UNIFORM CLOSING INSTRUCTIONS TMBA/TLTA BEST ......UNIFORM CLOSING INSTRUCTIONS TMBA/TLTA BEST PRACTICES MORTGAGE FRAUD TEXAS LAND TITLE INSTITUTE SAN ANTONIO, TEXAS 2008 Phyllis J

UNIFORM CLOSING INSTRUCTIONS

TMBA/TLTA BEST PRACTICES

MORTGAGE FRAUD

TEXAS LAND TITLE INSTITUTE SAN ANTONIO, TEXAS

2008

Phyllis J. Mulder

Senior Vice President & Texas General Counsel

ALLIANT NATIONAL TITLE INSURANCE COMPANY

INSTRUCTOR PROFILE

PHYLLIS J. MULDER

PROFESSIONAL EXPERIENCE

Phyllis J. Mulder is Senior Vice President and Texas General Counsel with Alliant National Title Insurance Company. She has over 27 years of experience in the real estate industry. Prior to joining Alliant National, Ms. Mulder was underwriting and claim counsel for Alamo Title Insurance Company and then United General Title Insurance Company. The title insurance experience came after 12 years in real estate private practice with San Antonio law firms – Davis, Smith & Davis, and then Fulbright & Jaworski. EDUCATION Juris Doctorate (with honors) 1981 University of Texas School of Law Austin, Texas

Bachelor of Arts in Education 1973 University of South Florida Tampa, Florida

PROFESSIONAL INVOLVEMENT Texas Land Title Association

Board of Directors Underwriting Section Chair Regulatory Committee Seminars Committee (past chair) Certification Committee Federal Issues Committee PAC Board of Trustees

American Land Title Association Title Counsel Committee Uniform Closing Instructions Task Force

College of the State Bar of Texas Texas General Counsel Forum

TEACHING EXPERIENCE Ms. Mulder has taught at many TLTA seminars, Arkansas Land Title Association seminars, as well as underwriter seminars in Texas, Arkansas, and Louisiana. In addition to education for the title industry, she has provided instruction at seminars for lenders and real estate agents.

UNIFORM CLOSING INSTRUCTIONS – TMBA/TLTA BEST PRACTICES –

MORTGAGE FRAUD

Phyllis J. Mulder Senior Vice President & Texas General Counsel

ALLIANT NATIONAL TITLE INSURANCE COMPANY

Uniform Closing Instructions I. Introduction Anyone who has closed a loan can attest to the frustration and inefficiencies that are created by a thick set of closing instructions, received minutes before closing, that differ not just from lender to lender, but also from branch to branch within the same lender. Wouldn’t it be nice to have one set of standard closing instructions, so that, well before closing, the closing agent would know what the lender will be requiring? The answer to that question, for most in the industry, depends on what is in the uniform closing instructions. II. Overview

A. The proposed Uniform Closing Instructions were developed by a task force of members from the American Land Title Association, the Mortgage Bankers Association of America, and the American Escrow Association. The goal of the three associations is to produce a set of standardized instructions that will be voluntarily adopted by lenders.

B. The Uniform General Closing Instructions detail the requirements for all

transactions. The General Instructions would be the same for every loan. Training for all parties would be critical, but once training is complete, all sides of the transaction would know what its duties and obligations are.

C. The Uniform Specific Closing Instructions provide a standard format for

the details of each transaction. The closing agent would be able to easily identify information about the loan – the borrower, the property, the loan type – as well as state-specific and loan-specific requirements of the lender.

2008 Texas Land Title Institute Uniform Closing Instructions - TMBA/TLTA Best Practices - Mortgage Fraud

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III. Purposes

A. The Uniform Closing Instructions are designed to:

1. Improve efficiencies and lower costs to the industry and the consumer by replacing the numerous, lender-unique closing instructions with two standard sets – general instructions and specific instructions;

2. Impose reasonable timing requirements on all the parties;

3. Help prevent mortgage fraud;

4. Facilitate electronic mortgages;

5. Prevent delays in closings by clearly articulating each duty and

responsibility of the lender, title company, and closing agent. IV. History

A. In the 1990s, the American Land Title Association worked with many of the major private entities in the real estate industry, such as Fannie Mae, Freddie Mac, Mortgage Bankers Association of American (“MBA”), the Department of Housing and Urban Development, and the other federal agencies that administered housing programs, to develop a standardized “closing instruction letter.” It was five pages, with an appendix for additional instructions. Lenders were not, apparently, willing to give up their proprietary forms, the government did not mandate use of the standardized form, and the standardized closing instruction letter was not widely adopted.

B. In 2004, ALTA approached the MBA again, and the MBA created an

internal task force to develop uniform closing instructions. The first draft of the MBA uniform closing instructions was completed in 2005. The American Escrow Association and ALTA joined in discussions with the MBA in 2006.

C. After numerous meetings, the three associations - ALTA, MBA, and

American Escrow Association – completed the proposed Uniform General Closing Instructions and Uniform Specific Closing Instructions. In late 2007, each of the associations introduced the proposed instructions and solicited comments from those in their respective industries.

D. The “Comment Draft” (dated October 5, 2007) can be found on the

associations’ websites – www.alta.org, www.mbaa.org, www.a-e-a.org, and at the following links –


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http://www.alta.org/http://www.mbaa.org/http://www.a-e-a.org/

http://www.tlta.com/legislativenew/legislative/ugci_draft1.pdf http://www.mortgagebankers.org/IndustryResources/ResourceCenters/UniformClosingInstructionsComments.htm.

E. Comments on the proposed uniform instructions were accepted until the

end of January 2008. The Texas Land Title Association submitted comments, which are at the end of this section of this paper.

F. After the end of the comment period, the task force began reviewing the

comments. In addition to the original task force members, others with an interest were included in the teleconference meetings. The most current draft of the instructions, Post Comment Draft (incorporating relevant non-controversial comments received), can be found at the following link -

http://www.alta.org/images/PDF/ugci_draft1.pdf.

G. The Uniform Closing Instructions are still a work in progress.

V. Mechanics of the Instructions

A. A comprehensive line-by-line analysis of the Uniform Instructions is beyond the scope of this paper.

B. Some items of interest on the workings of the instructions are listed below.

1. The instructions are designed for use with closings on residential

properties - one-to-four family.

2. The instructions do not apply to loans that are secured by multifamily or commercial properties.

3. Instructions for reverse mortgages and manufactured home loans will

be developed later.

4. The instructions include training directives to facilitate understanding of the instructions and to help instructors who will be teaching how to comply with the instructions.

5. Timing deadlines are what make the instructions work.

a. All information needed to prepare the settlement statement is to

be provided by the lender to the closing agent, at least two business days before closing.


