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This One Is A Doozie!
by Robert Franco | 2007/08/09 |

According to an article in the Columbus Dispatch, Illinois Pair Accused of Scamming 5 Area Lenders:

An Illinois couple were accused yesterday of mortgage fraud in a 2005 scam that caused losses of nearly $1 million to five area financial institutions in one day.

Albert and Janna Pliner of Cook County, Ill., were indicted in Franklin County Common Pleas Court and accused of money laundering, theft and securing false documents after an investigation by the Central Ohio Mortgage Fraud Task Force, county Prosecutor Ron O'Brien said.

Arrest warrants have been issued for the couple.

Authorities said the Pliners purchased a home in 2005 near Canal Winchester. Two months later, prosecutors say, they went to five different lenders on the same day and obtained second mortgages and home-equity lines of credit, getting up to $280,000 on each loan.

I have heard about stories that involved two loans in the same day, and those of us in the industry know how possible that would be to do. There is that time between application and recording the mortgage documents that anything could happen. But FIVE in one day? That must have been a pretty busy day for the Pliners, but $1 Million, or there about, is worth one day of hard work... isn't it?

The Dispatch didn't have much information, not even the names of the lenders that were scammed, but thanks to a Source of Title member in the area we have more information for you. The scheme was a little more complicated than a first glance would indicate and may have involved some prior planning.

Source of Title Blog ::

The previous owner was Robert Ivanov. The Pliners held a second mortgage for $85,000 on his property filed February 27, 2004. About a year later, the Pliners bought the property at Sheriff's sale when U.S. Bank foreclosed on their first mortgage with a balance of nearly $280,000. The Sheriff's deed was filed April 13, 2005. The Pliners held title free and clear, but shortly thereafter things got a bit messy.

On May 18, 2005 the Pliners closed a mortgage with E-Loan for $250,000, which was recorded on June 3, 2005. Interestingly enough, this was only a ten-year mortgage. But, apparently the Pliners had no intention of making any payments.

On May 25, 2005 they got down to business and closed five loans - in what order is any one's guess. But, from the mortgages on record at the Franklin county courthouse here is what we know:

  • They closed a loan with Huntington for $265,000, which was recorded on June 3, 2005.

  • They closed a loan with JP Morgan Chase Bank for $280,000, which was recorded on June 9, 2005.

  • They closed a loan with Fifth Third Bank for $100,000, which was recorded on June 27, 2005.

  • They closed a loan with U.S. Bank for $183,470, which was recorded on July 5, 2005.

  • They closed a loan with National City Bank for $100,000, which was recorded on July 14, 2005.

That is a total of SIX mortgages on the property before anyone could figure out what was going on; a total of $1,178,470. But why didn't someone figure out what was going on sooner? Well, they may have figured it out but what could they do after all the funds had been disbursed?

The first two mortgages were recorded on June 3, 2005. First was E-Loan's at 10:39 am, then Huntington's at 11:32 am - less than one hour apart. I don't know if these were mailed in for recording, or if they had someone do an update when they were recorded. But, even if we assume that they were all updated and walked-through, I could see Huntington caught off guard. If the examiner updated the title at 10:30 am, by the time the documents made it to the recording clerk it may have been too late to catch the E-Loan mortgage.

However, it should have been plainly obvious to those who came next that there was a serious problem. At that point, though, there is little that could be done but file the mortgage and establish their priority where they could.

Franklin county, like many others, still does round-table closings, which are more susceptible to this type of fraud. Perhaps this will spark more discussions about changing to an escrow closing process that would ensure that the mortgage is filed and priority is established before any proceeds are disbursed.

Here is an excerpt from an article on the Website of Joseph & Joseph, a Columbus, Ohio law firm, Escrow Closing vs. Round Table Closing:
The escrow closing can avoid some of the disadvantages of the round table closing. There is an orderly recording of the documents and transfer of the funds. In the round table closing there is often a gap between the time of the closing and the recording of the documents and the update of title. The seller may actually walk away from the round table closing with a check in hand before the deed is recorded. The risk of this "gap" is eliminated in the escrow closing.

As criminals become more knowledgeable and more brazen in their schemes to rip off lenders and title companies, we need to be even more aware of the weaknesses in our procedures. When safeguards are available, such as the escrow closing, we need to seriously consider implementing them. The traditions of yesterday may create opportunities for the crooks of today.

So, my questions to all of you today: Is it the local custom of your area to do round table closings or escrow closings? And, do you have any idea how you would have handled this scenario if you had been filing one of the later mortgages in this transaction?

Robert A. Franco


Categories: Escrow/Funding, Mortgage Fraud

1312 words | 5069 views | 10 comments | log in or register to post a comment

I've often thought that this type o...
I've often thought that this type of thing could be done and wondered why we don't see it more often? Seems like quite an easy way to get a bunch of money quickly, especially with all of the on-line mortgage opportunities out there. One can spend an afternoon at their computer and apply for 100 loans.

