What Makes a Real Estate Description “Legal”?

Real Estate Legal Descriptions - Details to watch for

The real estate closing is imminent but the title company calls and says there is a question about the legal description. How could that happen?

The legal description of the land is obviously one of the most important elements of the transaction – it describes what the buyer actually gets at the closing. But errors can be easily overlooked, and the resulting problems can be quite serious.

Legal description details to watch for:

Which Lot is being transferred?
The sellers might own two adjacent lots acquired in the same deed, but perhaps they built a new house on one and only want to sell the other one now. If it’s obvious that they own multiple parcels, it is imperative to confirm that the deal is to include all of them, and if not, make sure that the parties agree in advance as to which lots are intended to be included.

Does the description match what the seller intends to sell?
The sellers could have acquired the adjoining lot after they bought the home, or just a sliver of land because of a “lot line adjustment” with a neighbor dealing with an encroachment. Maybe a portion of the adjoining street or alley was vacated. But if the purchase and sale agreement only includes what was on the deed when the seller bought the house and that oversight isn’t caught, the buyer won’t get everything the seller intended to sell. Best to catch it now and not have to track down the seller later.

Lot line adjustments can be a problem.
It is important to make sure that the boundary is actually where the parties think it is, but also to make sure it’s reflected in amended tax parcels, subdivision maps and mortgages on both parcels. Most important, any boundary line agreement needs to include a mutual conveyance from each of the neighbors. It’s one thing to agree where the property line is, but another to make sure each has good title to the land on either side of that line – and then make sure the purchase agreement and deed agree.

Vacated Roads

Road vacation is the legal process of undoing a road creation. The vacated road ceases to be a
public road where the public has the right to travel. The vacated property usually reverts to the abutting owners up to the center of the road.

How are vacated roads handled in WA?
Vacated roads are especially important, because that land does not automatically pass with the sale of the adjoining main parcel if not described in the deed. In Washington vacated road must be expressly described in the deed.

Sale after foreclosure
Along these lines, if the house is being sold after a foreclosure it’s important to make sure the deed of trust and trustee’s deed included all the land the borrower acquired after taking out the loan.

We all know that the address is not itself a “legal description” and would not be sufficient in a deed. Nor should the address (and/or tax parcel) only be used in a purchase and sale agreement. In both cases a complete legal description is necessary. Otherwise it’s easy to overlook things such as the fact that the address might only apply to one of the lots owned by the seller.

Is a tax parcel sufficient as a legal description?
Tax parcels can be a trap. For example, where a lot line adjustment occurred the additional land might not have been included in the main tax parcel, or may have been assigned a new tax parcel number.

“It’s a good idea to visually check the property, and walk the property lines with the seller with a legal description in hand.”

Practical tips to use when purchasing a parcel

What Makes a Legal Description Legal?

Click the image above to download a printable version of this article.

It’s a good idea to visually check the property, and walk the property lines with the seller with a legal description in hand. Is there a vacant lot or a “greenbelt” next door? Does the yard look extra-large compared to other lots in the neighborhood? Is the driveway shared with a neighbor, or does it seem to go over the adjoining land? Does the garage or a shed in the back yard sit right on the line – or over it? Do all utilities come directly into the property from the street, or might some cross the neighbor’s land?

If property line issues arise they may cause a delay in closing, but if discovered early in the process by paying attention to the description and looking at the property they can usually be resolved quickly to everyone’s satisfaction.

For information on the types of legal descriptions, click the link below:

Real estate legal descriptions in WA

Questions or comments? Please share below!

Top 8 Questions About FIRPTA

FIRPTA Frequently asked questions

What is F.I.R.P.T.A.?
F.I.R.P.T.A. is an acronym for Foreign Investment Real Property Tax Act.  It was established in 1980 for the purpose of withholding the estimated amount of taxes which may be due on the gain of the disposition of a U.S. Real Property Interest from foreign persons.  A U.S. real property interest includes sales of interests in parcels of real property as well as sales of shares in certain U.S. corporations which are considered U.S. real property holding corporations. Persons purchasing U.S. real property interests (transferee) from foreign personsare required to withhold 10 percent of the amount realized.