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http://www.tlta.com/legislativenew/legislative/ugci_draft1.pdfhttp://www.mortgagebankers.org/IndustryResources/ResourceCenters/UniformClosingInstructionsComments.htmhttp://www.mortgagebankers.org/IndustryResources/ResourceCenters/UniformClosingInstructionsComments.htmhttp://www.alta.org/images/PDF/ugci_draft1.pdf

b. The completed settlement statement is to be provided by the closing agent to the borrower, the seller, and the lender, at least one business day before closing.

c. The lender must approve the settlement statement, in writing, at

least one business day before closing. d. If changes to the settlement statement are made at closing, the

closing agent must submit the proposed changes to the lender, who must respond within two business hours.

6. Hard copies of the general instructions will not be delivered to the

closing agent, but, instead, will be posted on the lender’s website or the MBA website or both.

7. Because the instructions are intended to cover all fifty states, some of

the provisions will not apply to us in Texas, and much of the terminology may sound different. Training will be critical in making the instructions useful.

8. The instructions include many links for references to laws, specific

program requirements (FHA, VA, etc.), and forms. VI. Conclusion Most everyone agrees standardized closing instructions have the potential to greatly improve the closing process for the title company, for the lender, and, most importantly, for the consumer. Many commentators, however, believe that the current draft will need many adjustments to be effective and to be acceptable to all parties. The extra effort would be well worth the outcome. Sources The Legal Description: Uniform Closing Instructions PDF Special Report (July 2008) http://www.octoberstore.com/Reeling_in_New_Revenue_PDF_Special_Report_p/tld-sp-100.htm MBA, AEA and ALTA Uniform Closing Instructions Project Online Workshop (January 2008) http://www.mortgagebankers.org/files/UniformClosingPresentation.pdf Participation with ALTA and TLTA Task Forces


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http://www.octoberstore.com/Reeling_in_New_Revenue_PDF_Special_Report_p/tld-sp-100.htmhttp://www.mortgagebankers.org/files/UniformClosingPresentation.pdf


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Uniform Instructions – TLTA Comments

January 21, 2008 Page 1 of 12

UNIFORM GENERAL CLOSING INSTRUCTIONS Page 5 – A. 2 – Agreement to Comply – Second paragraph Tabled the discussion

Page 6 of 39 - A.4 Definitions - b. “Business Day” • Having business days (except for rescission purposes) be based on a particular lender’s

days of general operation may cause confusion. How is a closing office supposed to know what days lender is open for business?

• The same standard should be used for “business day” for all purposes – only excepting Saturday, Sunday and “legal public holidays.”

Page 7 of 39 - A.4 Definitions - k. “Disbursement Approval” • Add the phrase “in writing” to this definition. It is preferable to have written authority for

funding, rather than relying on verbal instructions.

Page 8 of 39 - A.4 Definitions - r. “Fund” • Add the phrase “and confirmed receipt thereof” to the end of the phrase. • This is important to address the situation in which the lender may have either mailed,

couriered or wired the loan proceeds to the settlement agent or insurer, but same has not yet been received.

• Alternately, is it the intention of the instructions that the transaction is “funded” regardless of whether the loan funds ever reach the settlement agent/insurer?

Page 8 of 39 - A.4 Definitions - s. “Lender” • Add to this definition the sentence: “All references to ‘Contacting Lender’ in these

instructions refer to this Contact Information.

Page 8 of 39 - A.4 Definitions - dd. “Person with Rights” • We think it would make things more clear if the “Training Directive” examples were made

part of the actual definition of the term.

Page 11 of 39 - A.4 Definitions - yy. “Title Policy” • We question including a link only to the ALTA website in regard to title policies. At least two

states, by regulation, do not issue ALTA policies.

Page 11 of 39 – B.3. Miscellaneous – Lender’s Successors and Assigns • We have concerns about the far-reaching implications of this.

Page 11 of 39 – B.4. Miscellaneous – Incomplete INSTRUCTIONS • Rephrase for clarity:

Settlement Agent agrees to request from lender before signing (and Lender agreed to provide before signing) any enclosure or attachment referenced in the ATTACHMENTS section of the SPECIFIC INSTRUCTIONS that was not previously provided by Lender.


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Page 12 of 39 – C.2. Title Insurance – Closing Protection • We question including a link only to the ALTA website in regard to title policies. At least two

states, by regulation, do not issue ALTA policies.

Page 13 of 39 – C.6. Title Insurance – Loan Number • Note: The currently promulgated loan policy forms in Texas do not allow for either a Loan

Number or a MIN to be included in Schedule A. A proposed new Loan Policy form, scheduled for adoption for an effective date of April 1, 2008, adds the Loan Number, but addition of the MIN will require action in a future regulatory hearing proceeding.

Page 14 of 39 – C.9. Title Insurance – Exceptions and Restrictions • Note: With regard to paragraphs b and c – this coverage in Texas is only available by

purchase of an endorsement or by issuance of a T-2R Mortgagee Policy (when available). Will the required endorsement be listed in the Specific Instructions, Item 7 – Allowable Exceptions?

• Note: With regard to paragraph d – a portion of this required coverage is not currently available in the promulgated loan policy or endorsement forms in Texas.

• Question: With regard to paragraph e – is it intended that the Lender’s approval in writing would be contained in the Specific Instructions, Item 7 – Allowable Exceptions?

Page 15 of 39 – E.1 Settlement Statement - RESPA • Our concern is that the use of the “knowing and uncoerced” waiver will become the default,

and the provision for time for the settlement agent to review instructions and provide advance disclosure to lender and borrower will be lost. A frequent reason given for waiving waiting periods prior to closing is the loss of the borrower’s “lock” on interest rate or fees. Would “losing the lock” be considered to be a type of coercion for an early closing?

• Question: Is it anticipated that there will be a standard form provided for use in waiver situations – perhaps giving a list of items that would be allowed as reasons for the waiver?

• Note: We are completely in favor of the provisions requiring advance receipt of lender instructions, advance disclosure of the settlement statement to borrower and lender and delay of closing if this is not possible.

Page 15 of 39 – E.2.a Settlement Statement – Lender Approval • Training Note: All settlement agents must be trained with regard to the importance of

defined terms when reading and complying with instructions – and the critical importance of reviewing the named parties in the Specific Instructions. Our concern is that often a mortgage broker will be playing the role of “lender” all the way up to closing and will represent to the settlement agent that he has the authority to approve settlement statements.

• Question: If the two-business day receipt of information by the settlement agent has been waived, is the one-business day for Final lender approval still in place? How is it anticipated that this will work?

• Comment: We are in favor of a prohibition against closing the same day that settlement agent receives lender instructions.

• Spelling out examples of “date driven” changes would be helpful, for example “pre-paid interest” and “interest on loan payoffs” and “tax prorations and/or tax payments” What else?