As far as your question as to how I would handle it if I was filing one of the latter mortgages - generally when I receive documents to be filed from a client it is with strict instructions to do the bring-down immediately before the recording and to notify them if ANYTHING shows up. Assuming that the town recorder's office has indexed the prior mortgages, it should be very clear that something is amiss. I think it's probably prudent to record the mortgage anyway to establish priority for what it might be worth.

Here in CT we typically do escrow closings, so it's not so much of an issue.
by Lori Cassidy | 2007/08/10 | log in or register to post a reply

First, I would like to thank the Oh...
First, I would like to thank the Ohio officials for catching our Illinois crooks. That was very generous of them.

Unfortunately, here in Illinois, there exhists a gap period in most counties. The gap may range from a few days to several weeks. So, even updating the title prior to disbursing funds does not entirely eliminate the risk. Most of the county recorders would need to do some mighty catching up if we were to be certain of lien position prior to funding.

It is still advisable to update before funding here, nonetheless, to reduce the gap risk, which I believe is assumed by the title underwriter.

by | 2007/08/10 | log in or register to post a reply

Hence why we need title searchers, ...
Hence why we need title searchers, pre-settlement bringdowns, and efficient government offices that keep their records up to date.

I'm also surprised this hasn't happened more often. We all know where the gaps in the system are and now the scam artists are finding out, too.
by David Jenkins | 2007/08/10 | log in or register to post a reply

I read about this type of scam earl...
I read about this type of scam earlier this year in The Title Report. They call it a "scatter shot" or something like that. It's done with home equity loans because they are so easy to get. In the case of the one FATIC was able to stop earlier this year, I think one of the lenders caught on - maybe through credit report inquries.

Anyway, we do round table closings. We won't disburse unless the seller signs our disbursement affidavit which is petty strongly worded and our closers are trained to look into the sellers eyes while asking if they have recently gotten any other mortgages not being paid off on the HUD. The seller also has to initial that part of the owner affidavit.

This method won't catch a seasoned pro but does catch oversights and sellers who are trying to put one over on us but still have an honest bone in their body.

If a seller refuses to sign our disbursement affidavit, we handle the closing like an escrow closing and they can wait for their check.

A true crook can still take advantage but that's why title insurance is such a wise purchase.

Thanks for posting the situation. It's always good to be reminded of our weaknesses so we stay vigilant.
by Diane Cipa | 2007/08/11 | log in or register to post a reply

Title industry loss and loss adjust...
Title industry loss and loss adjustment expense ratios cannot be compared to Proeprty and casualty loss and LAE ratios until the time and effort that agents expend on loss mitigation and claim elimination are properly coded to Loss Adjustment Expense - like they they are in the P&C insurance industry.

Proper coding would not change the combined ratio of the Title insurance industry but it would demonstrate that the Title industry's loss and LAE ratio is probably in the 50% range, not 5%. The 5% loss ratio is strictly the incurred but not reported losses.
by Joe Petrelli | 2007/08/12 | log in or register to post a reply

I currently work for a title compan...
I currently work for a title company in central Illinois as a searcher. My current employer does NOT do datedowns prior to closing and doesn't have me check every document prior to recording deeds and mortgages. When I first started here a year ago I was shocked.

I worked for three years in southern Illinois as a searcher and this was always Priority #1. My previous company would NEVER disburse funds without checking every single document the recorder had left to record.

It was definitely easier to check every doc in the smaller counties. Unfortunately, from what I've encountered in the bigger central counties, the recording offices don't like letting searchers going through "their" documents.

I'm not surprised this type of fraud happened. I'm only surprised it hasn't happened to us and more frequently
by Emily H. | 2007/08/13 | log in or register to post a reply

In a case like this does anyone thi...
In a case like this does anyone think the recorders could have said something to the title co's. I live in kansas and I see alot of mortages coming thru with large amounts. 
by toni anderson | 2007/08/13 | log in or register to post a reply

Tennessee requires disbursement to ...
Tennessee requires disbursement to the seller at the table.

Of course, I have seen this not done more often than I have seen it done, but that is the law here, according to all the reports. In fact, I believe the state government changed the law a few years ago to require payment to the seller at the table because they thought some other player in the business (not sure if "predatory lender" or "sleazy title company" was the term used, but one of those) was benefiting from the delays at the expense of the seller.
by Tim Gatewood | 2007/08/14 | log in or register to post a reply

I typically don't comment on things...
I typically don't comment on things like this on the web, to avoid giving anyone ideas. What I don't get, though, is each title company is presumably paying off the same loan. Once the first title compnay pays off the loan, I would think that the lender would return a check, or wire to the next title company. Or call.

The lender must have returned $660K to the borrower without asking questions. Glad were all in this together.
by John Povejsil | 2007/09/11 | log in or register to post a reply

There never was a loan to pay off. ...
There never was a loan to pay off. All of these loans were apparently designed solely for cash-out. They may have even been equity lines where the banks really don't seem to care too much about the title. A title company may never have been involved with this scam, we really can't tell. Around here, the banks order a current owner search from some national vendor management company and they do all the disbursements themselves. They even mail the recording to the courthouse to be recorded. No pesky title fees that way. 
by Robert Franco | 2007/09/12 | log in or register to post a reply
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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