he spoke to was upset he was questioning the validity of the recorded reconveyances. Roy asked for proof of another transaction that paid the loans, but received no response. He asked for a statement of information from the seller giving authorization to contact Bank of America's payoff department to confirm the loans were indeed paid. The escrow officer never provided the seller's authorization.
The notary stamp on both documents indicated B. Ryan was the notary and he signed as "Bryan Ryan, Notary Public." Roy performed a notary database search and found many B. Ryans. He matched the commission number for the B. Ryan on the reconveyances. He found out B. Ryan worked for Tustin Community Bank, not Bank of America. Using the Internet he found the bank's telephone number and gave B. Ryan a call. When B. Ryan answered the phone, Roy was surprised – B. Ryan was actually "Bev Ryan!"
Bev said her notary expired January 19, 2009, but the stamp on the documents reflected an expiration date of January 10, 2011. After realizing her stamp was being used to commit fraud, Bev explained she usually attempts to mutilate her old stamp by removing the rubber seal after renewing her commission and obtaining a new stamp, but had failed to do so this time.
She hung up with Roy and filed a police report. Roy kept in contact with Bev and in their last conversation, she said she had been contacted by several other title companies with the same question about her notary stamp on false reconveyances. She said there must be quite a few false stamps with her name on them.
Roy notified the escrow agent. The escrow agent said he would contact the seller. The agent indicated in the telephone conversation that now this transaction was going to have to become a short sale! Roy also notified Bank of America's Real Estate Fraud Unit about the two recorded reconveyances, in case the owner attempted this type of fraud at another title company.
As a token of appreciation to Roy for his instinctive reaction to the reconveyances and for his extraordinary detective skills, the Company has given him a $1,000 reward and letter of recognition.
Moral of the Story
If the transaction had closed, the Company would have issued an owner's policy to the new buyer insuring them free and clear, marketable title to the property, as well as a loan policy to their lender insuring them a first lien position. After closing, the seller probably would have stopped making payments to the lienholders. The lienholders would probably have started foreclosure for non-payment of their loans, only to find out their liens had been released.
Foreclosure notices would have been sent to the property. The buyers would have contacted the title insurance company once they started receiving the notices – usually shocked and confused as to why they were receiving foreclosure notices from different lenders when they were not behind on their payments. Since the Company had insured their interest, the Company would have had to pay the lienholders to keep them from asserting their lien rights and then chase after the former owner/seller and hope they had assets the Company could lien until reimbursement could be made for the loss.
Recently, the Company has noticed an increase in claims resulting from forged reconveyances of deeds of trust or releases of mortgages. As a result the following guidelines have been put in place for title officers.
- It is necessary to have a chain of title that at least indicates when the most recent loan was satisfied or released. Any recent release of any loan on the property must be investigated.
- If a loan of record has been cancelled within the prior 12 months without a corresponding sale or refinance, title must contact the lender for confirmation that the mortgage has been released. A "corresponding sale or refinance" would involve a conveyance of the land for value with an accompanying deed of trust/mortgage or a refinance deed of trust/mortgage. In either event, the new deed of trust/mortgage must be in an amount sufficient to satisfy the released deed of trust/mortgage.
- If a property is free and clear of any loan and the current owner has owned it for less than ten years, the transaction has to be assessed by an underwriter prior to insuring.
- If the seller, buyer or third party presents a release for an uncancelled loan, the title officer must contact the lender for confirmation that the loan has been released. The title officer must use independent means to obtain the lender's telephone number. The title officer cannot rely upon a number supplied by the parties to the transaction.