Fraud relating to title and settlement services agents could be classified as a crime of opportunity. On his website, the sheriff of Jefferson County, Colo., Ted Mink, notes that such crimes occur because the property involved is very easily made available to a potential perpetrator.
At a closing there are large sums of money the agent is responsible for handling during the process. And for a growing number, especially those in financial difficulties, such funds can be a tempting target.
For example, a recent conviction in New York involved Brian Madden, the former president of Liberty Title Agency, who admitted to misappropriating and embezzling millions of dollars of escrow and other client funds.
Madden, who is awaiting sentencing, used the proceeds of his crime to enrich himself as well as helping to keep his business going, said the U.S. attorney for the Southern District of New York, Preet Bharara.
Another case in Miami resulted in the conviction of Catherine Maiz, a part of owner of Absolute Title LLC. Maiz, who is also facing 30 years in jail, submitted false information to the lender, resulting in over $500,000 being disbursed. The U.S. attorney for the Southern District of Florida, Wilfredo A. Ferrer, said Maiz and her co-defendants took the proceeds from the loans for their own use and benefits.
On his office’s website, Mink said, “While you can’t usually impact a criminal’s desire or ability to commit a crime, you can often prevent an opportunity.”
Looking to give lenders tools to prevent those opportunities is Cincinnati-based eLynx.
Andy Crisenbery, vice president of professional services, said lenders are becoming increasingly concerned with who they are entrusting with large sums of money. The problem is one of inadequately verifying the identity of settlement agents (including making certain they are property licensed) and whether the agent is approved to handle the closing for the lender.
Through the company’s eCN technology and its Settlement Agent Management component, validation of the settlement agent can be accomplished, he said.
When the lender submits a closing transaction through eCN, eLynx goes out and independently verifies with the title insurance underwriter that the settlement agent is in good standing and permitted to close the transaction. This is done before the settlement agent is allowed access to the closing package.
“So from a lender perspective, they are gaining a great deal more information about how that transaction is being closed on their behalf,” Crisenbery said. “The lender has received formal acknowledgement back from the title underwriter that yes, this settlement agent is able to close this loan.”
This is the type of information in the past had not been able to obtain, he noted. But through its network, eLynx has been able to accumulate registration information regarding nearly 100,000 settlement agents.
Crisenbery said the system does prevent settlement agent fraud from taking place “because it does concretely validate that settlement agent identity for that transaction.”
And there are occasional instances where the system has reported the underwriter has not approved the settlement agent for a transaction. Choice of the settlement agent can depend on what type of product as well as local practice, he said. Quite often the title underwriter does not know the name of the person closing the loan in its name.
It is at the last minute in a typical closing that the choice of the settlement agent is made. But because of the breadth of its network, eLynx is able to check the agent out.
“Given the level of funding for any particular loan, it just takes one (instance of fraud) to make a difference,” Crisenbery said.