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Page 16 of 39 – E.2.c Settlement Statement – Changes at Signing • Comment: It may be important to be specific that this applies to changes to both the

borrower and seller side of the Settlement Statement. • Training Note: This means that the closer should not allow signing to continue until lender

approval is received. They must tell people to return to complete the closing after lender approval is obtained.

Page 16 of 39 – E.3 Settlement Statement – Closing Costs and Deposit Disclosures • Question: What is the definition of “depositor of any monies”? What must actually be

disclosed? Say, for example, the borrower brings in a Cashier’s Check – and the “purchaser’s name” is not that of the borrower – do we show this cashier’s check below Line 204, with the name of the “purchaser of the check” as the “depositor”?

• Comment: The definition should make it clear that it is not the settlement agent’s responsibility to “look behind” the items delivered for deposit – but may rely on the face of the item when determining the “depositor”.

• Comment: It appears that the above situation would be one that requires a postponement of closing until a changed settlement statement can be approved.

Page 16 of 39 – E.4 Settlement Statement – Borrower Loan Proceeds • Question: Under which portion – “Pre-Signing” or “Pre-Funding” – of the Loan Conditions is

it anticipated that these instructions will appear? • Question: Is Lender’s approval of a Settlement Statement showing cash to borrower not

sufficient approval for payment of loan proceeds to the borrower?

Page 16-17 of 39 – E.5 Settlement Statement – Payoffs • Question: Just to be sure – we assume that seller’s outstanding loans are not being paid off

with “lender’s proceeds” – is this correct? Or is it anticipated that any change in the seller’s payoff will also be covered under this provision – and that a settlement statement reflecting this change must be approved by the lender before signing can continue?

Page 18 of 39 – E.10.a & b Settlement Statement – Mortgage Broker Compensation • Question: If the lender is sending the money to the settlement agent to pay the Yield

Spread Premium or Mortgage Broker Fee to the Mortgage Broker, the instructions appear to indicate that these items not be shown as POC on the settlement statement. How can an item not be POC and also not be shown in either the Seller or Borrower column of charges?

Page 18 of 39 – E.10.d Settlement Statement – Mortgage Broker • Question: Will this be delivered to the settlement agent by the Lender? Is the settlement

agent responsible for verifying this signature in any way?


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Page 18 of 39 – E.11 Settlement Statement – Settlement Agent Fees • Concern: The fees on the Lender Instructions are generally based on estimates provided

by settlement agent before settlement agent knows the final terms of the loan. Once the loan agreement is finalized, settlement charges are based on the final loan – causing settlement fees to change, in many cases. For example – the premium for a title insurance policy and/or endorsements are based on the loan amount – a change in the loan amount changes these fees; some settlement agents base an escrow fee on the loan amount – a change in the loan amount would then affect this fee; courier fees are based on the number of courier deliveries anticipated – lender instructions may require more or fewer such deliveries, causing a change in the fee; and, of course, recording fees are based on the number of pages in a document, which will not be known until the settlement agent receives the documents for signing.

• Question: Is this anticipated? Currently, settlement agent fees are not spelled out in Lender Instructions – and the changes between the estimates and actual fees are dealt with during the Settlement Statement approval process, not requiring new Lender Instructions.

Page 19 of 39 – F.2.b Closing Conditions – Verification of Identity • Comment and Question: It appears that paragraph b.i and b.iii. both require the Borrower

to sign the Borrower’s Certification – although b.i. ties it to a document listed in the Loan Documents section of the Specific Instructions and b.iii. seem to apply regardless of whether it is listed. What is the intent? Was this an inadvertent redundancy?

• Suggestion: If it was an accidental redundancy, we suggest rewording b.i. as follows: Have Borrower complete and sign (at the bottom) the Borrower’s Certification (if listed in the Loan documents section of the Specific Instructions). Training Directive: The certification contains . . . . . Borrower’s signature on this document is not notarized.

Page 19 of 39 – F.2.c Closing Conditions – Verification of Identity • Comment: Texas settlement agents are not permitted, by State regulation, to sign

certifications. It might be preferable to include in the instructions something to the effect that unless the information provided in the Borrower’s Certification matches the identifying information provided by Borrower at Signing, closing shall not take place – or something similar.

Page 19 of 39 – F.2.d Closing Conditions – Verification of Identity • Training Note: A “Permanent Resident Alien Card” is often called a “green card.”

Page 19 of 39 – F.3 Closing Conditions – Loan Document Review • Comment: We previously expressed concern about the definition of “Business Day”

coinciding with days on which the lender is typically open to transact most of its business. • Questions: It appears that the intention is that the lender will provide Loan Documents

directly to the Borrower. o How will this delivery be accomplished? o How will the settlement agent know whether the lender has met this requirement? o Is it anticipated that the lender will provide a document for the Borrower to sign

acknowledging receipt one day prior to Signing?


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o Will this be provided to the settlement agent, so that closing can be rescheduled if not received?

Page 19-20 of 39 – F.4 Closing Conditions – Closing Process • Training Note: It is important to stress this to closing employees. In Texas, closing

employees will be instructed that it is against professional standards for an escrow agent to explain the closing process or documents to the parties – and will be encouraged to direct Borrower to other appropriate resources for answers.

• Question: Why is this limited to “before Signing”? It seems that the directive should include the words “before or during Signing.”

Page 20 of 39 – F.5.b Closing Conditions – Notice of Right to Cancel • Question: Receipt of Notice of Right to Cancel – shouldn’t the “appropriate receipt form” be

a “model form”?

Page 20 of 39 – F.5.c Closing Conditions – Home Equity Line of Credit • Question: Will there be a document included with the Specific Instructions actually called

“HELOC Credit Agreement”? We currently see similar documents called many different things.

Page 21 of 39 – F.5.d.i Closing Conditions – Rescission Date • Comment: How is the closing employee expected to know the correct “rescission expiration

date”? Determination of the correct date should be the sole responsibility of the lender. • If the lender advises that the date is incorrect – and the closing employee lines through and

makes the change – how is the lender to be notified?

Page 21 of 39 – F.5.d.ii Closing Conditions – Rescission Date • Comment: If separate notices are signed on different dates, the reference should not be to

“his/her own copy of the notice” – rather it should read “his/her own notice.”

Page 21 of 39 – F.5.d.iv and v Closing Conditions – Rescission Date • Comment: Move both iv and v up to appear following i. • Comment: Final sentence of iv. should be amended to read: “Any correction to either date

must be made only upon specific written instruction from lender as to the dates to be substituted.”

Page 21 of 39 – F.5.e Closing Conditions – Rescission Date • Comment: We were unable to determine exactly what was intended by this paragraph – and

why is this part of the instructions to the closing agent. Would it be better to include this information in the Rescission Notice itself, since it is the parties receiving that Notice who need to know?

