Keen Title Examiner Discovers Forgery

The vesting on the open order sheet did not match the vested owner of record. That is not an unusual discovery in the title industry, but this time it triggered the title examiner to dig deeper and to uncover a forgery!

forged signatureOne of our sister branches in Denver opened a sale transaction in the amount of $450,000 and ordered the title report/commitment. The title examiner, Venita O., noticed the open order sheet reflected the property owner as an Estate of a named individual. The most current deed, however, reflected the owner as an LLC.

There was no death certificate of public record for the decedent, so Venita was unable to determine if he died prior to the deed to the LLC. She looked at previous deeds of trust in the chain of title to compare the decedent’s signature to the signature on the deed to the LLC. The signatures were not the same at all. Read more

Alert Escrow Officer Foils Forgery

signature examination in escrow

signature examination in escrowTraci F., an escrow officer out of our sister office in Vancouver, Wash. was handling a short sale transaction. According to the listing agent, the property owner was unavailable to sign his closing documents because he was in the Ukraine.

The agent also said the owner was not going to be able to come back to the U.S. to sign his documents, so Traci began making preparations to have the documents executed internationally. Days later the agent called to tell Traci the seller was suddenly able to catch a flight back to the U.S. and was on his way to her office to sign a Power of Attorney (POA), giving his brother the power to sign on his behalf. The agent was extremely excited and insisted the owner would be at her office in the next 15 minutes.

Synopsis

A seller located in the Ukraine suddenly appears in our Vancouver, Wash. office to sign a Power of Attorney, granting his brother the authority to sign on his behalf. A few days later, the supposed brother appears for the signing as attorney-in-fact. Guess what – it’s the same guy, and no, these guys are not twins!

Something seems fishy…

Traci thought it odd the seller was able to find a flight to the U.S. so quickly, however. She drew the POA document as instructed and it was executed, thus granting the ability for the owner’s brother to sign. A few days later the brother came in to sign on behalf of the owner. Something didn’t seem right, as Traci was fairly sure this was the same gentleman who had come in to sign the POA – representing himself as the seller – a few days before. The two were said to be brothers, so Traci thought similarities seemed possible and the “brother’s” ID photo matched his appearance. After the signing, Traci asked the opinion of the office receptionist, who also thought it was the same individual who had come in to sign a few days previously.

After further examination…

Traci had a gut feeling something was wrong with the situation and conducted more research. The printing and signature from the POA and seller’s newly signed closing documents appeared to be very similar. Traci examined the copy of the ID she had taken from the individual who signed the POA (representing himself as the seller) and the signature did not appear to match the one she had received on the POA. Traci brought the signed documents and ID copies first to her branch manager and then the county manager. The signatures on the seller’s ID did not appear to match up with the seller’s signature on the POA. But Traci was still certain that the seller and the brother were the same individual, posing as separate individuals.

As a result of her suspicions, Traci and her manager contacted the listing agent to let him know we would not be able to accept the POA. Traci expected the agent would be at least slightly irritated, however no questions were asked and no arguments were made. Traci made arrangements to contact the seller directly to execute the documents in the Ukraine.

Moral of the story

Traci did the right thing by not confronting the parties with her suspicions. Instead, she contacted her manager and together they denied the use of the POA, thus protecting the Company from insuring a deed with a possible forgery. If we had accepted and insured a forged deed, the owner could have come back to the buyer laying claim to the property. We are expected to protect the buyer’s ownership interest under the owner’s policy of title insurance issued through this transaction, since protection against forgery is the cornerstone of any of our policies.

Why Altered Checks for Earnest Money are Unacceptable

Altered Earnest Money Check

Settlement agents are regularly pressured into accepting altered checks (which they should not) for earnest money. This usually occurs when the buyer’s original offer to the seller indicates one escrow company and then, somewhere in the negotiations, the principals agree on another escrow company. Real estate agents do not want to go back and ask their buyer for a new check, so instead the check is altered and the buyer initials the changes. Accepting the check is done at the sole risk of the operation. In this story, our office accepted an altered check which proved to be risky.

The original check is altered

One of our sister offices received a fully executed Purchase and Sale Agreement, along with a personal check representing the earnest money. Per the agreement, the amount of earnest money due was $1,000. The check was originally written to Old Republic Title Co., but during negotiations the principals agreed to change the escrow and title company to ours. Rather than obtain a new check for $1,000, the buyer simply crossed through the original payee, wrote in our company name and initialed the change.

Transaction is cancelled
Earnest Money refund is requested

The settlement agent receipted-in the funds and began to process the transaction. About a month later the buyer decided he wanted to cancel the transaction. His real estate agent instructed the settlement agent to prepare cancellation instructions reflecting the earnest money as being refunded to the buyer. The settlement agent prepared the cancellation instructions and sent them to the listing agent.

At first, the seller was not sure they were willing to give the money back to the buyer. The real estate agents began negotiating for their respective clients. In the meantime, the buyer went to his bank, Wells Fargo, and tried to place a stop payment on his earnest money check. When the request was denied, he filed an Affidavit of Forgery, claiming the check was altered and cashed without his approval.

Earnest Money “refunded” twice

Simultaneously, the sellers signed mutual cancellation instructions agreeing to return the earnest money to the buyer. The settlement agent cut a check from the trust account to the buyer, representing the refund of the earnest money. The buyer deposited the refund into his account at Wells Fargo.

