Over the years there have been approximately a zillion articles and memos written about preventing forgery and fraud losses within the Title Insurance industry. In light of this long revered tradition, here is another one. The forgery/fraud “flags” are pretty much the same as they always have been:
1. The property is vacant land or non-owner occupied. This isn’t always true. A recent forgery involved an owner occupied residence that was free and clear and only purchased three years ago.
2. The property is free and clear. All the more proceeds to abscond with.
3. Title was obtained by an uninsured deed, frequently a gift. The bad guys know we question such deeds. It has happened that forged deeds have recorded with all the title company indicators (company name, order number, transfer tax) present on the document. If there is no concurrent institutional loan, you might want to check with the named title company to see if they did, in fact, insure it, especially if it was a non-8a.m. recording. These days, we are seeing fake Trustee’s Deeds (where the sale has actually not taken place yet) and fake deeds from REO Banks. These documents will frequently have a fake title company heading, fake title order number and fake escrow number which give the document a look of legitimacy.
4. Signatures on the new deed do not match a previous institutional deed of trust. Sometimes the irregular signature is on the old deed of trust. Lenders are sometimes fond of insisting that the borrowers signature be capable of being read, so they insist that the borrower write out their name instead of using their normal (illegible) signature. Don’t bet on it though. When you hear “clip clop clip clop”, think “Horse” not “Zebra”.
5. There are recent reconveyances without recent financing. It’s pretty unusual for somebody to pay off their loan without getting a new one. Check the reconveyances to see if they make sense. The bad guys know how title companies work. Most of the time, reconveyances are not printed. It is also possible that the reconveyance is genuine, but recorded in error. Don’t be shy about contacting a bank to see if it has actually been paid.
6. Escrow is being conducted by a new customer. If the escrow holds themselves out to be an independent licensee, you can check the corporations commissioner website for licensing.
7. The deal was brought in by a new customer/broker. There ain’t no such thing as a free lunch. With all the effort we put into sales and marketing, it is fairly unlikely that a good deal will simply fall into your lap by sheer accident.
8. There is a 3rd party assignment of funds. Saves the bad guys from having to negotiate a check made out to somebody that’s unaware of it. This is especially effective for the bad guys if the assignment is to a company not an individual. Talk to your company counsel to see if such assignments are a good idea under any circumstances.
9. The borrower (not the lender) wants personal bills, credit cards and other unsecured items paid through escrow. For example: faithful daughter refinances daddy’s home using forged power of attorney. She has her substantial credit card debts paid through escrow. Substantial enough that funds have to be brought in to close a cash-out refinance. Daddy is not amused and daughter is in jail. Title company pays.
10. Proceeds are being wired offshore. Sometimes, the bad guys like us to do their money laundering as a part of the transaction. Saves them some trouble.
11. There is a “broker” handling the transaction but no commission is being paid. Shockingly, some folks will claim to be a Broker when they are not. The “broker” may not be one. Just a front man for the crook. You can check the DRE website for licensing.
12. There are substantial buyers’ credits or sums paid outside of closing. Saves the bad guy from having to front any money to accomplish the crime, and maximizes ill-gotten gains.
13. No documents are executed in the escrow office. While it is possible that the bad guys would forge ID for the seller/borrower, it’s a lot easier to forge/steal a notary stamp. None of the above is an absolute pointer to a fraudulent transaction, but certainly do indicate that caution needs to be being taken. If you think you smell a rat, don’t be shy, talk to management.
Bottomline? We are professional paranoids. We are supposed to be. There once was a bank robber named Willie Hutton. When asked why he robbed banks, he said “That’s where the money is”. The amount of money available to be stolen in real estate will continue to attract crime. We are not policemen, but we certainly must remain attentive to situations where we, the title company, may end up being the victim.
About Colleen K. Cotter - mySanDiegoAgent Realty Group
The mySanDiegoAgent Realty Group provides professional real estate consultation in the areas of residential, income properties, luxury rentals, short sales, first time home Buyers, real estate for senior citizens, real estate issues related to divorce, military and corporate relocation. We are experts in downtown San Diego and coastal properties especially Coronado, Encinitas and Point Loma, downtown lofts and condos, urban planning and sports team seasonal placements.
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