• You might consider re-wording for clarity – and breaking into two sections – one for all borrowers signing on the same date – and another when borrowers sign on different dates.

Page 21 of 39 – F.5.f Closing Conditions – Rescission Date • Comment: Add the word “written” in regard to the instructions to be received from lender.


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• Training Note: Anticipate that the transaction will need to be re-signed if this occurs – and that a new rescission period will begin.

Page 21 of 39 – F.5.g Closing Conditions – Rescission Date • Comment: Is it anticipated that the Borrower will actually notify settlement agent of their

intent to rescind? Rather than putting the burden on the settlement agent of forwarding the notice to the lender, shouldn’t the settlement agent be advised to tell the Borrower that they need to deliver to the lender at the address/phone/fax shown on the Notice?

• Comment: If the instructions remain as written, we don’t understand why the settlement agent must not only fax the form to the Lender, but must also follow that up with a phone call or email?

Page 22 of 39 – F.5.h Closing Conditions – Rescission Date • Comment: The last sentence says: “If the Loan is not rescinded, Settlement Agent must

contact Lender for any required Disbursement Approval.” Since there is no way for the settlement agent to know whether the loan has been rescinded, it would be better to say: “When the rescission period has expired, Settlement Agent must contact Lender . . . .”

Page 22 of 39 – F.6 Home Owner Association Dues • Comment: Does the Lender require a copy of the “written statement provided by the HOA”?

Page 22 of 39 – F.7 Power of Attorney • Comment: Add a requirement that the lender’s acceptance of the use of the POA must be

“in writing.” • Question: On VA Loans, is the term used “Live and Well” as shown on the Instructions – or

“Alive and Well”?

Page 22 of 39 – F.8 Survey • Question: If they don’t match, and the settlement agent “notifies the lender” – then what? Is

the intention that the settlement agent doesn’t close until they receive written instructions from the Lender agreeing to the difference?

• Question: What if there is no address on the survey? Is this considered a “no match”?

Page 22-23 of 39 – F.9 Repair and Wood Destroying Organisms • Comment: This is a long and convoluted paragraph. Re-draft to make it easier to read and

understand. What is the requirement for the settlement agent to meet? For example: o a. If required by the Loan Conditions of the Specific Instructions, settlement agent shall

obtain “proof of completion of required repairs” on the form provided by Lender. o b. For VA Loans . . . . o c. For FHA Loans . . . .

Page 22 of 39 – F.10 Other Required Documents • Questions:

o If the lender is concerned about documents required by the purchase contract, shouldn’t these documents also be spelled out in the Loan Conditions of the Specific Instructions?


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How is a settlement agent to know what “documents required by the purchase contract” might be of interest to the Lender?

o What exactly does “before Closing” mean? Does this mean after the settlement agent receives the Specific Instructions – they must then contact the parties and have them come in prior to closing to deliver the documents? What if these are documents to be signed by one or more of the parties? Does this mean that there has to be a pre-closing document signing supervised by the settlement agent?

o What are examples of the type of documents that might fall into this category?

Page 23 of 39 – F.11 Document Formatting • Questions:

o What is an example of a document that might be prepared or created by the Settlement Agent – other than the HUD-1?

Page 24 of 39 – F.13 Document Signing • Comment: “No acknowledgment may be backdated.” In place of: “Closing Employee shall

not backdate any acknowledgment.”

Page 24 of 39 – G.8 Disbursement Conditions – Excess Loan Proceeds • Comment: This is fine, unless Lender requires the excess fees to be returned by Wire – in

which case there will be a cost for the wire, which should be born by lender. It might be better to add a sentence:

“Costs of returning excess loan fees will be reimbursed by Lender to Settlement Agent.”

Page 25 of 39 – G.9 Disbursement Conditions – Document Delivery • Question: Is it really intended that all of these documents will be delivered to the Lender

prior to funding? If not, the final phrase should be changed to “after Funding:”

Page 26 of 39 – G.9.d Disbursement Conditions – Document Delivery • Question: Does this refer to a signed “original” or a “copy” of a signed original? • Comment: Since it is not specific, there will be different interpretations.

Page 26 of 39 – G.9.h Disbursement Conditions – Document Delivery • Question: Who signs the application for a flood policy? Borrower? • Question: How is the settlement agent to know when the application for a flood policy was

signed? Is this Application something that is delivered to the Lender prior to closing? Brought into the closing office at Signing? Do they only need to apply – and not yet have a the policy? What is this all about?

• Question: What is an NFIP “Certification of Purchase of Flood Insurance”? • Comment: Need more information in order to properly comment and/or to train our

settlement agents.


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Page 26 of 39 – G.9.j and l and m, Disbursement Conditions – Document Delivery • Comments:

o What is required in each case – an original, a certified copy, just a copy? o What happened to paragraph “k”?

Page 26 of 39 – G.9.n, Disbursement Conditions – Document Delivery • Question: Is this only a requirement on a purchase money loan transaction? • Question: What does the term “signed original” mean? Is this only relating to a purchase

transaction, where the Deed to the buyer/borrower has not yet been recorded? • Comment: If this is a requirement for all loan transactions, a definition of “conveyance

document” is required. Not all property owners took title by virtue of a Deed. Property may have been inherited or have been obtained by a court order in a divorce or other type of legal settlement proceeding.

Page 26-27 of 39 – G.10 Disbursement Conditions – Document Delivery • Comment: Amend to read as follows:

Closing Employee must deliver to Borrower Payment Instructions document (provided by lender) regarding when, where and how Borrower is to make the Loan Payments, as provided by Lender in the Loan Documents section of the Specific Instructions.

Page 27 of 39 – H.1 Post-Disbursement Conditions – Loan Document Delivery • Comments:

o Define the term “in the same order delivered to Settlement Agent.” Most Lender Instructions are received via email – and no one controls the order in which the documents will print. Additionally, when documents are corrected or additional documents are required, that leaves the “order delivered” up to question and interpretation.

o It is unreasonable to expect Settlement Agent to return documents to each lender in a different order.

• Suggestion: A better practice, if lender’s want to receive documents in a uniform order, is to specify the order in which all documents will be returned (if applicable) for all loans. In other words, a Uniform Document Delivery schedule. This would allow settlement agents to create a checklist to use for training and quality assurance in regard to loan packages.

Page 28 of 39 – H.3 Post-Disbursement Conditions – Recorded Document Delivery • Questions: What is the definition of the term “promptly” in this paragraph? A standard

practice would be to deliver the recorded document (if received by the settlement agent) with the title policy. Is it anticipated that the recorded document should be returned to the lender separately?