FIRPTA top questions

Click the image above to download a printable version of this article.

What is the purpose of withholding 10%?
Real estate withholding is a prepayment of anticipated tax due on the gain of the sale of a U.S. real property interest. It is not an additional tax. Any difference between the amount paid and the amount owed is refunded to the seller when a tax return is filed.

Who is responsible for finding out if the transferor is a foreign person?
It is the transferee’s/buyer’s responsibility to determine if the transferor/seller is a foreign person and subject to withholding.

Are there exceptions from FIRPTA withholding?
Yes.  Exceptions are explained on the IRS.GOV website here.

Who is responsible for withholding 10% of the amount realized?
Withholding is the responsibility of the transferee/buyer.

How and where is the F.I.R.P.T.A. withholding paid?
The buyer must complete IRS Form 8288 and Form 8288-A and remit them, along with the payment to the IRS at the address shown on Form 8288.

What is the settlement agent’s role with regards to F.I.R.P.T.A.?
The IRS Rule requires the transferee/buyer to determine if withholding applies and, if so to remit the withholding to the IRS. If the buyer has determined F.I.R.P.T.A. withholding applies, the buyer and seller may mutually instruct the settlement agent to deduct the 10%, gather the applicable forms and remit them to the IRS on their behalf.

Will a Limited Practice Officer (LPO) give legal advice with regards to F.I.R.P.T.A.?
A LPO or settlement agent is not qualified to provide legal or tax advice relating to F.I.R.P.T.A.  If you are involved in a real estate transaction with a foreign person or entitiy and require legal advice, you will need to seek council from a professional other than the settlement agent.

More information on F.I.R.P.T.A. can be found here:
Internal Revenue Service – FIRPTA Withholding
Internal Revenue Service – Exceptions from FIRPTA withholding
Internal Revenue Service – Reporting and Paying Tax on U.S. Real Property Interests
Internal Revenue Service – Withholding Certificates (reductions in 10% withholding)
Internal Revenue Service – Definitions of terms and procedures unique to FIRPTA
Internal Revenue Service – Foreign Persons Involved in U.S. Real Estate Transactions

Questions or comments?  Please let us know by sharing below!

Flopping – The Latest Short Sale Scam

Short Sale Loss Mitigation

Short Sale Fraud
It is estimated lenders lose hundreds of millions annually in undervalued short sale transactions. Loss mitigators working on behalf of the lenders have anywhere from 450 to 600 active files on their desks at one time. Working the best deal for the lender is an all-consuming task for the loss mitigators and each short sale has its own complexities.

When a seller applies for short sale approval, the seller submits hardship affidavits and signs forms such as a Purchaser Eligibility Certification which includes statements such as:

In making this request for consideration of a short sale I certify under penalty of perjury:

  • All of the information in this document is truthful.
  • I/We agree that the financial information provided is an accurate statement of my/our financial status. I/We understand and acknowledge that any action taken by the lender of my/our mortgage loan on my/our behalf will be made in strict reliance on the financial information provided.
  • I understand that if I have intentionally defaulted on my existing mortgage, engaged in fraud or misrepresented any fact(s) in connection with this document, the lender may cancel any modification of foreclosure prevention agreement and may pursue foreclosure on my home. I understand the lender will use the information in this document to evaluate my eligibility for a short sale.

Even with statements such as these, the loss mitigator still goes through a process to confirm the information provided by the seller is true, but some fraudsters have found ways around this.

A Short Sale Flopping Example

In August 2010 one of our our South Pasadena, Fla. offices closed a short sale transaction. The seller (we will call him Jim Kling) had two loans on the property and the lender on both loans was Bank of America. The sales price was $425,000. Bank of America agreed to the sale and issued short pay approval letters for both loans.

The buyer was a LLC and the managing member of the LLC was Bill Hamley. The buyer purchased the property with cash and did not get a purchase money loan. At closing, the buyer and seller both signed an arm’s length affidavit which contained these statements:

“There are no hidden terms or hidden agreements or special understandings between the Seller(s) and the Buyer(s) or among their respective agents which are not reflected in the Agreement or the escrow instructions associated with this transaction.

