May 2015 Newsletter

Oh, the Hazards of Running an Escrow Desk!

The latest in e-mail and wire fraud and a big thank you to a fellow escrow company owner and President of the Long Beach Escrow Association – PJ Garcia – for sharing and alerting us:

In California the Lender funds the Buyer/Borrower’s loan funds to the Title Company and not the Escrow Company, so there are 3 parties involved in the funding of the loan – the Escrow Officer asks the Lender to fund the loan. The Funder of the Lender company actually funds the loan, and the Title Officer of the Title Company receives the funds.

This is the story of what almost happened in a transaction:

The Funder is ready to send the money out and asks the Escrow Officer for the Title Officer’s wire instructions. The Escrow Officer sends an e-mail with the instruction to the Funder.

The Escrow Officer’s e-mail address is hacked and the hacker sends a look-alike e-mail with fake wire instructions to the Funder and a statement, “Sorry, sent the wrong wire instructions, here is the correct one”.

The Funder sends the funding figures to the Escrow Officer via the look-alike e-mail address. Using a look-alike e-mail address for the Funder, the hacker proceeds to transmit the funding figures to the Escrow Officer’s real e-mail. Still with me?

The Funder gets ready to wire the money to the fake wire account, BUT, her wire department had the presence of mind to call the Title Officer beforehand to confirm the wire instructions. This is when they uncovered the e-mail fraud on both the Escrow Officer and the Funder, and the attempt to mis-direct the funds.

It has gotten to the point that e-mails can be readily hacked by any smart hacker, particularly when it is a yahoo, gmail or other free account. How do we prevent this?

  • If you are a Buyer, call to confirm the escrow officer’s wire instructions while you are at the bank.
  • For a Seller requesting a wire for proceeds the Escrow Officer should call the Seller to confirm that the written wire instructions given are correct.
  • As a funder, call the Title Company directly to confirm that the wire instructions are correct.

Look at all the additional steps that we have to take now. What is this world coming to?

Why the CFPB really doesn’t give a darn about Congress

Jeb Hensarling (R- Texas), Chair of the House Financial Services Committee said in February that, “The CFPB undoubtedly remains the single most powerful and least accountable federal agency in all of Washington”.  Why is that and how did it come about?

Here’s the scoop: With the enactment of the Dodd Frank Act a bunch of government agencies were consolidated and one agency was established to oversee the protection of consumer interests. This agency is the Consumer Financial Protection Bureau (CFPB).

This is an independent agency and because they are under the Federal Reserve they are exempt from the Federal Advisory Committee Act, which demands open meetings and public involvement and reporting. They do not need funds from Congress to operate so they also do not come under any congressional supervision.

So, you ask, where do they get their operating funds from?

The power of the CFPB comes from the fear they put into the hearts of financial institutions through their investigations and that dreaded final “Consent Order”.

The CFPB has the right to fine and penalize any institution who seeks to defraud the consumer.

With the new TRID regulations that are coming to play on August 1 this year, here are the penalties that are coming to play when the new regulations are not followed by the Lenders:

$5,000 a day – first time around each day they don’t correct or fail to pay

$25,000 a dayIf the lender continues to disregard

$1,000,000 a day if the lender knowingly violates this law

Meanwhile, here are some examples of the muscles they have flexed and “donations” to their coffers for operations, just in the last year:

May 2014: Action taken against RealtySouth, the largest real estate firm in Alabama, fined $500,000 for not adequately informing their consumer clients that they have a choice when it comes to choosing service providers in the transactions.

January, 2015: Consent Orders against Wells Fargo and JPMorgan Chase. They found bank loan officers taking kickbacks through a now defunct Title Company . For their failure to oversee their employees Wells was fined $24 million and Chase $11.7 million in penalties and restitution.

February : NewDay Financial fined $2 million for using deceptive mortgage advertising and kickbacks.

Then it was All Financial Services, Flagship Financial Group and American Preferred Lending.

April: California based RMK Financial (Majestic Home Loans) was fined $250,000 for practicing deceptive advertising. Green Tree Financial $63 million for harassing and “mistreating” Borrowers who were trying to save their homes from foreclosure.

Right now they are taking action to penalize and ban those individual officers of defunct Genuine Title who conspired with Wells Fargo and JP Morgan Chase to take kickbacks.