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Page 28 of 39 – H.5 Post-Disbursement Conditions – IRS Filings • Comment: This instruction is unnecessary! IRS regulations place the burden for 1099-S

Reporting on the party shown as Settlement Agent on a HUD-1 settlement statement, or if another type of settlement statement is used, on the party preparing the settlement statement. The regulations are very plain that should the responsible party fail to file the appropriate report, no other party in the transaction becomes responsible. The only time a lender has any responsibility is when there is no settlement statement.

Page 29 of 39 – H.6 Post-Disbursement Conditions – Post Closing loan Document Requests • Comment: We are concerned about use of the term “in the normal course” – “the normal

course” of what? What if a settlement agent does not copy or keep copies of lender documents?

• Suggestion: Change the paragraph to read: Settlement Agent must provide Lender with any and all copies of Loan Documents requested by Lender in relation to the Closing, if any such loan documents were retained by Settlement Agent in the normal course of business, not later than 7 Business Days from the request, if the request is received by Settlement Agent within one year of the Disbursement, or 15 Business Days from the request if the request is received by Settlement Agent more than one year after the Disbursement.

Page 29 of 39 – H.10 Post-Disbursement Conditions – No Limitations on Usage • Question: We have the same question as before: “What is an example of a document that

might be prepared or created by the Settlement Agent – other than the HUD-1?”

Page 29 of 39 – H.11 Post-Disbursement Conditions – No Limitations on Usage • Question: What about the situation in which the loan document is not in compliance, but the

settlement agent could not reasonably determine that the document wasn’t in compliance? • Comment: It would be better to amend the paragraph to add the provision “executed or

completed” to read as follows: If Lender discovers that any Loan Document is not executed or completed in compliance with the Closing Instructions . . . . .

Page 30 of 39 – J .l Fraud Prevention and Disclosure – Reporting Suspicious Activities • Comment: This is a VERY IMPORTANT instruction and is, unfortunately, very poorly

worded. We suggest the following re-wording the first sentence of the first paragraph as follows:

As soon as reasonably possible after discovery, Settlement Agent or Signing Agent must notify Lender’s designated ‘Fraud Prevention Contact’ as set out in the LENDER CONTACTS section of the SPECIFIC INSTRUCTIONS of “suspicious activity.” “Suspicious activity” includes any activity in connection with the Loan that Settlement Agent suspects may be unfair, deceptive, misleading or unlawful behavior by any Lender or Mortgage Broker, or the employee of any Lender or Mortgage Broker.


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• Comment: We suggest the following re-wording of the second sentence of the first paragraph to add the highlighted language:

Lender indemnifies Settlement Agent and Signing Agent, and their employees, against any legal claims brought by a Lender employee, Mortgage Broker or Mortgage Broker employee who is the subject of any suspicious activity report given in good faith.

• Question: The second paragraph provides very good instructions with regard to stopping the Signing and reporting to the Lender – but then what?

• Important Concern: Settlement Agents continue to have concern about suits brought by sellers or borrowers for loss or damage because of closings suspended in keeping with these fraud prevention provisions and feel that they should look to lenders for indemnification in this regard.

• Training Issue: The prohibition against a real estate brokerage employee or agent or mortgage broker acting as an “interpreter” is buried within the second paragraph. It should be called to the attention of Settlement Agents that these “interested parties” should not be allowed to act as interpreters for borrowers who do not read or speak English – a disinterested third-party interpreter should be required.

Page 30 of 39 – J .2. Fraud Prevention and Disclosure – Suspicious Activities • Question: What level of “due diligence” is required of the Settlement Agent in meeting the

“reasonable person in the normal exercise of his/her duties”? This needs to be spelled out with examples.

• Comment: There is a grammar problem with this important first sentence. The wording should probably be as follows – replacing the term “its” with “his/her”:

Unless expressly . . . . is known (or should have been known by a reasonable person in the normal exercise of his/her duties) by Closing Employee . . . .

• Comment: the reference to “contact Lender” should be “contact Lender’s Fraud Prevention Contact” – especially since the standard Lender Contact person may be the one we are making a report against.

Page 30 of 39 – J .2c Fraud Prevention and Disclosure – Suspicious Activities • Question: What is anticipated by the reference to a fraud which “may be” committed? • Question: With regard to instruction iii:

o What level of diligence is expected with determining that an invoice might have been falsified or be incorrect?

o What level of diligence is expected with determining that a Loan Document includes “incorrect data.” Arguably, the Loan Application is a Loan Document – is a Settlement Agent supposed to review all of the items on this document with the borrower to ascertain whether all names, addresses and other data are correct?

• Question: With regard to instruction iv – inconsistent with what “earlier documents”? Most “earlier” loan documents are not in the possession of the Settlement Agent. Most “earlier” title documents appear in a chain of title, but are not in the possession of the Settlement Agent.


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Page 30 of 39 – K.1 Mortgage Broker Certification Comments: • The phrase “participating in the transaction” is too vague – it is possible that there may be a

mortgage broker about whom the settlement agent is unaware. • The phrase “Whenever a Mortgage Broker is participating in the transaction” should be

replaced by the phrase: “Whenever a Mortgage Broker is shown in Other Contacts Section of the Specific Instructions . . . .”

TX Closing Training: Best practices would indicate that this should be signed by the Broker and delivered to Settlement Agent at or prior to borrower signing.

Page 36 & 37 of 39 – L Electronic Origination Requirements The sub-committee did not feel qualified to comment on this section.

Page 38 & 39 of 39 – M Electronic Records Maintenance The sub-committee did not feel qualified to comment on this section.


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UNIFORM SPECIFIC CLOSING INSTRUCTIONS General Comments: We did not review this portion of the documentation critically but offer a few comments below.

Page 1 of 11 – Section 2 – Property Comment: It is very important to include a field for the “legal description” of the property to be given as security for the loan; street address and Parcel No. are not sufficient identification in many states.

Page 4 of 11 – Section 6 – Other Contacts – Seller Question: What is the responsibility of the Settlement Agent if the name of the parties in title – who will be delivering title to the borrower – is not the same as the name of the Seller in this section?

Page 5 of 11 – Section 7 – Mortgagee Title Insurance Comment: It will be important for lenders making loans in states where ALTA forms cannot be issued to require the appropriate state-specific forms of title insurance, rather than requiring the Settlement Agent to make a determination as to which state-specific forms may be equivalent to a list of required ALTA forms. Comment: In the “Allowable Exceptions” area, it will be important for lenders to be aware of issues which may render it impossible for a title agent to only except to taxes which are “not yet due,” as discussed previously.

Page 8 of 11 – Section 10 – Fees, Charges, Impounds and Payoffs Comments: • There should be some notation with regard to the fact that the lender may request that a fee

or charge be placed on an incorrect line on the HUD-1 – in which case, the settlement agent has a dilemma, unless this Section contains an instruction to complete the HUD-1 in accordance with RESPA Regulations. The preface to the Specific Instructions says that they take the place of any inconsistent instruction in the General Instructions (such as the instruction to complete the HUD-1 in compliance with HUD-RESPA requirements); however; the lender’s instructions do not relieve the Settlement Agent of liability under RESPA for placing fees or charges on inappropriate lines.