There is no agreement, whether oral, written, or implied, between the Seller(s) and the Buyers and/or their respective agents which allows the Seller(s) to remain in the property as tenants or to regain ownership of the Property at any time after the consummation of this sale transaction.”

Cindy Archer at our escrow office was the settlement agent. She closed the sale in accordance with the terms of the short sale approval letters. Upon receipt of the payoffs, Bank of America promptly prepared and recorded a satisfaction of mortgage for each loan.

In April 2011, the buyer decided to sell the property. The seller entered into a purchase and sale agreement, and opened escrow with Cindy Archer. The title report was ordered, and upon receipt of the title report Cindy reviewed the requirements. She ordered the HOA demand, checked the property taxes and looked up the LLC with the state. The LLC was in good standing but the managing member had changed. According to the state the managing member was now Jim Kling. Remember that name? Jim Kling was the borrower who signed an arm’s length affidavit when he sold his home via short sale stating he had no side deals with the buyer. This same Jim Kling was now re-selling his home for almost one hundred thousand more than what he sold it for just eight months earlier. Not in our office he’s not!

Flopping is where the buyer of a short sale purchases the property for less than the true fair market value by influencing the appraiser or real estate agent to provide a Broker Price Opinion (BPO) which undervalues the property.”

How could Jim re-sell the same property less than a year later for $100K more when the real estate market is still depressed? This is the latest trend in mortgage fraud and it is called flopping. Flopping is the opposite of flipping. Flopping is where the buyer of a short sale purchases the property for less than the true fair market value by influencing the appraiser or real estate agent to provide a Broker Price Opinion (BPO) which undervalues the property. This information is provided to the loss mitigator who approves the sale based on the fraudulent information. The buyer then turns around and sells the property at fair market value, realizing a profit the lender should have received. In this instance, both the buyer and seller participated in defrauding the lender.

Flopping is a serious concern.

According to Fannie Mae a flopping scheme requires the perpetrator to conceal or provide falsified information to the loan servicer. This is information the servicer needs to make an informed short sale decision. These concealments may include hiding:

  • The true parties to transaction
  • Any contingent transactions
  • The true value of property
  • The transaction described above was not an arms-length short sale. Clearly the principals worked together to facilitate a reduction to the existing loan, resulting in the original borrower making a profit from the sale of his home. This is mortgage fraud on the part of the seller.

Our Company will not knowingly participate in defrauding or misrepresenting to a lender any facets of a transaction. Cindy had no knowledge of the fraud during the prior transaction. But, in the subsequent transaction, she could see what transpired and was not about to facilitate the completion of this crime. Cindy resigned from the transaction.

Earnest Money Instructions Clarified on New NWMLS Form 21

NWMLS form 21 Clarifies Earnest Money InstructionsThe recent changes to paragraph b “Earnest Money” in the NWMLS Purchase and Sale agreement (Form 21) finally gives escrow the authorization they need to assist in the release of the earnest money upon termination of the agreement. We are very pleased with this change; it will not only eliminate delay but will result in happier buyers, sellers, brokers and happier closing agents.

The Old Paragraph B – Why the confusion?
Remember that Escrow is a neutral third party that can only follow written instructions agreed upon between the buyer and seller. In the former version of the NWMLS Form 21 paragraph b. the instructions for what a closing agent could do with Earnest Money was EXTREMELY limited.

Under the old agreement the parties had to agree in writing as to disbursement of the earnest money, in the absence of such an agreement (Rescission) the closing agent was instructed to commence an interpleader action within 30 days of the demand. These limited choices left everyone including the closing agent feeling very frustrated.

A New Paragraph B – Clear Instructions
The revisions made to the form as of 8/11, provides the closing agent with the clear and precise instructions they need in order to release the earnest money in a timely manner. Not only does it give clear instruction to the closing agent but the buyers and sellers have also been given clear notice of the process if there is a dispute with earnest money.

