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Demand That Their Bank Show Proof of a Promissory Note - PDF

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									                                                                                                           volume 5 issue 4            April 2010



Make ‘em Find the Note!
                                                                                    Inside This Issue
By Lisa A. Tyler
National Escrow Administrator                                                       Make ‘em Find the Note!
This year we’ve seen a number of billboards, flyers and Internet advertisements     Our offices are being inundated with notices from
targeting delinquent borrowers by law firms willing to help them force their        delinquent borrowers, obviously drafted by attorneys,
lenders to completely forgive the balance of the mortgage. The law firms            demanding the lender and/or title Company (as trustee
are using RESPA and TILA Rules as the backbone of their action to force the         for the lender) produce the original promissory note. The
lenders to forgive the debt if the lenders are unable to produce the original       notice stipulates the borrower will pay the loan in full upon
promissory note!                                                                    presentment of the original promissory note, but if the
                                                                                    lender can not produce the note, the debt is forgiven!
The process begins by the attorney writing a letter to the mortgage servicer,
beneficiary under the deed of the trust/mortgage and the trustee under
                                                                                    Fix Up Fraud
the deed of trust. In this letter the attorney demands the production of
more than 100 excessively broad and burdensome documents, including the             Buyers are taking full advantage of a down market by
original executed promissory note. Some of the other documents included in          purchasing homes at low, low prices after foreclosure or
the demand are assignments and servicing agreements executed between                through short sales. The problem is most of the homes
the lenders and investors throughout the life of the loan. Read about this          have either been neglected or damaged and no longer
latest scheme in “Make ‘em Find the Note!”                                          qualify for government financing, such as an FHA Loan.
                                                                                    As a result, some real estate agents are requiring the
“Fix-Up Fraud” is a short story about ill-informed buyers wanting to capitalize     buyer to pay for repairs up-front.
on a down market by purchasing foreclosed and short sale properties.
In some markets, listing agents are insisting the buyer fix these homes             You Can’t Teach Instinct
in advance of purchase to ensure the property qualifies for government
financing. In many cases, however, the buyer loses the money spent fixing           We’ve seen a lot of counterfeit cashier’s checks showing
up the property when the REO seller either can’t perform under the contract         up in our offices drawn from foreign banks, but now we
or the short sale negotiator refuses the buyer’s offer. We have received            have counterfeit checks being deposited from domestic
reports of buyers losing $8,500 and more!                                           banks as well. One of our escrow officers just detected
                                                                                    a $525,000 counterfeit cashier’s check supposedly drawn
We reported in the December 2009 edition of Fraud Insights, through                 from a Citibank account. It was her gut instinct that told
a story entitled “Counterfeit Checks Plague Colorado,” about                        her to keep inquiring about the check and ultimately
two offices that had received counterfeit checks – one                              it was her gut instinct that saved the company from a
of which was drawn from a Canadian Bank. Since                                      potential $525,000 loss!
then we’ve seen the same type of counterfeit
checks show up at our offices in California,
New Mexico, Nevada, Oklahoma and
Texas. Armed with the knowledge
of what the Colorado operation
went through, our operations are
refusing the counterfeit items
and turning the crooks away.

In this month’s edition of Fraud
Insights be sure to read “You
Can’t Teach Instinct” to discover
how Tracy Spigener, an escrow
officer with Fidelity’s Las Vegas
operation, recently detected
a counterfeit check issued from
a domestic bank – Citibank™!