• Most escrow/closing systems do not allow Settlement Agents quite so much scope with regard to marking an item as POC by this array of parties. How do we anticipate addressing this from a practical standpoint?


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TMBA/TLTA Best Practices The Texas Mortgage Bankers Association and the Texas Land Title Association collaborated to produce “Best Practices for the Real Estate Settlement Process.” The Best Practices and the TLTA announcement are on the following pages. You are encouraged to adopt the Best Practices and meet with your counterparts in the industry to discuss the Best Practices and how they can work to the benefit of the lender, the title company, and our mutual customers.


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August 18, 2008

TLTA and TMBA Jointly Endorse New Best Practices

We are very pleased to announce that the Texas Land Title Association (TLTA) and the Texas Mortgage Bankers Association (TMBA) have worked together to develop and jointly endorse a set of Best Practices for the Real Estate Settlement Process and we are pleased to introduce them to you today for the first time. These voluntary guidelines are designed for use by professionals involved in the real estate settlement process as a way to establish appropriate timelines and create efficiencies, while preserving the integrity of the transaction and providing transparency, predictability and superior service to the consumer. How did this project come about? Over the past several years, TLTA leaders have worked with representatives from the mortgage lending industry on issues of common concern. During our meetings with TMBA, frank discussions took place about the real day-to-day problems that occur in the settlement transaction process and how that process might be improved upon, not just for one group, but for everyone involved in the process. A working group was developed with on the ground folks from both industries to identify the problems and seek solutions. These Best Practices are the result of those meetings and the hard work of those dedicated volunteers. We are proud that our association could participate and provide a forum for this groundbreaking, proactive collaboration and we believe the benefits will be far-reaching. In today's tough economic climate in particular, wide-spread voluntary adoption of these Best Practices by both industries will allow us to work smarter and more productively and to better serve our customer. Additionally, we believe that following these practices will help reduce the incidence of mortgage fraud. While these guidelines are clearly voluntary, we ask all of you to review and consider adopting them in your business. The more participation there is, the more success we can all realize for this cooperative effort designed to provide real and lasting benefits to everyone involved in exas real estate transactions. T

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http://www.informz.net/z/cjUucD9taT02NDEzOTUmcD0xJnU9MCZsaT0yNDcyMDkx/index.htmlhttp://www.informz.net/z/cjUucD9taT02NDEzOTUmcD0xJnU9MCZsaT0yNDcyMDkx/index.htmlhttp://www.informz.net/z/cjUucD9taT02NDEzOTUmcD0xJnU9MCZsaT0yNDcyMDkx/index.htmlhttp://www.informz.net/z/cjUucD9taT02NDEzOTUmcD0xJnU9MCZsaT0yNDcyMDkx/index.html

Best Practices for the Real Estate Settlement Process | TLTA and TMBA | 2008

Best Practices for the Real Estate Settlement Process s

These best practices were identified and developed through a collaborative effort between the title insurance and mortgage lending industries in Texas. They are designed for use by professionals involved in the real estate settlement process as a way to establish appropriate timelines and create efficiencies while preserving the integrity of the transaction and providing transparency, predictability and superior service to the consumer. These practices, jointly endorsed by the Texas Land Title Association and the Texas Mortgage Bankers Association, are for consideration and use on a voluntary basis by parties involved in the settlement process.

Adequate Time Periods • Within 3-5 business days of receipt of the loan application, Lender should order title and provide Title Company with

contact information for the funding Lender.

• After receiving the order, Title Company should contact Lender to confirm receipt, give estimated time for completion of title work and either request a copy of the existing survey or advise that a new one should be ordered.

• Within 48 hours of receipt of the survey, and no later than 5 business days prior to closing, Title Company should issue a signed and updated title commitment that includes all survey exceptions, if any (i.e. easements, boundary lines, etc. should be defined and located as to type and location or deleted.)

• Within 48 – 72 hours prior to the scheduled closing, Lender should provide Title Company with preliminary closing instructions.

• Within 24 - 36 hours prior to the scheduled closing, Lender should provide Title Company with final closing instructions and loan documents.

• Within 24 hours prior to the scheduled closing, Title Company should provide borrower with a copy of the note and HUD-1/1A for review.

Notifying Lender of Changes to HUD-1/1A • Title Company should close the loan only in accordance with Lender’s approved HUD-1/1A.

• Title Company should notify Lender of any changes to the HUD-1/1A and receive written approval from Lender prior to closing.

• Lender should provide Title Company with a written response to requests for changes immediately upon receiving proposed changes so that closing may proceed as scheduled.

Disbursement Approval • No funds should be disbursed by Title Company to any source other than those listed on the closing instructions

and the HUD-1/1A without prior written approval from Lender.

• Lender should provide Title Company with a written response to any request for disbursement modifications immediately upon receiving that request so that closing may proceed.

Fraud Prevention • Lenders and Title Companies should be vigilant in looking for red flags and inconsistencies in each transaction,

notifying each other of concerns and delaying closing until all issues are resolved. Privacy Protection • Lenders and Title Companies should periodically review their policies and practices to ensure they are in

compliance with all state and federal privacy laws and regulations.

• Except for the computer-generated 1003 to be executed at closing, documents that contain non-public personal information (i.e. pay stubs, bank statements, credit letters, etc.) as well as any documents containing final loan approval requirements, should not be sent to the Title Company.

Voluntary Guidelines Endorsed by the Texas Land Title Association

and the Texas Mortgage Bankers Association


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Mortgage Fraud I. Introduction The downturn in the real estate and financial markets has created opportunities for legitimate investors. Unfortunately, it has also created opportunities for perpetrators of fraud. It is more important than ever to be alert for possible fraud in real estate transactions. The FBI 2007 Mortgage Fraud Report found that mortgage fraud continues to be an escalating problem. The Mortgage Asset Research Institute reported in its Tenth Periodic Mortgage Fraud Case Report to the Mortgage Bankers Association (March 2008) that “professional fraudsters will devise new and improved schemes to exploit the weakness in the current market.” II. Factors Contributing to an Increase in Mortgage Fraud

A. Because of the slow-down (and in some cases - the stand-still) of the real estate market, property owners are becoming desperate to sell their properties, making them easy targets for fraudsters.

B. Those in the mortgage industry who are paid by commission are hurting

as the housing market declines and there are fewer deals on which to make a commission. As they struggle to maintain their current standard of living, those folks are targets for mortgage fraud perpetrators who can “help” them get some loans booked and closed.

C. With credit tightening and lenders raising lending standards, individuals

with good credit will be targets for fraudsters who will attempt to steal identities as part of a mortgage fraud scheme.