Upon termination of the agreement the parties shall execute a release form (Authorization to Disburse Earnest Money – Form 50), if either party fails to execute the form, the other party may make a written demand to the closing agent for the earnest money. The closing agent shall promptly deliver notice of the demand to the other party. If the other party does not object to the demand with 10 days of said notice the closing agent is authorized to disburse the funds to the party making the demand. In the event of dispute over the earnest money, the closing agent can still commence an interpleader action.

What do you think?  Will these revisions save you time and effort in the future?  Please share your thoughts by commenting below!

For your reference, we have included paragraph b. here:
nwmls form21 paragraph b

Residential Title and Escrow Rate Calculator – TicorRates.com

Online rate calculators for title and escrow services have become indispensable tools for loan originators over the last couple years.  Why?  Because a higher degree of accuracy is now required when loan originators disclose settlement fees to consumers on the Good Faith Estimate or GFE.  And with settlement fees falling into three tolerance categories it’s critical for loan originators to know that the fees quoted by the title insurance and escrow provider will be accurate and won’t change by more than 10%.

Calculate rates for your GFE instantly! Try out the free title and escrow rate calculator today! Click here to try it now at TicorRates.com!

Therefore as a service to our clients Ticor has created an easy to use, online rate calculator.  View the calculator at http://ticorrates.com to try it out today!

TicorRates.com benefits:

  • It’s easy to use
  • 24/7 availablility
  • No need to log in
  • Calculate Fees in under a Minute
  • Quotes are valid for 60 Days

Here’s a 2-minute video tour of TicorRates.com
Click on the play button below to watch it now.

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A quick review of the GFE and HUD-1 Settlement Statement Changes

Last year significant changes were made to RESPA’s two primary disclosure forms (GFE and HUD-1 Settlement Statement) for the purpose of ensuring more timely and effective disclosures of the settlement costs of residential mortgage loans. One of the major changes was the addition of a third page to the HUD-1 which facilitates a side-by-side comparison of the settlement charges listed on the Good Faith Estimate vs. actual charges on the HUD-1 settlement statement.  In addition, the new HUD-1 makes it easier for lenders and settlement agents to identify tolerance violations with the settlement charges.

Charges that cannot increase on the HUD-1 Settlement Statement

  • Origination charge
  • Credit Charge
  • Adjusted origination charge
  • Transfer taxes

Charges that cannot increase in total by more than 10% on the HUD-1 Settlement Statement

  • Recording fees
  • Title Services
  • Any other required services that are provided by a company identified by the loan originator

Charges that can increase on the HUD-1 Settlement Statement:

  • The initial escrow deposit
  • Daily interest charges
  • Homeowner’s insurance
  • Any required services consumers purchase from providers not identified by the loan originator

What do you think? Is this calculator a time saver for your business?

Please share by commenting below!

Is Title Insurance Worth It? Fraud Victims Covered…

A senior escrow officer at one of our sister companies recently purchased an investment property for all-cash with her brother. After closing, they renovated the property and found tenants who would sign a long-term lease. Six months later, the property was foreclosed upon by Bank of America and the escrow officer and her brother almost lost their investment!

Title Insurance Claim Story

Fortunately for the escrow officer and her brother, they purchased title insurance at closing. They immediately notified the claims department of their loss. The claims officer began researching how the buyers could have lost the property to foreclosure when they had not mortgaged the property in the first place.

A Shell Game Indeed…
What he found was shocking. In 2010 the original owners fell on hard times and stopped making payments to Bank of America on both their mortgage and Home Equity Line of Credit (HELOC) as evidenced by more than one recorded Notice of Default in public records. Shortly thereafter the owners recorded a Substitution of Trustee and Deed of Reconveyance for each loan. These documents purportedly released the two Bank of America loans. They were supposedly signed by an authorized representative of BAC Home Loan Servicing, LP, but were not signed in the home office of Bank of America. Instead these two releases were signed, according to the notary, in Placer County, Calif.

Next, the property owners deeded their (now free and clear) piece of property to a company, called Atlus Equity, LLC, which subsequently listed and sold the property to our escrow officer and her brother for $190,000. The tenants living in the property received Notice of Trustee’s Sale and stopped making their monthly rent payments to save for an impending move once the foreclosure occurred.

“The claims department is standing by to write the check to Bank of America in exchange for their deed.”

