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Tales From the Closing Table: April 2016

Andrew Liput
Apr 29, 2016
The mortgage closing transaction is the single largest financial transaction in the lives of most consumers, and it is also the riskiest stage of the mortgage process for lenders

The mortgage closing transaction is the single largest financial transaction in the lives of most consumers, and it is also the riskiest stage of the mortgage process for lenders. While the vast majority of lawyers and notaries and title agents are experienced, ethical and diligent professionals, for a few the role of closing agent is too tempting a lure for selfish criminal intent. This column addresses the good, the bad and the ugly!

Top industry news …
►A belated congratulations is in order for John Hollenbeck, EVP at First American Title after being named new president of the American Land Title Association in January. John is a long-time industry fixture and a strong advocate for title underwriters and agents.  Good luck John!

The industry was rocked by the news that a jury awarded Mount Olympus Mortgage Company more than $25 million in a lawsuit alleging "corporate espionage" by former employee Benjamin Anderson and his new employer, Guaranteed Rate. Anderson and another former Mount Olympus originator who now works for Guaranteed Rate, Brian Decker, were accused of stealing loan files, borrower information and other proprietary data from the Irvine, Calif.-based lender. According to the lawsuit, "The purpose of the scheme was to divert hundreds of Mount Olympus loan customers to Guaranteed. The individual defendants misappropriated Mount Olympus confidential and proprietary information and directed its customers to Guaranteed." In a transient industry, where mortgage loan originators and their lender employers often have differing opinions on “who owns the client,” this is a serious wake-up call for big-time salespersons who are seeking to jump ship and take business along with them

In what may be some good news for mortgage lenders coming out of the Consumer Financial Protection Bureau (CFPB), mortgage complaints no longer lead the list of complaints at the Agency, having been supplanted by complaints about debt collectors. Debts not owed accounted for 38 percent of all debt complaints. Other issues raised were the frequency of calls—weekly, daily and even at places of employment, and lawsuits filed for debts that were not actually owed or where the statute of limitations had long passed.

You can’t make this stuff up!
This month, like every month, we feature some of the latest news about mortgage and closing fraud affecting our industry. These are real cases from around the country, only the names have been redacted to avoid threats of frivolous legal action …

►A former attorney with the Federal Deposit Insurance Corporation (FDIC) was sentenced to 12 months and one day in prison, followed by two years of supervised release, for defrauding Wells Fargo Bank in connection with the sham short sale of her home to her live-in boyfriend. She was also ordered to pay $288,497 in restitution and to forfeit the proceeds of her offense. The female barrister, who pleaded guilty to committing bank fraud, was a senior attorney at the FDIC until September 2014.

A Georgia lawyer and his title agent accomplice were indicted on charges of with conspiracy, wire fraud and related crimes in connection with the alleged theft of $20 million-plus from attorney escrow accounts and operating accounts of a law firm and title agency to pay personal expenses.

Five Virginia mortgage employees, one a VP with Sun Trust Mortgage were convicted by a federal jury on charges of conspiracy to commit wire fraud affecting a financial institution and various counts of wire fraud affecting a financial institution. According to court records and evidence at trial, the ringleader, then employed at Bank of America, was hired by SunTrust Mortgage tasked with opening an office in Annandale, Va. After hiring his wife, another former loan officer from Bank of America, and her brothers, to work as loan officers, the group falsified loan applications for borrowers and purchased fake tax documents to support the false loan applications.

A Florida title company is under fire, and has been named a defendant in a lawsuit for sending the wrong wiring instruction to a borrower when then wired the purchase proceeds not to the seller, but to a group of criminals. The instructions were sent to the title company by hackers who were behind the theft scheme. The title company is now being held to task over its data security measures.

A Brooklyn, N.Y. attorney who pleaded guilty to two felony conspiracy charges for her role in a massive mortgage fraud scheme has received a five-year suspension from practice. The lawyer pled guilty in 2011 to one count of conspiracy to commit wire fraud and one count of conspiracy to commit wire and bank fraud as one of 12 co-conspirators in a scheme that fraudulently obtained more than $9 million worth of residential properties by using fictitious identities and documents. It is unclear why the state bar took five years to finally take disciplinary action against her.

TRID surveys revealing
There have been interesting polls released lately regarding how TRID has impacted lenders, settlement agents and consumers.

A Secure Insight survey conducted of 1,342 mortgage industry executives nationwide regarding the impact of the new Closing Disclosure (CD) on their lending business found that the preparation and rollout went well, although over nearly two-thirds of respondents experienced “significant operational cost increases” impacting budgets, staffing needs and consumer rates and fees. More than 80 percent felt the new rules have had a “positive impact on the overall transparency and efficiency of the mortgage process.” A similar SSI poll of  9,560 attorneys, title agents, escrow officer and notaries nationwide found that most agents rated the impact of the new CD on business operations as “Negative” or Very Negative,” fueled mainly by increased operational costs. As to the new form’s impact on consumers, from the agents’ point of view, it has not been as positive as perhaps the CFPB had hoped. Nearly 60 percent of those polled felt that the new disclosure has not helped with efficiency and transparency, and that the impact has generally been “Negative.” Only nine percent saw the new form as a positive for the consumer experience, while the balance felt the “jury is still out.” 

STRATMOR announced that data extracted from its MortgageSAT Borrower Satisfaction Program reveals overall consumer satisfaction with the mortgage process has increased since TRID was implemented—but the increase is satisfaction mainly has to do with the fact that lenders are more frequently contacting borrowers during the post-application/pre-closing period, as a result of the CFPB’s new rule. STRATMOR’s data also shows that although the average number of days to close a mortgage loan increased for a few months after TRID was first implemented, the average number of days to close has since decreased—at least as of February—back to a normal “pre-TRID” level.

Closing Corp. recently released the results of its own survey of consumers. The company interviewed 1,000 repeat homebuyers who had purchased a home both before and after the new TRID rule took effect on Oct. 3, 2015. Some of the findings were: 64 percent of respondents said it was easier getting a mortgage under the old rules, than under TRID; 57 percent said it took more time to close a loan under TRID than it did previously; 63 percent said that the new “Know Before You Owe” forms for loan estimates and closing disclosures were easier to understand than the old forms; 68 percent said the new forms did a better job preparing them for the closing costs they would have to pay and 65 percent of the respondents said that the costs and fees were “explained better” in their most recent experience. The biggest positive response seems to be related to shopping for services. According to Closing Corp., 78 percent of consumers surveyed said they were more informed about their third party service provider options (title companies, pest companies, engineering inspectors etc.)—74 percent of those consumers said they took advantage of it and 55 percent said they saved money as a result. 

On the lighter side …
This month, we have a little something for everyone …

What is a mortgage broker? A real estate agent without the sense of humor.

What is the definition of a good real estate agent? Someone who has a mortgage loophole named after him.

What's the difference between a real estate attorney and an accountant? The accountant knows he is boring.

Andrew Liput has been a corporate, real estate and banking attorney for nearly 30 years He is the founder, CEO and president of Secure Insight, the first data intelligence and risk analytics firm to offer specialized vendor management services to mortgage lenders and banks nationwide addressing settlement agent risk. He can be reached by e-mail at

This article originally appeared in the April 2016 print edition of National Mortgage Professional Magazine.

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