D. Home builders are suffering losses due to declining demand, rising

inventory, and increasing foreclosures. They may rationalize “bending” some rules.

III. Types of Fraud

A. Fraud for Housing - Fraud for housing commonly involves a borrower who makes misrepresentations or omissions with the intent to deceive or mislead a lender into making a loan that would not have been approved if the true facts were known. Examples are lying about income or employment history to qualify for a loan. The motive for the fraud is to acquire and maintain ownership of a house for personal use.

B. Fraud for Profit - Fraud for profit, like fraud for housing, involves misuse of

information with the intent to deceive or mislead a lender into making a


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loan. But, unlike fraud for housing, the fraud perpetrators have no intention of acquiring and maintaining a house, and no intention of repaying the lender. Their plan is to make off with the loan proceeds. The motivating factor is money. Fraud for profit is also called “industry insider fraud,” because it is often committed with the assistance of others in the industry, such as mortgage brokers, real estate agents, property appraisers, and title companies.

IV. Latest Schemes

A. Seller Assistance Scams

1. Areas with a depressed housing market are ripe for this fraud. When houses are not moving, sellers become worried and are motivated to “do whatever it takes” to consummate a sale.

2. The scam usually involves accomplices – an appraiser and a straw

buyer. The perpetrator finds an anxious seller and negotiates the amount the seller is willing to accept for the house, say $150,000. The appraiser inflates the value of the house, for example to $190,000. The seller and the straw buyer enter into a sales contract for $190,000. The straw buyer obtains a loan from a lender who relied on the false appraisal. For purposes of the example, say a 90% loan of $171,000. At closing, the seller gets his $150,000. The extra $21,000 (or possibly $30,000 with 100% financing) is paid to the perpetrator as a “servicing fee.” The straw buyer, who never intended to occupy the property, defaults on the loan. The lender is stuck with a $150,000 house, plus the costs of foreclosure, maintenance, and resale.

3. This scheme is sometimes called a “cash back purchase” or a “one flip

transaction” because it eliminates the need for two transactions to create a profit.

4. Watch out for red flags, which include -

a. A property that has been posted of foreclosure; b. A sales price that seems high and out of sync with the

neighborhood and the tax appraisal value;

c. A payment to a third party, often labeled as a servicing fee or a repair expense;

d. A real estate agent’s commission being based on the amount

paid to the seller, as opposed to the sales price;


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e. A buyer not planning on occupying the property.

B. Short Sale Schemes

1. The sellers involved in a short sale transaction are frequently in financial distress, and often about to lose their property due to foreclosure. They are vulnerable to swindlers, who present themselves as someone who can help the seller out of a dire financial situation.

2. A major factor in a lender agreeing to a short sale is the value (or lack

of value) of the property. The lender’s determination that a borrower is upside down (owing more than the property is worth) is calculated based on the value of the property. Fraud usually involves deceiving the lender about the value of the property or concealing funds that are paid to the seller. Many types of scams are being pulled off.

a. Sale of Personal Property – In this scheme, the parties present

a side agreement under which the buyer agrees to pay the seller for furniture or other personal property. They instruct the closer not to disclose the payment on the settlement statement, because it is outside of the real property transaction.

b. Multiple Settlement Statements – This scheme requires the

complicity of the title company closer. One settlement statement is prepared for the seller’s lender – the lender that has agreed to accept the short sale. The settlement statement shows a false purchase price, one that is less than the amount actually being paid by the buyer. The second settlement statement, provided to the buyer’s lender, shows the correct purchase price.

c. Sham Sales – The basis of the sham sale is a conveyance that

is not an arms-length transaction to a bona fide third party. Basically, the seller is trying to reduce monthly mortgage payments by pretending a sale. The sale is usually to a relative or a friend. The seller does not move out of the house, and may lease the property back from the “buyer.” Eventually, the property is re-conveyed to the seller.

d. Straw Buyer –

i. This is a sophisticated fraud for profit scheme.


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ii. The perpetrator identifies a potential property, recruits a straw buyer, and assists the straw buyer in obtaining 100% financing.

iii. The straw buyer deliberately defaults on the loan, and, then,

approaches the lender to approve a short sale.

iv. The sale is to the perpetrator, who has entered into a sales contract with the straw buyer for less than the value of the property.

v. The lender agrees to the short sale, not knowing that the

loan default was planned to create the short sale situation.

vi. After the short sale, the fraudsters sell the property at the actual value for a profit.

vii. A variation is a sale at an artificially inflated price, as

evidenced by a bogus appraisal.

viii. Another variation involves pulling additional money out of the property with the straw buyer borrowing money for repairs. The repairs are never made. Instead, the loan proceeds are pocketed by the fraudsters.

3. Watch out for red flags, which include –

a. A request that a payment not be shown on the settlement statement;

b. A request for conflicting settlement statements;

c. A sale to a relative, friend, or wholly owned entity;

d. A seller not moving out of the property;

e. A seller leasing the property back from the buyer;

f. A buyer not planning on occupying the property;

g. A short sale arranged shortly after the purchase of the property;

h. A sale of property for a profit by the buyer shortly after the

purchase at which the lender accepted the short sale.


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C. Foreclosure Rescue Scams –

1. When a borrower is facing foreclosure, the distress, financial and emotional, leaves that person vulnerable to fraudsters who offer to “help save your home.” Fraudsters promise to work out a deal to stop the foreclosure and re-structure the loan. One of the documents that the fraudsters have the victim sign is a Deed, conveying the property to the fraudster. Once title is transferred, the fraudster either obtains a loan to take out any equity in the house or sells the house. Nothing having been done to work out the loan with the original lender, the lender forecloses. The fraudster is long gone with the money.


a. A property that had been posted for foreclosure;

b. Title that was transferred shortly before the current transaction;

c. The prior “seller’s” lien being outstanding;

d. The current seller not living at the property.

D. Builder-Bailout Schemes

1. Many builders and developers are in financial distress as home and property sales continue to drop due to increasing foreclosures, rising inventories, and declining demand. In this scheme, a builder or developer, who is having difficulty selling inventory, offers incentives to the buyer (who becomes the borrower), and the incentives are concealed from the lender.

2. For example, the builder tells the buyer that the builder can help the

buyer qualify for 100% financing. The builder achieves this by increasing the price of the $200,000 house to $240,000, and in the sales contract showing a $40,000 down payment to be paid directly to the builder. The $40,000 is forgiven and never paid. If the lender forecloses, there is no equity in the home, so the lender suffers a loss because of the additional expenses due to the foreclosure, maintenance, and sale of the property.


a. A down payment made directly to the builder;

b. A sales price that seems too high based on the neighborhood and tax appraisal value;


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c. A real estate agent’s commission being based on the amount

borrowed, as opposed to the sales price.