Fraud Insights is published                We want your story ideas,              Editor:
by Fidelity National Financial             photos and suggestions                 Lisa A. Tyler
                                           phone: 949.622.4425                    National Escrow Administrator
                                           e-mail: settlement@fnf.com
                                                                                             www.fnf.com                      settlement@
                                                                                             fnf.com
   Make ‘em Find the Note!
   Our offices are being inundated with notices from delinquent borrowers,               his/her duties and the new beneficiary is the attorney! After the Notice is
   obviously drafted by attorneys, demanding the lender and/or title                     drawn, the attorney draws a Substitution of Trustee and Full Reconveyance.
   company (as trustee for the lender) produce the original promissory                   The attorney signs the document as the new beneficiary releasing the
   note. The notice stipulates the borrower will pay the loan in full upon               deed of trust of record. The attorney then delivers the original signed and
   presentment of the original promissory note, but if the lender can                    notarized documents to a title company to record on his/her behalf as an
   not produce the note, the debt is forgiven!                                           accommodation. Of course, our title company branches have refused to
                                                                                         record the documents, which are usually delivered as a bundle of more
   Borrowers are contacting law firms across the nation that are advertising on          than 60 documents at a time, affecting 30 loans.
   billboards, the Internet and flyers on traffic signs with messages such as “Make
   ‘em Find the Note!” The law firm promises to help delinquent borrowers retain         Moral of the Story
   their home by sending legal notification to the trustee, beneficiary or mortgagee     If your office receives the notice, you have no obligation to pull the file.
   stating the borrower is in receipt of the notice of default or foreclosure notice     The burden of proof is on the lender, not the settlement agent.
   from the trustee or lender’s attorney. The notice states the borrower is an
   “acceptor” of the offer to foreclose or collect a payoff demand, but that they        According to 12 USC Section 2605 Servicing of Mortgage Loans and
   have the right to dictate terms under protections they have under the law.            Administration of Escrow Accounts there is no provision for cancellation
                                                                                         of the debt if the lender fails to provide the requested information within
   The borrower signs the notice stating they will put up the full amount to pay         the time frame allowed. Consequences for noncompliance with the
   off the debt with a Notary Public. Once the lender finds the original promissory      requirements is the reimbursement to the borrower for any damages
   note the Notary Public will be instructed to release the funds on hold.               they might have suffered and any additional damages, the court deems
                                                                                         necessary, but not to exceed $1,000 – certainly not cancellation of the
   Commentary from Lisa Tyler                                                            note balance!
   First of all, if the borrower had the money to pay off the loan,
   wouldn’t they be making their monthly payments in the first place?                    Find out more at HUD’s Web site:
   Secondly, why would they give hundreds of thousands of dollars to                     http://www.hud.gov/offices/hsg/ramh/res/resp2605.cfm
   a Notary Public to hold? Notary Publics typically have no net worth
   to back the funds if they are misappropriated.
                                                                                         Lenders found violating the rules, as set forth in TILA, are subject to
                                                                                         a fine not more than $5,000 or imprisoned not more than one year, or
   In addition to producing the original promissory note, the borrower, at the
                                                                                         both. Nowhere in the rule does it stipulate the borrower’s debt is then
   advice of his/her attorney, demands written clarification of various elements
                                                                                         automatically forgiven.
   related to the servicing of the account from its origination to the present date,
   which can include:
                                                                                         The details about the Truth in Lending Act (TILA) 15 USC 1601 can be
                                                                                         found by going to the following site:
   •   Sale                                   •    Transaction
                                                                                         http://www.fdic.gov/regulations/laws/rules/6500-200.html#fdic6500112
   •   Transfer                               •    Reversals
   •   Funding source                         •    Actions
                                                                                         Remember:
   •   Legal and beneficial ownership         •    Payments
                                                                                         If a law firm delivers documents to your office for an “accommodation”
   •   Charges                                •    Analyses
                                                                                         recording, remember we are not a recording service and we should not
   •   Credits                                •    Records and more
                                                                                         record documents that are not specifically related to a transaction we are
   •   Debits
                                                                                         closing and/or insuring.
   The notice from the homeowner makes the claim that they might have been
   victim of predatory lending and until the lender can produce an accounting of
   the servicing of the loan from its inception, it can not report any derogatory
   items against the borrower’s credit.

   The notice is sent to the beneficiary, servicer and trustee via certified mail and
   quotes the Real Estate Settlement Procedures Act (RESPA) Title 12 section 2605(e)
   and the Truth in Lending Act (TILA) 15 USC SECTION 1601. The notice requires
   that the lender respond within sixty days of its receipt of the notice from the
   borrower. Most importantly, the notice declares that if the lender fails to respond
   within the time frame allowed the loan will be completely set off or forgiven,
   because of the lender’s breach of responsibility.

   After the sixty day period lapses the attorney drafts additional documents, such
   as a Constructive Notice from the borrower, stating the original trustee has been
   relieved of his/her duties and substituting himself/herself as the new trustee.
   These additional documents further state the beneficiary has been relieved of