There are more, but I won’t bore you or your eyes will glaze over. If a government agency is able to generate such funds on their own, and no Congressional funding is required , thank you very much, is it no wonder that they don’t care when Congress demands, yells, threatens and, in general, throws a fit?

A great example of “no money, no talk” and “if you don’t hold the purse strings it is hard to bring them to heel”.

Well, it’s too bad that Congress wised up and on April 14th, the House passed by a huge majority the “Bureau Advisory Commission Transparence Act”, which demands greater transparency and accountability and took away their exemption under the Federal Advisory Committee Act.

It will be up to the Senate next, and then the President to sign it into law. Also in the works, a five panel commission to oversee this agency instead of one Director holding the power.

Oh, and did I mention that the CFPB’s new headquarters is costing $215 million (and more)? This article may be old, from July of 2014, but it gives you a general idea of conspicuous consumption, all in the name of the consumer, no less!

The Spite House

A story that deserves some thought. The elderly homeowner did not want to sell her home to the developers, even after she was offered a cool million dollars.

So in spite of the bucks she stood her ground and the developer built the shopping mall around her.

She died a year later of cancer and the house transferred hands. It was due to be auctioned unless the present owner paid  up the $185,000 owed.

Here is the question: Should the elderly homeowner have taken the million dollars and had an easier last year of her life? Or was she right to stick by her guns? What did she gain? What did she lose?

Here is the article. You decide.

It’s time to do your income taxes!

I know what you are thinking: What the heck, I haven’t even finished filling my 2014 taxes and you want me to start on my 2015? Actually, yes, that is what the IRS is recommending you do.

What better time to start this year’s tax planning  than now, when you have an idea of what you did wrong last year and it’s still early enough this year to make sure you don’t make the same mistakes?

Marriage laws – What to tell those teenage kids  

Let’s call this a public service announcement. All you want to know about under 18 teenage marriage laws throughout the states is right here at your fingertips.

Gosh, it’s good to know that most states won’t allow you to marry if you are under 16, but gee, in Idaho you can if you have a court order. (Where is Idaho?)

In Mississippi, you can’t marry when you are under 15 years of age.  I feel like I am in some third world country with child bride practices….

Cell phone data – deleted is not actually gone

No one, and I mean absolutely no one can say that I am a techie. I can turn on my phone, I can take pictures, and every once in a while, I can figure out how to send out those pictures.

Phone data is just something that accumulates in my phone, willy nilly, because, hey, I text, I go on Facebook, and I connect with my office computer.

I figure that if I deleted something on my phone, it’s gone, goodbye, vamoose. But apparently, just because I can’t find it anymore does not mean that someone else can’t.

So for those of you who are real estate agents and your phone is an important tool of communication, be sure you remember that any communication and information on your phone (whether you deleted it or not) that involves transactions that end up in litigation can be subject to disclosure under a subpoena served.

So if you are sitting in court and swear that you did not send that text, some data forensic expert can prove you wrong and then there will be hell to pay… (See article)


(Real questions left on our website- verbatim!)


Q: Hi, My father passed his house to me by signing and notarizing the grant deed few months back. He has a mortgage on it and the property is in California.

I left the mortgage on his name and I am paying monthly payments.

I did not get the deed recorded at county office in a fear that lender might be notified and might call the loan due.

How long can I wait without having the deed recorded?

A: It is true that the Lender may call the loan due if they receive notification that the property has transferred to another person not on their loan.

However, holding the deed unrecorded is also not a good idea. Unless you do not pay the mortgage payments and the Lender looks into the title ownership, most lenders do not have the time and manpower to track the ownership transfers, if any, of all the properties on which they have loans on.

If you keep making the payments and don’t give them a reason to look into the chain of title to your property, you should be okay.

One thing you might consider is to re-do the deed and keep your father as one of the owners on the property, together with you.

There are, of course, financial and legal consequences to everything you do, so be sure you have gotten correct counsel from your legal and financial representatives on this matter before everything is finalized and recorded.

By the way, one way the Lenders might find out about the transfer is if you change the insurance coverage and take out your father’s name totally. The insurance company will alert the Lender.

Again, I recommend that even if you change the ownership to just your name, keep your father as an additional insured on the insurance policy just in case. Please talk to your insurance agent about this.

“A dog is not considered a good dog because he is a good barker.

A man is not considered a good man because he is a good talker”


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