banner
article3photo
byline
in this issue
article1
article2
article3
article4

 
Theresa Griswold, a commercial escrow officer for Chicago Title Company in Riverside, California, received an order from the NBU to close and insure a $450,000 refinance loan secured by commercial property in Chicopee, Massachusetts. Theresa only had three days to obtain the payoff statements for four outstanding liens reflected on the title commitment. The outstanding liens were shown on the commitment as follows:

1st mortgage in favor of ABC Mortgage
2nd mortgage in favor of Construction Lender
3rd mortgage in favor of ABC Mortgage
4th mortgage in favor of World Famous Lender

Theresa reached out to the managing member of DTS, LLC, the property owner and borrower on the new loan, to obtain payoff information. For some reason the managing member was reluctant to provide Theresa with contact information and loan numbers for each loan. After a few phone calls the borrower provided payoff information and stated the 1st and 3rd mortgages in favor of ABC Mortgage were paid in full.

Theresa thought the borrower and his broker who were claiming the mortgage was paid could be right, since the fourth mortgage had recorded on October 2, 2018, with the World Famous Lender and may have paid off the prior mortgages.

Theresa asked the borrower for proof both loans with ABC Mortgage were paid in full and then she ordered payoff statements, expecting the statements to reflect a zero balance for each. Instead she received two payoff statements from ABC Mortgage. The amount due from the two separate mortgages totaled $288,918.45.

The managing member of DTS, LLC emailed a copy of a recorded Discharge of Mortgage for the first Mortgage in favor of ABC Mortgage and a copy of a recorded Satisfaction of Mortgage for the third mortgage in favor of ABC Mortgage.

Theresa was suspicious and wondered why ABC Mortgage would issue a Discharge of Mortgage for one loan and a Satisfaction of Mortgage for the other. Theresa took another look at the discharge and discovered it released a mortgage recorded in book 18065, page 143. The mortgage shown in first position on the title commitment was recorded in book 18065, page 113. The page number was one digit off!

She emailed her contact at ABC Mortgage with a message that read:

  It has been brought to our attention that the two loans the above mentioned borrower had with your organization, relating to the subject property have already been paid off and discharged/recorded as satisfied. Please provide us with a ZERO demand letter for each of the two loans, together with a copy of a corrected Discharge of Mortgage for loan number 1845586.

All documents supporting this request, including borrower authorization are enclosed herewith. This loan is closing tomorrow, October 17, 2018, therefore I would appreciate it if you could provide the two letters as soon as possible together with confirmation the correction to the discharge will take place.

The response from ABC Mortgage read as follows:

  Theresa, your information is incorrect. The discharge you reference as an error actually refers to the following mortgage and is a correct discharge. Also your assertion that the loans have been satisfied are false. At this juncture we are referring this to outside counsel. Our previous payoff letter stands.

Theresa discovered the Discharge of Mortgage was unrelated to the current first loan of record; it released a take–out loan that was satisfied by the second mortgage. The recording numbers were quite similar because the release of the old mortgage and the new mortgage recorded in the same transaction.

The Satisfaction of Mortgage was not forged. It was, however, wrongly signed by a bank employee of ABC Mortgage, and it was recorded on October 2, 2018. However, it should have never been signed, nor recorded. The gentleman from ABC Mortgage stated the individual behind this incident was being fired.

Theresa reached out to the NBU manager in Los Angeles to let them know her findings; they immediately amended the title commitment to reflect the Satisfaction of Mortgage as erroneously recorded by the lender.

Theresa notified the new lender she had received the payoff statements from all four lenders and the aggregate payoff amount of $556,266.54, which exceeded the loan amount of $450,000. She asked how they would like to proceed, since the borrower would have had to bring in well over $130,000 to close the transaction. The transaction cancelled, and loan funds were returned to the new lender.

Theresa's expertise and experience protected the Company from a potential loss of $288,918.45 and for that the Company is grateful. In fact, so grateful, the Company has rewarded her $1,500 along with a letter of recognition for her diligent efforts to protect the Company from claims and losses.

 

 
 

MORAL OF THE STORY

A lien release (i.e. reconveyance, satisfaction, discharge) by itself should never be accepted as absolute proof of payoff in an insured transaction without further investigation. The supporting evidence the lien release is legitimate would be a zero demand or payoff statement reflecting the loan as paid in full.

 
 

 

 
  SHARE    
 
 
 
footer_line
 
stop fraud! share
 
footer_line
 
 
FNF Home