In the meantime, the escrow officer and her brother have been working with the claims officer to settle with Bank of America to deed the property back to them. The Trustee’s Deed Upon Sale states the bank is due $189,000. The claims department is standing by to write the check to Bank of America in exchange for their deed.

Sadly, after a search in the claims system, we have discovered this same scam has been pulled by the same individuals at least five times leading up to this claim.

Moral Of The Story
There are specific elements that we are cautious of when examining title for free and clear property. Specifically, we investigate the event that led to mortgages being paid in full and review recorded lien releases and investigate their authenticity if they appear to be executed outside of the main lender office.

What do you think? Is title insurance worth it? Please share your thoughts by commenting below.

Top 4 Domestic Partnership Questions

A domestic partnership is a legal relationship between two adults who are not married. The status confers many of the rights and benefits also available to married couples in many aspects of life but it is not marriage under Washington law. Originally only a few of these affected real property, but as of 2008 many elements of real property ownership applicable to married persons now also apply to domestic partnerships.

1. Who qualifies for domestic partnership?

How does domestic partnership affect real estate ownershipDomestic partnerships can apply to persons of the same sex, but also to those of the opposite sex where at least one of them is 62 years old or older. This is important to those who want some of the benefits of marriage but who do not want to be married. For instance, a domestic partnership will allow inheritance of a home as if the couple were married, but preserve the single status of those persons who do not want the relationship to affect, for example, pensions or Social Security benefits. For those couples it is important that the legal relationship not be equivalent to marriage.

“Domestic partnerships can apply to persons of the same sex, but also to those of the opposite sex where at least one of them is 62 years old or older.”

2. How do domestic partnerships effect real estate ownership?

Broadening the treatment of real property to apply to domestic partnerships means that now interest in real property is equivalent to both homestead and community property for a married couple. (Please see previous post on community property & homesteads in WA by clicking here.) And, of course, if either partner dies without a will, title to real property will be treated the same as for a married couple in similar circumstances. (Please see May 2011 post regarding probates.)

3. How can I have a domestic partnership legally recognized?

In order for the domestic partnership to be legally recognized in Washington State a declaration of domestic partnership must be completed and filed with the Office of the Secretary of State, Corporations Division. It can be terminated automatically if the partners marry each other as recognized in Washington (which would only apply to domestic partners of the opposite sex). It can also be terminated voluntarily by filing a notice and affidavit with the registry and meeting certain other criteria. The final way it can be dissolved is by a court process similar to marriage dissolution.

4. Will Washington State recognize a same-sex marriage registered in another state?

Limited reciprocity rules apply to domestic partnerships. A legal union formed in another state that is “substantially equivalent” to a Washington domestic partnership will be recognized here as such. However, a same-sex marriage that is legal in another state is not recognized in Washington as either a marriage or a domestic partnership.

Washington State Domestic Partnership Resources:

Domestic Partnerships – WA State
Frequently Asked Questions
Domestic Partnership Declaration.pdf

Questions or comments? Please respond by leaving a message in the comment box below!

Fraudulent Mechanic’s Liens Thwarted

Unfortunately, REO properties are a prime target for fraudulent Mechanic’s Liens, since it is not uncommon they might need some repairs or work done and since there are so many different people involved in rehabilitating foreclosed properties for eventual resale.

Mechanics Lien Fraud

A fraudulent mechanics lien was filed repeatedly against bank owned properties.

Fool me Once…
One of our sister companies had a sale transaction wherein Federal National Mortgage Association (FNMA) was the seller as the property was an REO bank owned property. The title report reflected a Mechanic’s Lien payable to Anna Moskovyan for painting. Moskovyan was contacted for a payoff statement and lien release. The payoff amount was shown on the settlement statement, however, FNMA stated they were not aware of any work being performed on the property by Moskovyan. Since this transaction was so close to closing, FNMA approved the payment and did not dispute the invoice or lien. Moskovyan came to our offices and picked up her check in exchange for a release of her lien.

