|Old Republic Title Insurance Company reports seeing a number of claims in Florida emanating from forged deeds on foreclosed, bank-owned properties. The forged deeds are into trusts and the transaction insured is the one out of the trust. Florida is ripe for this scam as the properties may sit in bank REO for many months prior to sale.
The sequence is as follows:
Because it is easy to vary the name of the person acting as an officer of the lender and the grantee, this type of scam does not lend itself to our usual “red flag” process. It does require vigilance on the part of the lender and the title agent. The most consistent indicia of a fraudulent deed are that the grantee is a trust and only nominal stamps are paid for the transfer to the trust.
If you suspect an REO deed in your chain of title is fraudulent, please check with the actual lender (not the office or officer appearing on the deed) to confirm the validity of the deed; you may also direct your questions and concerns to The Fund’s Underwriting Department at 1-800-432-9594.
Fraudulent inducement – Real property sale — Action against seller and realtors by purchaser who discovered a week after closing that property was subject to fines based on three-page list of code violations
On January 3, 2003, the owner of a property in St. Petersburg was served with a Notice of Hearing to appear, on January 22, 2003, before the City of St. Petersburg Code Enforcement Board regarding 14 cited code violations. On February 22, 2003, he signed a contract to sell said property. In the Seller’s Property Disclosure Statement, dated March 3, 2003, owner answered three questions pertinent to this case: “(a) Is there any existing or threatened legal action affecting the property?,” to which the “No” box was checked; “(b) Do you know of any violations of local, state, or federal laws or regulations relating to this property?,” which was left unanswered, and; (c) “Is there anything else that you feel you should disclose to a prospective buyer because it may materially and adversely affect the value or desirability of the property, e.g. zoning violations, nonconforming units, set back violations, zoning changes, road changes, etc.?”, to which the “Yes” box was checked. In response to the follow-up to “explain in detail,” The owner wrote, in part (the last several words are not discernible), “back room has code violations from original owner, due to it not having owner occupied license.”
The owner did not attach to the Disclosure Statement, nor provide to the buyer, the three-page list of cited code violations. The buyer did not have a professional home inspection conducted and personally inspected the property only once. The closing and conveyance of the property took place on March 20, 2003. A week after closing, the buyer was informed by the City of St. Petersburg that the property was subject to fines based on the three-page list of code violations.3
The Court held that “Florida law is clear that a seller has a duty of disclosure to the buyer of “facts materially affecting the value of the property which are not readily observable and are not known to the buyer.” See Johnson v. Davis, 480 So.2d 625, 629 (Fla. 1985) (emphasis added). This duty of disclosure extends to the seller’s real estate broker. See Syvrud v. Today Real Estate Inc., 858 So.2d 1125, 1129 (Fla. 2d DCA 2003). This duty extends to the real estate broker.
* The code violations included: floor in bathroom peeling up; wiring in closet exposed; refrigerator and range not plugged in; door to storage area has rotten wood and not sealed; ceiling in living room has gaps; hole in wall under the sink; kitchen plumbing not to code; kitchen in disrepair; certificate of inspection required; kitchen floor missing tile and grout; after-the-fact permits required for work completed, and; garage apartment must be removed.
LIPP vs. ELY. Circuit Court, 6th Judicial Circuit (Appellate) in and for Pinellas County. Case No.04-0071AP-88B. UCN522004AP000071XXXXCV. November 9, 2005. Appeal from Summary Judgment, Pinellas County Court, Judge Walt Fullerton.
13 Fla. L. Weekly Supp. 119a
Fraudsters are creating entities with names very similar to real title agencies or law firms, and are holding themselves out to be agencies or attorneys appointed with various underwriters. The Fraudsters create CPLs, commitments, policies and other documents through creative word processing, cut and paste, and other methods that appear, on first glance, to be documents from the underwriter. They use these documents to induce their victims into funding transactions the fraudsters have engineered.
In order to avoid your clients or yourselves from becoming victims of the fraudsters, you need to be extra vigilant in dealing with any title agency or law firm, especially if dealing with them for the first time. Here are some steps you should follow:
1. Be alert to discrepancies or inconsistencies in any document you are provided.
Commitments and Policies- Is the Commitment a current version (2006), or has an outdated version been provided to you or your client? Does the underwriter and version of the jacket match the underwriter and version reflected on the schedules? Does the commitment look like the commitments you have received for the same underwriter on other previous occasions?
CPLs – Are the fonts and type sizes consistent throughout the document? Is the address for the underwriter consistent with your knowledge of the current address of the underwriter?
2. Check with the underwriter before relying on any CPL, Commitment or Policy issued by an agent or agency you are unfamiliar with. Call the underwriter’s agent verification department or go to the underwriter’s website to verify the agency status of the agent and the validity of the documents you have been provided. Do not fund (or allow your clients to fund) a transaction before checking with the underwriter. (Even if an agency is actively appointed by an underwriter at the time they issued the commitment and CPL, they could be inactive by the time you fund. Check with the underwriter again, right before funding.) Be sure to verify the address and phone number of the agent in the underwriter’s records matches the address and phone number of the entity you are dealing with.
3. Check the website for the Florida Department of Financial Services (www.myfloridacfo.com) to verify the status and underwriters of a licensed title agency, and the Florida Bar’s website (www.floridabar.org) to verify that an attorney is licensed to practice law in Florida.
4. Because these fraudsters are creating entities with names similar to real title agencies or attorneys, you should also be alert to the use of a name similar to yours. If you are contacted by someone looking for information on a transaction you are unfamiliar with, ask questions about how they got your name and number, who they have been dealing with, and the details of their transaction. If you believe that fraudsters are using a name similar to yours, contact your underwriter and the law enforcement authorities.
More information about this type of fraud and a bulletin issued by the Florida Land Title Association is available at FLTA’s website (flta.org).
Attorneys’ Title Fund Services, LLC 6545 Corporate Centre Blvd., Orlando, FL 32822