Abuse of Power - Unscrupulous Title & Mortgage Company Operator Orchestrated Fraud Scheme.

June 17, 2010 - PRLog -- A title insurance policy from Insurance Company protects real estate against risks and insures against loss. If a title policy as insured is ever attacked the Title Insurance Company is to defend the property, if necessary defend of the rights under the policy that adversely affects the title as insured. If a loss is sustained they protect a property up to the full amount of the policy, which usually is equal to the full price paid for the property.

A "deed" is merely an instrument whereby a seller transfers his or her right of ownership, whatever it may be, to you. It is not proof that the person described as the seller is actually the owner. It does not do away with claims or rights others may have in the property. From the deed, you cannot determine what rights others may have "rights" in the property, as well. There are mortgages and leaseholder rights... liens due to unpaid taxes... lien claims to those whom the owner owes money... mining, oil or air rights... and many others.

Anyone who has such a claim is, in a limited way, a part-owner. He or she cannot ordinarily be deprived of their interest except by having the claim settled or released. The property may be sold - even without their knowledge - but the claim is still good until satisfied. As a new owner you may know nothing about these risks, but you are still vulnerable to such claims on your property. That's why you need an insurance policy from a Title Insurance Company.

A former owner-operator of Noble Title Agency and Noble Mortgage Company in Colorado has been indicted by a federal grand jury in Denver on 63 counts of wire fraud in connection with a mortgage fraud scheme that Noble allegedly perpetrated.

The indictment states Noble knowingly devised and intended to devise a scheme to defraud lending companies that funded residential mortgage loans and for obtaining money from them and from buyers who paid cash for a residence by means of materially false and fraudulent representations.

Specifically, it was part of the scheme that Noble allegedly orchestrated the purchase of numerous residential properties, and then allegedly used a network of straw buyers, including family members and various associates, to fraudulently obtain mortgages.  Noble's straw buyers would obtain mortgages via sham paperwork submitted to lenders through Noble's mortgage company business, then would soon thereafter sell the properties to other straw buyers controlled by Noble.  

"It is important to prosecute mortgage fraud cases to protect the integrity of the financial markets," said U.S. Attorney David Gaouette. United States Attorney David Gaouette and Federal Bureau of Investigation (FBI) Special Agent in Charge James Davis made the announcement.

The defendant used companies he controlled to facilitate and conceal his scheme. Through Noble Mortgage Company, he acted as mortgage broker and arranged to have false and fraudulent documents presented to the lenders to enable the buyers to qualify for loans for the properties.

Then through Noble Title Agency, he acted as a title insurance agent, and caused commitments for title insurance to be issued which made it appear that the buyers would be purchasing the properties free of prior encumbrances and that the lenders would be guaranteed priority leans, when they would not be.

Closing agents or Title companies, in this case his Noble Title Agency was supposed to act as settlement agent. As such, they must establish and maintain escrow accounts which contain assets held in trust. During each transaction there are many entities and individuals involved that they performed services for and charged fees to, including a lender, a real estate professional, mortgage broker, title insurer, buyer and seller etc...

Settlement agents are supposed to track all receipts and disbursements from each settlement and escrow account, and, among other things, affirmatively agree to secure and file all documents which are part of the transaction, not abuse the trust that had been prearranged by all the parties involved.

Noble controlled the closings on these sales via his title company, allowing him to create false HUD-1 settlement statements that made it appear that the proceeds of the sales were being used to satisfy the prior mortgages on the property.  This, according to prosecutors, was not the case, as the loan proceeds and monies associated with the loans were not used to pay off the prior loans as directed by the lenders.

During the course of his fraud scheme, Noble repeatedly misrepresented the true state of title on these properties from lenders and his title insurance underwriter. When he was concealing the unpaid mortgages it allowed new title insurance policies to be issued.

The ripple effect of fraud is as deep as it is far-reaching; the overlooked, unknown victim in this type of real estate fraud scheme in this case is the actual Title Insurance Company, in which timing is everything generally does not find out about fraud until a discrepancy arises after the title commitment/policy is issued.

He also, allegedly, improperly diverted the funds intended to pay off prior mortgages into accounts under his control, using an entity called Equity Builders. The company was used as a conduit for the money and ultimately his own personal benefit.

"Investigating and prosecuting mortgage fraud cases remains a priority for the Denver Division of the FBI," said FBI Special Agent in Charge James Davis.

Noble was arrested by FBI special agents without incident in California and has been released on bond. The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

If convicted, the defendant faces not more than 20 years' imprisonment and/or a fine of not more than $250,000 per count for each of the 63 counts and Noble could also be ordered to pay restitution. Noble is being prosecuted by Assistant U.S. Attorney Linda Kaufman.

The Real Estate & Mortgage industry needs to step up its own brand of self-enforcement. While some days it may seem too big to curtail on our own, try to stop it we must. In this case, prevention begins not with millions, not with thousands, not with hundreds, but with one: one loan officer, one title office, one Mortgage Company – one person – at a time.
It is important to note that lending institutions, companies don’t commit fraud – people commit fraud.

We all need the fraudsters to FEAR retribution from the ethical honest "Real Estate Industry Professionals and Homeowners".


Michael S. Richardson
Director/Chief Quality Officer
Author of "An American Epidemic, Mortgage Fraud a Serious Business"
www.preventmortgagefraud.com

Follow me on Twitter @ FocusonFraud

# # #

Mortgage Compliance and Quality Control is staying abreast of the requirements of law and regulation that must be complied with in manner that promotes production.