volume 5 issue 4          April 2010
 Fix Up Fraud                                                                         You Can’t Teach Instinct
 Buyers are taking full advantage of a down market by purchasing                      We’ve seen a lot of counterfeit cashier’s checks showing up in our
 homes at low, low prices after foreclosure or through short sales.                   offices drawn from foreign banks, but now we have counterfeit
 The problem is most of the homes have either been neglected or                       checks being deposited from domestic banks as well. One of our
 damaged and no longer qualify for government financing, such as                      escrow officers just detected a $525,000 counterfeit cashier’s
 an FHA Loan. As a result, some real estate agents are requiring the                  check supposedly drawn from a Citibank account. It was her
 buyer to pay for repairs up-front.                                                   gut instinct that told her to keep inquiring about the check and
                                                                                      ultimately it was her gut instinct that saved the Company from a
 In some markets the listing agents are advising potential buyers to pay for up-      potential $525,000 loss!
 front repairs to abandoned REO and short sale properties during the offer and
 closing process to ensure the property will qualify for government financing. As     Tracy Spigener opened a sale transaction on Thursday, March 4, 2010 for
 a result, the buyer pays for repairs to get the home ready for appraisal. In one     a selling agent she regularly did business with. When the selling agent
 recent transaction the buyer paid $8,500 up-front to have termite damage and         dropped off the purchase contract and earnest money with Tracy he
 other items repaired in anticipation of qualifying for FHA financing.                mentioned he was leery of the buyer because of the following:

 The property was an REO property owned by a bank – post foreclosure. During          1. The buyer bought the property sight unseen
 repair to the property a contract was presented and accepted by the bank.            2. The agent had only communicated with the buyer via e-mail and had
 An escrow was opened and a title report ordered that uncovered a defective              never actually visited the buyer
 trustee’s sale. The bank ultimately had to re-start the noticing period and the      3. The sale price for the property was $480,000, but the buyer sent a
 entire foreclosure process!                                                             cashier’s check in the amount of $525,000, representing the full
                                                                                         purchase price plus $45,000
 The REO bank had to pull out of the contract, since it could not deliver free        4. The buyer insisted on a quick close on or before March 31, 2010
 and clear marketable title to the buyer. The buyer received a full refund of her
 earnest money deposit, but not the $8,500 spent repairing the home.                  Taking all those facts into account, Tracy proceeded cautiously. She
                                                                                      reviewed the earnest money deposit, which was a cashier’s check drawn
 The buyer asked the title company what she could do to collect her up-front          from Citibank. She opened the escrow and deposited the earnest money
 cost of repairing a home she ultimately could not purchase. Our response was         with specific instructions to her Operational Accounting Center (OAC) to
 to consult an attorney, since she might have the ability to file a mechanics’ lien   notify her if and when the cashier’s check cleared the trust bank, which
 in order to recoup her costs.                                                        for Tracy’s office is with Bank of America™.

                                                                                      The very next day, Friday, the OAC saw a credit for the deposited item
                                                                                      using the online banking system and notified Tracy the item had cleared
                                                                                      the bank. Tracy was very suspicious, but called the selling agent to let
                                                                                      him know the check had cleared and provided a list of the information she
                                                                                      needed in preparation for the closing.

                                                                                      On Monday, the selling agent reluctantly called Tracy to let her know the
                                                                                      buyers were backing out of the transaction and were demanding a full
                                                                                      refund of the funds they had deposited. The sellers were furious, because
                                                                                      they took their house off the market for this pending sale and had already
                                                                                      packed the entire house in anticipation of the move. Tracy prepared the
                                                                                      cancellation instructions and sent them out.

                                                                                      She trusted her instincts about this buyer and placed a call to the
                                                                                      manager at Fidelity’s OAC. She asked him to obtain verification directly
                                                                                      from Citibank that the cashier’s check actually paid before she refunded
                                                                                      the money to the buyer.

                                                                                      The OAC manager was unsuccessful at obtaining the verification from
                                                                                      any branch of Citibank, who simply refused to provide any information
                                                                                      regarding the cashier’s check. The OAC manager escalated the matter to
                                                                                      FNF’s Banking Administration team. They were able to confirm through
                                                                                      their relationships with Citibank that the cashier’s check was indeed
                                                                                      a counterfeit!

                                                                                      [Continued on pg4]




www.fnf.com
[You Can’t Teach Instinct – Continued from pg3]

Tracy notified the selling and listing agents that the cashier’s check was
counterfeit and ended up cancelling her transaction. Tracy only had the right
to retain that portion of the funds that were considered “earnest money”
pending the execution of the cancellation instructions by buyer and seller. If
she had released the balance of the funds to the buyer, it would have been a
dollar-for-dollar escrow loss for her office. Tracy’s instincts were right and for
following those instincts she has been rewarded a $1,000 from the Company
as well as a letter of recognition.




                                                                                        For client distribution,
                                                                                     please attach business card.




                                                                                                                    www.fnf.com

								
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