Something’s Fishy…
Shortly afterwards an officer, Paula, from another sister company noticed Mechanic’s Liens appearing on all the title reports wherein FNMA was the seller. Paula did some further investigation and discovered, upon closer examination, it appeared the lien was exactly the same – simply recorded over and over again against different REO properties owned by FNMA. This is when the following warning was sent to her co-workers:

Mechanic’s Liens were recorded on FNMA properties in our area. The exact same lien, for the exact same amount, for the exact same service, was found recorded against several properties. We’ve checked with FNMA and the Listing Agent and this woman who signed this Mechanic’s Lien had not been contracted with to provide any services; the properties in question were not painted and were never scheduled to be painted. If you receive a title report or a supplemental report with a Mechanic’s Lien, let us know immediately so that we can get this addressed before you try to record. The agent in this particular case has had six of his FNMA listed properties compromised in this manner, and he has no idea who this person is.

We are not sure how wide-spread this is and whether it has gone to surrounding counties, however, it will likely disrupt recordings in our area for a while, and we need to keep our eyes open for them.

Once our offices confirmed FNMA had not contracted with Moskovyan to perform work on its properties, the operations obtained an indemnity on each transaction in which a fraudulent Mechanic’s Lien was filed with the county recorder and proceeding to close without paying the lien holder. The listing agent reported the fraudulent liens to the police department, and a case number was assigned.

Be Aware
If this lien or similar liens appear on your title report, do not take the lien at face value. Do some investigating and contact the seller and listing agent to make sure any lien affecting a property is, in fact, a true lien and not fraudulent. This could end up saving the customer and Our Company from a potential lawsuit.

The sad part of this tale is how it illustrates anyone can take a document to the County Recorder’s office, pay the appropriate recording fee and have it recorded against any property. The county does not check for validity of a lien, just that the document is in the proper format. The integrity of our public records system is broken down with every fraudulent document recorded. This only emphasizes the importance of title insurance and what a vital role Our Company plays in the American dream of home ownership.

Questions or comments? Please leave a share below!

The Anatomy of a “Cash Back” Mortgage Fraud Scheme…

Cash Back Mortgage Fraud Scheme Busted

A cash back mortgage fraud scheme puts the loan at a greater risk because it originates with negative equity in the property.

In March 2011, seven people were arrested and indicted in a mortgage fraud scheme. For approximately two years the defendants had perpetuated their scheme in more than 18 transactions. The indictment says they “knowingly and willfully devised, and intended to devise, a scheme and artifice to defraud lenders … to obtain money from lenders by means of material facts and fraudulent pretenses, representations, and promises, and by intentional concealment and omission of material facts.”

Here’s an example of how the scam worked.
The loan officer lured in a straw buyer by telling him he would be paid $10,000 for every house he purchased without having to put any money down, along with additional money when the homes were resold. Sounds great, right? The ring leader would remodel the house and rent it out. After two years, the house would be resold to the renter. The rent payments were applied toward the mortgage payments.

The straw buyer agreed to lend his name and credit to a transaction. The parties closed on the purchase of one property on a Wednesday for $550,000. The straw buyer obtained a mortgage for $495,000. The loan application contained the following material false statements:

  • Inflated monthly income
  • Inflated bank account balances
  • Inflated assets

The lender wired $502,041.34 to the escrow/title company. The escrow/ title company issued a check in the amount of $144,861.78 to a shell company the ring leader owned. This disbursement was not disclosed to the lender on the HUD-1. The straw buyer was given $9,700 cash in a paper bag by the loan officer after closing.

On Thursday the ring leader withdrew $66,500 from her bank account and converted it to a cashier’s check. The cashier’s check was provided to the escrow/title company as the down payment and closing costs purporting to be from the straw buyer and not third party funds.

Did you notice the timeline? The file closed before all the funds were in. This is what facilitated the scheme. The $144,861.78 is released to the ring leader who deposits the funds into her account so she can turn around and provide the down payment check on behalf of the buyer. No one is out any cash up front.

The perpetrators were indicted on 14 different charges. Their scheme qualified them for almost $13.5 million in fraudulent loans and received over $2,907,452 in ill-gotten gain from the proceeds of these loans and real estate transactions.

