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Source of Title Blog : Defalcations

Why the cost of Closing Protection Coverage has increased in Ohio
by Robert Franco | 2013/05/02

Effective yesterday, the cost to consumers for closing protection coverage has increased by $5 for each covered party.  Public records obtained from the Ohio Department of Insurance show that the change was largely due to concerns that losses caused by defalcations are uncertain and closing instructions are evolving.  A Demotech report recommended the premium increase.

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Categories: Defalcations, Risk, Liability and Claims, Title Industry

Source of Title Blog :: 2 comments ::

As I Predicted - The New Jersey Supreme Court Overruled a Bad Appellate Decision
by Robert Franco | 2010/08/03

Last year, I wrote a blog about The North Jersey Practice.  It was about an appellate case that held that an underwriter was responsible for an attorney's theft of funds - even though the attorney sole his client's money before the title company got involved. I wrote at the time, "I would expect a reversal on appeal."  And I was right...

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Categories: Attorneys, Defalcations, Title Industry

Source of Title Blog :: 1 comments ::

The North Jersey Practice
by Robert Franco | 2009/08/06

When the buyers hire their attorney to represent them in a real estate purchase and he absconds with their money, who is liable for the loss?  According to the Appellate Division of the Superior Court of New Jersey, the title company is on the hook.  The Court refers to this as an illustration of the "north Jersey practice."  Perhaps it's time for title insurers in north Jersey to rethink their closing procedures. 

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Categories: Attorneys, Defalcations, Escrow/Funding, Risk, Liability and Claims, Title Problems

Source of Title Blog :: 7 comments ::

From Roman Mythology To Greek Tragedy
by Robert Franco | 2008/12/29

There is a fascinating article in the Denver Post regarding the collapse of the Mercury Companies.  It has a pretty good timeline of the events that led to the company's demise and the fallout caused by the bankruptcy filing.  In just a few short years, the company went from $1 billion in revenue to bankrupt, with debts exceeding assets by about $42 million.  It appears that overzealous expansion wiped out the 61 year old family business.

In 2002, the company changed its name from Security Title Guarantee to Mercury Companies - a sure sign of hubris.  It seems the choice of the new name was quite ironic given its iconic demise.

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Categories: Defalcations

Source of Title Blog :: 0 comments ::

All The Makings Of A Hollywood Blockbuster
by Robert Franco | 2008/06/19

Fast boats, drug deals, vanished millionaires, and lots and lots of missing money .  Will they discover bodies or fugitives from justice?  And... where did the $2.5 million go? If some big-shot producer doesn't have a writer working on the script, they might be missing a golden opportunity.  Somebody... get my agent on the phone!

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Categories: Crime, Defalcations

Source of Title Blog :: 0 comments ::

A Few Simple Rules
by Robert Franco | 2008/01/24

If there is one thing you can say about the criminals in the title industry, they are courteous (if not very bright). Take for example, Jarrell and Katherine Britts, formerly of Eagle Title and Abstract. They stole $7.7 million and just patiently waited at their home to be arrested. How nice of them.

Jarrell Britt, who was an officer with the Clearwater police department before entering the title business, started Eagle Title in 1993. At one time he employed 75 people and closed 100 transactions a day. But, like most criminals, that wasn't good enough. He wanted more.

He managed to steal $2.6 million from the company's escrow accounts before selling the company to First American for more than $3 million in 2004. He was retained as general manager after the sale and managed to skim off another $2.1 million. It wasn't until he violated his non-compete agreement with First American that he was placed on administrative leave, then resigned, and the audit was conducted that discovered the missing money.

He had managed to conceal his embezzlement by blaming short-falls on redundant, erroneous wire transfers. But, it was soon discovered that he had diverted the funds to other business interests and bought nice cars, a 37-foot boat, and a $1.6 million dollar home; a nice home, where they courteously waited to be arrested.

From this story, I thought it would be a good idea to review a few simple rules for owners' of title agencies:

RULE #1: DO NOT STEAL FROM YOUR ESCROW ACCOUNTS!! That money does not belong to you - it is your customers' money. This is really the most important rule, and if you follow it the rest of rules aren't really necessary.