E. Buy and Bail

1. Buy and bail is a tactic used by borrowers who want to get out from under a mortgage and want to buy another more affordable property. Typically, the borrower will be upside down, owing more than the house is worth, or the borrower may see another property as a better investment. The borrower approaches the lender for a loan for a new house, and tells the lender they will be renting the old house. Because the borrower has a good payment record and qualifies for the new loan, the lender makes the loan for the new house. The borrower then quits making payments on the old loan and lets it go back to the lender through foreclosure.

2. To counter the buy and bail scheme, Fannie Mae has adopted new

guidelines that require an owner to have 30% equity in a house before they can close on another property.

F. House Stealing

1. This scheme involves identity theft. The fraud perpetrators choose a

house to steal and assume the owner’s identity. They often steal the identity by obtaining personal information using the Internet and then creating fake IDs. Vacation homes, rental property, property owned by elderly people are favorite targets.

2. Watch for red flags, which include –

a. Documents signed outside of the title company or attorney’s office;

b. Signatures that don’t match;

c. Facts that don’t make sense, for example, a 30-year old

impersonator signing on behalf of someone who has been in title for 40 years.

V. Other Types of Mortgage Fraud Other types of mortgage fraud are still being perpetrated. Attached is a Mortgage Fraud Checklist, which identifies additional schemes and indicators to be alert for.


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VI. Conclusion How can we minimize mortgage fraud? Be alert for the red flags listed above. Follow the TMBA/TLTA Best Practices. Fraud is more easily discovered when the parties are not rushed to close. Use “identity risk management” – know the parties with whom you do business. Sources Federal Bureau of Investigation 2007 Mortgage Fraud Report (April 2008) http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm Federal Bureau of Investigation Financial Crimes Report to the Public Fiscal Year 2007 (October 1, 2006 – September 30, 2007) http://www.fbi.gov/publications/financial/fcs_report2007/financial_crime_2007.htm#mortgage Federal Bureau of Investigation Mortgage Fraud Webpage http://www.fbi.gov/hq/mortgage_fraud.htm Mortgage Asset Research Institute Quarterly Fraud Report (August 25, 2008) http://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-2008Q1.pdf Mortgage Asset Research Institute Tenth Periodic Mortgage Fraud Case Report to the Mortgage Bankers Association (March 2008) http://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-10th.pdf Fannie Mae Mortgage Fraud News: October 2008 https://www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews1008.pdf Fannie Mae Mortgage Fraud News: September 2008 https://www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews0908.pdf Fannie Mae Mortgage Fraud Update February 2008 https://www.efanniemae.com/utility/legal/pdf/fraudupdate0208.pdf Bankrate.com – Mortgage Fraud Flourishes in Down Markets (March 8, 2007) http://www.bankrate.com/brm/news/real-estate/reminiguide07/mortgage-fraud-downmarket-a1.asp?caret=4e Money Laundering and Mortgage Fraud: The Growth of a Merging Industry (2008) by Katalina M. Bianco, J.D., CCH Writer Analyst http://www.cch.com/press/news/CCHWhitePaper_Fraud.pdf Buy and Bail – The Latest Fraud Tactic (September 1, 2008) by Alden Smith http://www.loan.com/blog/2008/09/01/buy-and-bail-the-latest-fraud-tactic


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http://www.fbi.gov/publications/fraud/mortgage_fraud07.htmhttp://www.fbi.gov/publications/financial/fcs_report2007/financial_crime_2007.htm#mortgagehttp://www.fbi.gov/hq/mortgage_fraud.htmhttp://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-2008Q1.pdfhttp://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-10th.pdfhttps://www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews1008.pdfhttps://www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews0908.pdfhttps://www.efanniemae.com/utility/legal/pdf/fraudupdate0208.pdfhttp://www.bankrate.com/brm/news/real-estate/reminiguide07/mortgage-fraud-downmarket-a1.asp?caret=4ehttp://www.bankrate.com/brm/news/real-estate/reminiguide07/mortgage-fraud-downmarket-a1.asp?caret=4ehttp://www.cch.com/press/news/CCHWhitePaper_Fraud.pdfhttp://www.loan.com/blog/2008/09/01/buy-and-bail-the-latest-fraud-tactic

Mortgage Fraud Checklist

To help minimize the risk of mortgage fraud, use this checklist as a quick reference for each of your files.

If you answer YES to any of the questions, scrutinize the transaction more closely and consider discussing it with your manager or underwriting counsel.

Property Flipping Schemes

1) Does the appraisal seem high and out of sync with the neighborhood or the tax appraisal value?

Yes No 2) Does it appear there have been multiple transfers within a short time

period? If so, do the sales prices appear to disproportionately increase each time?

Yes No

3) Has the buyer on the contract changed between the initial contract and closing?

Yes No

Silent Second Schemes 1) Are the funds for the down payment being paid by someone other than

the borrower? Yes No

2) Have you been asked to show on the HUD-1 that the down payment was already paid?

Yes No 3) Was a “seller credit” for the down payment requested? Yes No

Nominee Loan / Straw Buyer Schemes 1) Have you been asked to make payments to anyone not properly reflected

on the HUD-1? Yes No

2) Will the buyer not be present at the closing? Yes No 3) Is there someone attending the closing who is not the buyer, seller, lender

representative, or one of the parties’ attorneys or real estate agents?

Yes No

Fictitious / Stolen Identity Schemes 1) Have you been informed, at the last minute, that a power of attorney will

be used for the closing? Yes No

2) Are you having difficulty obtaining proper, valid identification for every person executing documents at the closing?

Yes No

Distressed Seller / Pretended Sale Schemes 1) Is there any indication the sellers of the property are not aware that they

are actually selling the property? Yes No

2) Has the seller filed for bankruptcy, or has the property been posted for foreclosure?

Yes No 3) Is there any indication that the seller is not moving off of the property after

closing? Yes No

4) Is the seller leasing back the property? Yes No Suspicious Activities To Watch For

1) Has one of the parties purchased multiple properties within a short time period?

Yes No 2) Has any party to the transaction requested you to issue checks to

individuals or entities who appear to have no relation to the transaction? Yes No

3) Has anyone requested you to change the HUD-1 that has already been approved by the lender?

Yes No

This is a guide to current, common fraud schemes, not a complete reference. Fraudsters, by their nature, seek to find ways around rules, procedures, and safeguards, so fraud schemes will continue to evolve in type and sophistication.

2007 Checklist 2008 Texas Land Title Institute Uniform Closing Instructions - TMBA/TLTA Best Practices - Mortgage Fraud

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Uniform Closing InstructionsTMBA/TLTA Best PracticesMortgage FraudTLTA Comments 2008.pdfcover sheet.pdfUniform Instructions_TLTA Comments _2_