Operation Stolen Dreams

By Lisa A. Tyler
National Escrow Administrator

From industry insiders to straw buyers, nearly 500 people have been arrested in a nationwide mortgage fraud takedown that reflected the coordinated efforts of law enforcement to address the growing problem of crime in the real estate industry. One of the largest takedowns occurred in the Las Vegas area, in part due to the heroic actions of Michael Mitchell, a sales representative with Fidelity. Michael assisted the FBI in its investigation that led to indictments of 123 people in the Las Vegas area alone. Read more about this story in the article entitled "Operation Stolen Dreams."

Reading stories in Fraud Insights sometimes makes our readers uncomfortable – maybe even cringe at the thought of some of the acts our own employees have committed, much less our customers. The story entitled "Forging Documents Is Completely Unacceptable" is one of those stories. The reader can't help but cringe when understanding the implications of a forgery in a refinance transaction.

Last but not least, read the story entitled "Heir To An Inheritance" to find out how a cunning and thorough escrow assistant uncovered a forgery by the son of the deceased owner with the same name. Her story serves as a reminder of the importance of checking the date of birth on the identification presented at signing.

Two heroic associates were rewarded a cool grand in recognition of their insightful approach to their jobs and their diligence in stopping fraud on all levels. The money should come in handy with the holidays fast approaching. Even better, this can be you! Submit your heroic stories to us at settlement@fnf.com. If the story is published in a future edition of Fraud Insights, you too will be rewarded $1,000.

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articles

Operation Stolen Dreams

A Las Vegas sales representative comes to the aid of one of his customers and winds up providing valuable evidence to the FBI. The evidence presented by the sales representative assisted the FBI in its investigation and indictment of a ring of fraudsters as part of a nationwide mortgage fraud takedown.

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Michael Mitchell
Fidelity National Title
Las Vegas

Michael Mitchell, a sales representative for Fidelity's Las Vegas operation, stopped by one of his client's real estate offices. The broker at that office told him that one of the properties he had just listed was an REO (bank-owned) property that should have been vacant but, upon inspection, the broker discovered a tenant living in the property. The broker couldn't understand how this could have happened – since the bank had foreclosed and the owner had been evicted.

In an effort to help his customer, Michael accessed the county records online and discovered that an entity "Reification Group, LLC" was shown as the owner of record. The deed was executed by the grantee, not the grantor, and the notary on the deed had a universal notary stamp called a "National Notary Public of Commerce." Michael performed an entity name search on the Secretary of State's Website and found that the license for that entity had been revoked. It showed the managing member as Karen Tappert – a name that rang a bell with Michael.

He went onto the Intranet under the Compliance & Security portal and looked up Tappert's name. There he read previously issued underwriting bulletins and found she was listed individually, along with Reification Group, which our Family of Companies refuses to do business with.

Utilizing our Fidelity Passport Online System (that includes a search utility for property address/owner names), Michael identified several other properties that had also been deeded to Reification Group and were all using various UPS® Mail Stores for the return addresses on the deeds. Michael then worked with the customer service department to produce an absentee owner report with matches to the first few mailing addresses on Reification Group. They found several other entities associated to Tappert, such as Saraland Investments, Pacific Federal Title Associates, Amari Group and Deschutes River Properties. Those new entity names gave additional mail drops and, after a few mailing address and owner name searches, Michael identified 28 Las Vegas properties involved with this ring of fraudsters. About a dozen of these were either notarized by or had deeds executed by Tappert.

Michael expanded his search and, ultimately, identified almost 100 properties from six states that all linked back, in some manner, to Tappert and the various entities she was involved with. All of them were using the same half dozen or so mail drop addresses in Las Vegas.

Michael alerted the title plant manager of his findings so he could tag the addresses of the properties as having fraudulent documents of record. Within hours Michael received an e-mail from the title manager stating the Company had just avoided a loss on one of those properties! Michael took the situation another step further and notified the Clark County Recorder's office, which issued an "internal alert" to watch for those names as potentially fraudulent. Michael didn't stop there.

He turned over his meticulous list of properties and ownership records to a local FBI agent. Turned out – Tappert and the entities she was involved with were part of an ongoing nationwide investigation called "Operation Stolen Dreams." As a result of the investigation, which began in March 2010, 123 defendants have been charged, convicted or sentenced in Las Vegas. Those defendants, including Tappert, are accused of engaging in hundreds of fraudulent transactions with straw buyers (someone whose name is used by someone else to buy a house) and causing losses to lenders of more than $246 million.

FBI Special Agent Roy Dampier sent the following e-mail message of thanks to Michael:

  "I want you to know that your assistance with our investigation of Karen Tappert has been very helpful. All the material you have provided has been useful, but the binder you gave me recently will be an asset throughout the rest of our investigation. The Assistant United States Attorney working on this case, Michael Chu, commented that this binder is one of our most useful pieces of evidence, and it was very well put together and organized. Anything else you can provide will be greatly appreciated. Thanks again for all your hard work."

For his incredible insight and diligence, Michael has been rewarded a $1,000 on behalf of the Company along with a letter of recognition.

Months after these fraudsters were charged, it was discovered many of the ownership records still reflected "Saraland Investments" and other entity names created by the fraudsters. When the banks eventually sell the properties, the ownership records will not reflect the true owners. Now that the individuals, entities and properties have been identified, the title industry has begun the task of clearing the titles to those properties. This is a challenge. How does the title insurance industry somehow recognize a fraudulent deed in the chain of title? We must do one of the three following things: (1) ignore it and record a deed from the bank to the new owner; (2) record a corrective deed from the bank; or (3) record some affidavit of erroneous recording in order to perfect the transfer of ownership to the new buyer.