So, do not steal from your escrow accounts, but if you do...

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Categories: Crime, Defalcations, Ethics, Small Agents, Title Industry

Source of Title Blog :: 5 comments ::

Troubled Consumers Want Assurance
by Robert Franco | 2007/08/06

There is a great article in the Springfield Business Journal, Veteran Title Agencies Forced to Defend Practices. Basically, it describes the problems that Guaranty Title caused with its defalcation. Consumers want to know that they don't have to worry about getting caught up in a similar mess.

“It doesn’t take long to learn how to steal that money,” Clinkenbeard [general manager of Springfield-based Fidelity Title Agency] said. “It can happen fast.”

In recent weeks, Clinkenbeard and his agents have been reassuring customers that the title insurance industry – like all business sectors – has a small number of bad apples. He said the Guaranty Title scandal has had a chilling effect, especially for homebuyers handing over thousands of dollars in earnest money to Fidelity Title.

“The biggest question we get is, ‘How do I know you guys aren’t going to do this to me?’” Clinkenbeard said. “It’s a bad situation. Fidelity Title shouldn’t have to explain itself.”

That would be a tough question to field for anyone. It's like asking someone if they are lying to you... even if they say "no" how do you know that's not a lie? I don't think any agent would tell their customers that they have been embezzling funds from their escrow and its basically a game of musical chairs. "Let's just try to get your closing done quickly before the music stops."

Though underwriters conduct routine audits of their agents, the results of the audit aren't made public. As the Guaranty defalcation shows, even if their is a serious problem known to the underwriters and the department of insurance, it can be concealed for quite some time.

Is it necessary, at this point, to require title agents to undergo a public auditing process? Once a year agents could have their books audited by a public accounting firm to reassure the public that the company's escrow account is whole. But, what a pain that would be for an agency to submit to every year.

Maybe consumers just need to be reassured that their title company has been well established. Guaranty was founded in 2001 and developed the shortfall in their escrow account by 2006. By contrast, Clinkenbeard said that his agency has been around for nearly a century, through various owners and he purchased the agency from Fidelity, its underwriter, in 1997.

But even this doesn't seem to be a great measure of stability. An established agent could turn on hard times and not every new agent is susceptible to such dishonesty.

Defalcations can really be damaging to the reputation of the industry and have an impact on all agencies. The best way to control the situation is for better oversight by the underwriters and the departments of insurance. When a problem is detected, the agent should be canceled immediately. Or, if the underwriter and DOI believe there was an honest mistake that caused the shortfall, a controller should be placed in the office to straighten things out.

Consumers must have confidence in the title companies that handle their transactions. If the industry is unable to provide it, the regulators might have to consider requiring public audits, which nobody really wants.

Robert A. Franco

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Categories: Defalcations, Title Industry

Source of Title Blog :: 6 comments ::

Who Knew What When?
by Robert Franco | 2007/07/31

Defalcations aren't nearly as rare as they should be, especially in Missouri. On June 19, Nixa, Missouri based Guaranty Title Co suddenly closed its doors, apparently with no notice to its clients. A spokesperson from the Missouri Department of Insurance said that an investigation had been launched.

“We are charged with regulating insurance companies, and it’s also important that we ensure that consumers are protected in this situation,” a DOI spokesperson said in a statement. “We will be reviewing their financial records and accounts.”

But who knew what when? This wasn't the first the DOI had heard about trouble at Guaranty Title. The first week of July, the DOI acknowledged that it had received two complaints about the defunct title company last year. The DOI said that they could not release specifics about the complaints because they were still under investigation. However, he did comment that complaints about a title company could involve issues such as delays in paying premiums or filing paperwork.

Then, yesterday, an article in The Springfield Business Journal shed some additional light on the nature of the problems at Guaranty. LandAmerica, Guaranty's underwriter, audited the company in February 2006 and shared the results with the DOI about six months later when a complaint prompted an investigation. Guaranty's escrow accounts were short $500,000 and it failed to report over 5,000 policies totalling approximately $400,000 in premiums.

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Categories: Defalcations, Title Industry

Source of Title Blog :: 0 comments ::

Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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