Clearing out dormant funds can be quite challenging. In most instances, the parties to the escrow have not made contact with us for some time. To complicate things further, at times, there is minimal information in the file to indicate why the funds remain on deposit or who they belong to. The Disbursement Specialist must familiarize oneself with the details in the file, then track down the parties and obtain written instructions to disburse the funds to the rightful owner.

Kathy Barriball, Disbursement Specialist, was assigned a file wherein the funds had been on deposit for several years. Kathy began working on the file in 2019. The funds represented a security deposit for the completion of improvements related to a subdivision. The agreement was between the developer and the homeowners' association (HOA).

Based on the information available, Kathy determined the funds should be released back to the developer. The public report had been finalized and filed many years earlier indicating the improvements had been completed. Kathy tracked down the authorized signer for the developer and the management company for the HOA.

The developer signed the mutual release instruction authorizing the return of the funds to his company. The HOA's management company said they would present the request to sign the mutual release instruction to their board of directors at their next meeting, which was scheduled for two months later. Kathy notified the developer.

Kathy marked her calendar accordingly and followed up with the management company to ensure the mutual release instruction was on the agenda for their next meeting. The meeting ended up being delayed by two weeks, but the management company confirmed the topic was on the agenda. She contacted the management company the day after the meeting to follow–up. The board elected to forward the documents to legal counsel to review.

Kathy followed up at the end of the month only to receive a response from the HOA's attorney. The board did not feel they had sufficient information to release the funds back to the developer.

However, the HOA was more than happy to bring up another dispute they had with the developer for construction defects and underfunding of the HOA's reserves. Kathy pointed to the written agreement stating it did not provide security to them for these items — it only provided for the completion of specific improvements to the subdivision. The HOA's attorney asked Kathy to notify the developer the HOA was requesting a portion of the funds for construction defects and underfunding of the HOA's reserves.

Kathy responded by asking the HOA to remit a demand pursuant to the security agreement. The HOA simply demanded $54,000 but provided no documentation to support the demand. She passed their request on to the developer; they reached out directly to the HOA and negotiated a settlement.

After months of negotiation, an agreement had been reached. The HOA signed mutual instructions to accept $12,000 as settlement of their grievance and release the balance of $110,915 to the developer. The developer provided a post office box to mail the check to. He asked for an estimated time of arrival so he could plan his next trip to the post office; due to COVID–19, he was not making regular trips to collect his mail.

Kathy was preparing the checks when she received an email. The developer asked her to wire the funds and reply as soon as possible so he could email the wire instructions. The email read:

Kathy immediately noticed many discrepancies:

• John always opened his messages with "Hi," and had the best spelling and grammar.
• Kathy exchanged emails just one day earlier where John indicated he goes to the post office once a week. That contradicted the new message.
• Based on Kathy's email with him from the previous day, she knew the post office was open.
• John always closed his emails with, "… John." This email ended with, "Thank you," with a period and his full name.

It did not add up at all.

Kathy did not reply to the email. Instead, she called John at a known, trusted number. She asked if he had just sent her an email. He had not. He stated he suspected his secretary's computer had been hacked just last week. Kathy reported the incident to her manager, National Escrow Administration, and Cyber and Wire Fraud Strategies, and sent the developer a check.

Kathy could have easily fell for this common crime and sent $110,915 to the fraudster's account; but she did not. The Disbursement Specialists with DSG are required to maintain 10 hours of settlement training, along with specialized training provided by DSG's team trainers.

Kathy's training kicked into high gear when she noticed red flag warnings contained in the email. She adhered to the Company policies and procedures and is being rewarded $1,500. Great job!

Article provided by contributing author:
Diana Hoffman, Corporate Escrow Administrator
Fidelity National Title Group
National Escrow Administration