In addition, title insurers have to be sensitive to the rights of parties in possession where the fraudsters have leased the property to tenants who have rights to the property. If a tenant is occupying the property and we close and insure the transaction, the new buyer could face legal action regarding the removal of the tenant, which is likely covered under his/her owner's policy.

 

Forging Documents Is Completely Unacceptable

Recently one of our employees forged the borrower's signature on a credit line closure letter. The transaction was a refinance and the forgery was discovered after the file was closed. The employee resigned immediately but the damage was already done.

The transaction was a refinance and the title report revealed a first and second lien of record. The second was a line of credit. It was unclear at the beginning of the transaction whether the credit line was going to be paid off and closed, or if the second was going to subordinate to the new loan. The office waited to order the payoff statement and put a freeze on the account. A few weeks later the loan processor called the office asking for copies of the payoff demands for the first and second loans. The settlement agent told the assistant to order the payoff on the second loan ASAP.

The second lender was Merrill Lynch Credit Corporation. In response to the payoff request it sent a "Request to Close Account" form. The instructions stated it would not issue a payoff demand until it was in receipt of this form signed by the borrower instructing Merrill Lynch to close the line of credit. The settlement agent continued to pressure the assistant for the payoff on the second. Knowing it could take a while to get the borrower in to sign the Request To Close Account, the assistant buckled under the pressure and forged the borrower's signature on the Request. The forged form was faxed over to Merrill Lynch, which put a freeze on the account and, pending receipt of the payment, began processing the account closure.

Once our office received the payoff letter from Merrill Lynch, our office forwarded it on to the loan processor. It turns out the borrower also worked for Merrill Lynch and had already told her loan officer she did not intend to pay off and close out her credit line. She had an excellent interest rate and terms on the line of credit. She had already put in a request for subordination and the paperwork was already being processed. No one told our office this was her intent.

A few weeks later the loan package arrived, as did the subordination paperwork. The settlement agent worked up the file, conducted the signing and gave the file to the assistant awaiting the expiration of the rescission period. The lender funded, title recorded and the assistant disbursed the file. Shortly after closing, the borrower went to draw some funds from her line of credit. She was shocked to discover her line of credit had been closed. Knowing she did not close the line of credit she asked who did. Merrill Lynch told her they had a Request To Close Account form, signed by her and remitted by Chicago Title. She asked them to send her a copy of the signed form and, upon receipt of the form, could clearly see she had not signed the Request. The borrower contacted the manager at Chicago Title and demanded an explanation. The manager immediately investigated the accusation only to discover it was true! After a few questions, the assistant finally admitted she had signed the form and not the actual borrower. She said she had thought she was under the gun and the settlement agent pressured her to get the payoff demand ASAP. She made a very bad decision which came with a very high price, her job. Before she left that evening, the assistant handed in her resignation.

The borrower demanded action from our Company. She wanted her line of credit re-opened. Merrill Lynch did re-open the line but not at the same terms as before. The borrower sent e-mails demanding an explanation. She wanted to know what "our plans were to address the forgery and any future repercussions because of the episode." She stated: "This was not just an inconvenience, nor some mix up, it was a crime." Although she was very concerned about possible ramifications this might have on her credit, she was even more concerned about the safety of her identity. If our employee would forge her name, then what else might she do? This is of especial concern since the employee has access to all of the borrower's personal information.

We did advise the borrower that the assistant no longer works for us and offered her Credit Check Basic® from Experian® so she can monitor her credit for the next year. The damage has been done, and now the borrower has a very bad impression of our Company. Forging someone's name to a form or document is never acceptable, regardless of the circumstances or how innocent you might think it is. The same goes for cutting and pasting. If a document requires the buyer or seller's authorization, then it must be signed by the buyer or seller.

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Heir To An Inheritance

An ordinary document review by an extraordinary escrow assistant uncovered a forgery in what would have otherwise cost the heirs to an estate thousands of dollars.

Escrow closed what appeared to be a typical sale transaction of free and clear property. The seller presented valid state-issued ID bearing the same name as the vested fee title owner. Stacey Smith, escrow assistant for Fidelity National Title's operation in Mid-Willamette Valley, Ore., reviewed the file after the document signing was completed by the seller and the disbursements were made. Stacey noticed the vesting deed was dated and recorded in 1995, and the supposed seller's year of birth on his ID was 1984. That would mean he was only 11 years old when he purchased the property!

She also noticed the seller's ID included "Jr." even though the vesting deed did not designate "Jr." or "Sr." Stacey immediately brought this information to the escrow officer's attention. The escrow officer was Marcy Taisey, and her quick inquiry resulted in a determination that the "seller" was actually the son of the vested owner who is deceased. There was no death certificate of public record nor was a probate pending. The escrow officer promptly ordered a stop payment on the proceeds check issued to the seller at closing.

Then, the escrow officer went to work tracking down the heirs of the deceased owner. She found four in all, and ultimately, obtained the appropriate signatures on the closing documents. Fidelity would have faced potential, substantial losses under the owner's and loan policies issued if it wasn't for Stacey's careful post-closing review of the file and prompt action.

Marcy had this to say about Stacey's actions: "This scenario served as a reminder to me to be diligent in review and comparison of information provided in this heightened and desperate economy. I feel extremely blessed to be associated with the caliber of co-workers in our Mid-Willamette operation."

Moral of the Story:
It would have been easy for Stacey to overlook or turn a blind eye to the forgery by one of the heirs. Instead, she alerted the escrow officer of her findings and assisted in locating the heirs and re-closing the transaction legally benefiting of all principals! Our owner's policy would have protected the new owners from an adverse legal action from the heirs. Stacey saved the Company from a potential $40,000 claim, the total amount of the policy. As a result she has received a $1,000 reward and a letter of recognition from the Company.

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