Shortly thereafter, our Operational Accounting Center (OAC) received notice from Bank of America that our trust account was debited $1,000 based on the fact the original earnest money check was altered. When a fraud report is filed, banks act quickly to freeze the amounts in question while they determine the merits of the report. Wells Fargo immediately contacted our bank, Bank of America, who reviewed the affidavit.

The risk of accepting altered checks

Anytime a settlement agent accepts an altered check, he or she subjects the instrument to questioning. As a matter of fact, accepting an altered or endorsed check is done solely at the operation’s own risk, since the banking agreements Our Company enters into offer no protection for these checks. The operation is on their own to prove they were entitled to negotiate the check.

Accepting an altered or endorsed check is done solely at the operation’s own risk…

The OAC quickly found this out. They contacted Bank of America upon receipt of the notice our account was debited. Bank of America referred back to the banking agreement. Neither Bank of America nor Wells Fargo would provide assistance since the office accepted and negotiated an altered check – even though they had already refunded the buyer their earnest money deposit.

The OAC filed an Affidavit of Claimant on the refund check disbursed to the buyer. The basis for the affidavit was the fact that the borrower had already collected the original earnest money deposit. The claim was denied.

The Borrower withdraws Affidavit of Forgery

Next the settlement agent contacted the buyer’s real estate agent. She explained the borrower needed to withdraw their Affidavit of Forgery since he had received his refund. The borrower finally withdrew it and their account received credit for the original deposit. Whew! All of this work for a $1,000 deposit on a cancelled transaction for which we will never be paid!

The Moral of the Story

When Our Company opens a trust account, a banking agreement is signed which outlines the bank’s and Our Company’s responsibilities. One of our responsibilities is to accept checks made payable to Our Company only. If an office deviates from the agreement and accepts a third-party-endorsed or altered check, the bank has no obligation to assist or defend them; which is exactly what occurred in this instance. Settlement agents should be aware of the risks when accepting personal checks which have been altered or endorsed, and request a replacement check.

Have you encountered a situation where an altered check was either used or not accepted? Please share your comments below!

Betrayed with an Uninsured Deed…

Beware of uninsured deeds.An escrow officer in one of our sister operations opened a purchase transaction for $347,000. She ordered the title report and the order was assigned to Casandra, a commercial title officer. Casandra issued the report reflecting two owners of record: Maysa Alhelow, a single woman and Thomas Paul Helo, a married man as his sole and separate property.

The escrow officer processed the order and once she received all signed documents and monies, shipped the documents for recording. It is normal and customary in California, where the property is located, to record prior to disbursing the escrowed funds. The escrow officer was waiting for recording confirmation.

Uninsured Deeds

Uninsured deeds in the chain of title always pose a whole new level of risk for a title insurance company. Title officers are taught to scrutinize those types of deeds for obvious signs of forgery or other misconduct on the part of the grantors and grantees. The title officer in this particular order did just that and ultimately halted a transaction that would have inevitably caused a title claim.

When the recording package arrived Casandra noticed only Alhelow signed the deed to the new buyer, and not the co–owner Thomas Paul Helo. Casandra called the escrow officer and asked why there was no deed from Thomas. The escrow officer explained that she was told the owners had recently recorded a deed, wherein Thomas conveyed his interest in the property to Alhelow.

Casandra located the recorded deed from Thomas to Alhelow.
She inspected the deed and noticed the following:

  • Deed was uninsured
  • Deed was not notarized by a Company–approved notary
  • The signature of Thomas Paul Helo appeared to be VERY different than his signature on other recorded documents

A New Deed was Needed

As a result, Casandra called the escrow officer and insisted Thomas sign a new deed in the presence of an employee or Company–approved notary. The escrow officer called the number she had for Thomas, but Alhelow answered the phone. The escrow officer explained the need for a new deed from Thomas. Alhelow responded Thomas could not possibly come into the office to sign the new deed as he was in Los Angeles and would not be returning anytime soon. The escrow officer informed her it was not a problem as Thomas could sign at one of our Los Angeles offices. Alhelow said she would contact Thomas.

In the meantime, the escrow officer did some research, found a Los Angeles number for Thomas and contacted him directly. When she explained the need for him to sign a new deed, Thomas confirmed he did not sign the first deed conveying his interest to Alhelow, and he had no knowledge the property was even being sold!

“…and he had no knowledge the property was even being sold!”

The escrow officer asked Thomas if he was even interested in selling the property and he stated, “No.” The escrow officer immediately resigned from the transaction, knowing full–well Thomas was not going to agree to the sale.

A Forgery Indeed

It was later discovered that Thomas’ brother, Kahir Tim Helo, had actually forged Thomas’ signature on the deed. And the escrow officer and Casandra discovered Kahir is Alhelow’s boyfriend! Ruth C. Escobar, who notarized the forged deed, works for a tax preparation office in Bakersfield. It is unclear as to what identification Kahir provided the notary.

Casandra’s keen observation of the uninsured deed disclosed a forgery and prevented a future claim from the real Thomas Paul Helo.

Our Title Insurance Policies Insure Against Forgery

Thomas’ brother and his brother’s girlfriend were attempting to sell the property without Thomas knowing, so they would not have to split the proceeds with him. Our title insurance policies insure 100% against forgery. Had Our Company closed and insured the transaction, and later Thomas Paul Helo made a claim to his interest in the property, we would have had to defend our policy holder – the buyer. As the insurer, we would have had to settle with Thomas in order to obtain a valid deed and cure the title defect for the new owner of the property.

Thoughts or questions? Please share below!