Mortgage fraud is becoming much too prevalent. It is being prosecuted, and it seems that it isn't so easy to conceal. So, why are people trying these scams that will most likely land them in jail? I can't believe they really think that they can get away with it. We always used to assume that criminals aren't that bright... but they do find creative ways to lie, cheat and steal.
Terry Hoffert, an Iowa abstractor, was arrested when it was discovered that she wasn't using loan proceeds to payoff existing mortgages - she was pocketing the money. Something that would eventually be discovered, but she did all that she could to delay the inevitable and continue her scam.
So far, it looks as thought she managed to steal $437,000. But, now that an arrest has been made, the Spencer, Iowa police department expects that more victims will be found. Her scheme was complicated enough that she was apparently able to get away with this for several years. Here's how...
"During the closing process, when the second bank issued a check to pay off the first loan at the first bank, it's alleged that Hoffert wouldn't forward that money to pay off the loan, but kept that," Spencer Police Chief Mark Lawson explained. "Then in the process of this whole thing, the addresses somehow got changed, so if a payment got missed, the people who thought that first loan was paid off would never receive any mailings or notifications. They instead went to Hoffert's post office box."
(See, The Daily Reporter, Home refinancing scam leads to charges)
As the closing agent, Hoffert had all of the information she needed to change the mailing address on the mortgage that was to be paid off. So, when she pocketed the money that was supposed to go to the bank, she would receive the billing statements. She would be able to use the proceeds that she stole to make the payments, so that no one would notice that the mortgage was still open while she scammed others... and she did.
It appears that she made sufficient payments on the mortgages to prevent the homes from going into foreclosure while she perpetrated the same fraud on others. Eventually, she would run out of money to continue her scam, but she got caught before that happened. She got caught because one of the families applied for an equity loan and they were denied because they still had that original mortgage that was supposed to have been paid off.
It seems rather easy to trace the source of the fraud, once one of the victims realized that their mortgages had not been paid. All they would have had to do is contact the lender and ask them where the statements were being sent. In this case, that mailing address led them to Hoffert's P.O. Box.
Title and abstracting business are suffering with the "mortgage crisis" and "credit crunch." In part, I think this will bring more of these frauds to light. When those who have been stealing from their escrow accounts don't have the money to hide their crimes, it's only a matter of time until they are discovered. I have no sympathy for any of them. They vast majority of us are honest and hardworking. We are having a difficult time in this economic environment, but we don't steal from our customers.
Maybe this will help serve to clean up the industry, but there will be substantial damage. These kinds of losses are expensive for the underwriters... or in Iowa, the state, which runs the Title Guarantee Program in lieu of title insurance. Perhaps this will lead to more thorough audits and compliance regulations. In Ohio, the legislature has already implemented an audit program for title agents - the audits must be conducted by independent CPA's. Long term, better oversight will serve the title industry well and, hopefully, when the mortgage market turns around, we can rebuild the trust and integrity with the public that we desperately need.
Robert A. Franco
SOURCE OF TITLE