Sandbagging

In June 2008, Jefferson County Wis. was hit with severe flooding. Since many homes were left damaged beyond repair, the Flood Mitigation Assistance Program provided funding to purchase damaged homes from the homeowners. Unfortunately, this story is an example of how one person tried to defraud Jefferson County to avoid foreclosure.

Fidelity Land Title, Ltd., a title agent for Chicago Title Insurance Company, contracted with the acquisition company representing Jefferson County in purchasing the damaged homes. Fidelity Land Title's contract included preparing title commitments on each property being purchased by the county.

One of the commitments prepared by Title Officer Julie Barnhart in August 2010, was on a property owned by a local builder. The chain of title revealed the previous owner was the builder's mother, a local real estate agent. There were several judgments against this owner, the mortgage was in default, the lender had begun foreclosure proceedings and a judgment against the mother was still attached to the property.

In March 2011, a Jefferson County representative asked Fidelity Land Title to bring the title commitment up-to-date. Julie prepared the update. The title search revealed the property had transferred on November 10, 2010. Another title company had closed and insured the transaction. Satisfactions had been recorded for the mortgage and most of the judgments. Only two judgments remained; one against the son and the other against the mother.

The updated title report was sent to the Emergency Management Department at Jefferson County. Shortly thereafter, Julie received a phone call from the builder's mother who confirmed the property was sold in November 2010. The mother went on to explain the judgments against them were false and the other title company had accepted affidavits in order to issue their title policy. Since the mother and builder had common names, Julie did not question the other title company's actions. What Julie did question was why the mother was calling, when the property was already sold to someone else.

That same day a Jefferson County representative called Julie. The county representative apologized for the owner who should not have called her directly. Then the representative asked Julie if the owner told her the whole story. Julie was still confused as to why the county representative was referring to the mother as the owner.

Jefferson County was in receipt of an unrecorded land contract. The vendor was the new owner who purchased the property in November 2010. The vendee was the previous owner – the builder – and the land contract was drawn up and notarized by the builder's mother, a local real estate agent. Guess what date the land contract was executed? November 10, 2010 – the same day the buyer sold the property.

Julie asked for a copy of the land contract for review. She started to put all the pieces of the puzzle together. It turns out the builder had a mortgage on the subject property in the amount of $187,600. The lender had begun foreclosure proceedings and the deal with Jefferson County wasn't proceeding quickly enough. The builder was going to lose the property to foreclosure so he convinced an investor to purchase the property from him through a short sale. The investor paid $100,000 for the property when he purchased it on November 10, 2010.

The same day the investor sold the property back to the builder for $232,000 under an unrecorded land contract. The builder intended to sell the property to Jefferson County under the Flood Mitigation Assistance Program for $244,000. Out of the proceeds the builder intended to pay the investor $177,000. Apparently the county was still willing to purchase the property but the title had to be back in the name of the builder. The representative at the county had plans to record the land contract, a deed in fulfillment and then a Deed from the builder to the county.

Julie decided to review the file with Chicago Title Insurance Company Underwriting Counsel. Together they agreed it would be better to allow the other title company to close and insure the sale from the builder to Jefferson County. In the meantime, a representative from the other title company called Julie, at the urging of the builder's mom, to see if she needed anything from them in order to close. Julie explained they had decided not to insure and instead referred the deal to the other title company, as they insured the most recent sale. Julie did mention they should ask for a copy of the land contract.

Next, Julie called her customer at the county to let him know she would not be able to insure this deal. A couple of days later, she received another phone call from the other title company thanking her for telling them about the unrecorded land contract. The builder's mom, the real estate agent, had called them to ask about insuring the deal with the county. They asked the real estate agent about the land contract. There was a long pause and then the real estate agent replied by saying, "What land contract?"

Clearly there was some funny business going on. The builder, who sold the property through a short sale, stood to gain from the sale to the county by re-acquiring the property through a land contract on the same day he sold the property. Additionally, there were still some outstanding judgments which needed to be cleared up. Instead of putting Fidelity Land Title and Chicago Title at risk Julie decided to pass on this deal. For her efforts she has been rewarded $1,000.

Moral Of The Story
Short sales are supposed to assist property owners who sell their homes in a down real estate market, when they owe more than the current market value. The seller should be working hard to get the best price they can. A short sale is not supposed to be about getting the buyer the best deal possible. In this instance it appears the borrower might actually gain from the sale to the county – funds which probably should be applied to the shortage on his payoff. And, depending upon the terms of the short sale agreement, the short pay lender might have the right to re-attach their lien based on the fraud perpetrated by the parties to the transaction.

UV Detectors

UVeritech™ has provided an updated list describing the UV security features visible when using a "Fraud Fighter™" UV detector. Many of our offices use the Fraud Fighter. For those of you who don't know what the machine does, it helps to detect counterfeit identification.

Below are samples of what the UV security features look like on the driver licenses issued in the states of Washington, Wisconsin and Alabama:

All but five states in the country issue identifications which contain a UV security feature. The five states without a UV security feature on their identification cards are Arkansas, Maine, North Carolina, North Dakota and Tennessee. The list below describes the security features for all other states.

If you do not have a Fraud Fighter in your office, you do not have the ability to check the ID presented. The Company does have a discounted rate available through UVeritech. Call them at 800.883.8822 or visit their Website at www.fraudfighter.com to order your Fraud Fighter. Be sure to let them know you are part of the FNF Family of Companies.