Here are some of the other details from the indictment:

Straw Buyer Mortgage Fraud

A “cash back” scheme is one variation of mortgage fraud. In a “cash back” scheme, the perpetrator of the scheme offers to purchase a property for more than the

seller’s asking price and submits a contract to the seller for the inflated price. The seller agrees to the sale because they are generally receiving the full asking price.
Often a “straw buyer” is used to facilitate the “cash back” scheme. Generally, a straw buyer is someone recruited by the perpetrator to take out a mortgage and purchase a house in their name. The straw buyer normally does not live in the house or have the intent to reside at the house.

A Uniform Loan Application, also known as Form 1003, is prepared for the straw buyer. A lender uses this form to record relevant financial information about the applicant who applies for a mortgage. Misrepresentations are made to qualify the straw buyer for a mortgage. In signing the loan application, the straw buyer acknowledges that “the information provided in the application is true and correct.”

This scheme could have never been pulled off without the escrow/title company. The indictment goes on to identify the role of an escrow/ title company in a real estate transaction:

Generally, a straw buyer is someone recruited by the perpetrator to take out a mortgage and purchase a house in their name.

A title or escrow company is used in which the subject property is deposited for safekeeping under the trust of a neutral third party (escrow agent) pending satisfaction of a contractual contingency or condition. Once the conditions are met, the escrow agent will deliver the property to the party by the contract.

After receiving the loan documents facilitating the buyer and seller signing, escrow agents prepare a final HUD-1 wherein details of the actual receipt of lender funds and fund disbursements are listed for the records of the lender, seller and purchaser. The escrow agent is required to disburse funds according to what has been indicated in the HUD-1 settlement statement.

The escrow agent received the down payment from the ring leader in transaction after transaction and never disclosed them as third party funds. The disbursements were also hidden since the ring leader was paid out of the escrow file without being disclosed to the lender on the HUD-1. The escrow/title company who handled these closings is now closed.

A cash back scheme puts the loan at a greater risk as the loan originates with negative equity in the property.

All of this information was crucial to the lender because a “cash back scheme puts the loan at a greater risk as the loan originates with negative equity in the property.” To summarize, “the co-conspirators artificially inflated the sales contract prices … the defendants concealed from the lending institutions by intentionally withholding from the lender that payments were made to unrelated third parties to the transactions or omitting on the HUD-1 that at the close of each sale a portion of the loan was paid to an unrelated third party to the transaction. Additionally, in some transactions, the parties failed to disclose to the lender that the straw buyer or purchaser of the property received cash back from other members of this conspiracy for the use of straw buyer’s credit to purchase the property.”

Moral Of The Story
All receipts and disbursements must be completely and accurately disclosed on the HUD-1 and to the lender. Making disbursements to individuals or entities who are not a party to the transaction is completely unacceptable. Seller proceeds should be disbursed to the seller only and not their LLC or members of their LLC.

Domestic Partnership Law in Washington State

Domestic Partnership Law in Washington State took effect  Thursday, June 12, 2008.  This law does not create a legal relationship that is equivalent to marriage, but does create property rights that previously applied only to married persons.

Domestic Parnerships Washington

Domestic Partnership Law in Washington State

Who can enter into a Domestic Partnership?
Two people of the same sex of any age over 18 and capable of consent or two people of the opposite sex, at least one of whom is over 62 years of age.

Almost every statute that addresses rights of married persons relating to real property has been amended to also apply to State Registered Domestic Partners.

This includes:

  • Community property rights including automatic presumptive community interests
  • Homestead rights
  • Inheritance rights
  • Dissolution in Superior Court

Domestic Partnerships are established in Washington by simply filing with the Washington Secretary of State’s Office.

Useful links:

DomesticPartnerships
Frequently Asked Questions
Domestic Partnership Declaration.pdf

More Resources:
Seattle City Clerk’s Office – The City of Seattle’s Domestic Partnership Registration program allows unmarried couples in committed, on-going family relationships to document their relationships. Couples may consist of a man and a woman, two men, or two women.

Domestic Partnership Registration is voluntary, and does not create any new or different legal rights or responsibilities, or any contractual relationships or obligations between those registered.
http://www.seattle.gov/leg/clerk/dpr.htm