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We have recently been notified of a new type of
fraud involving short sales. The elements of the
fraud are described below:
1.
There is an existing first lien mortgage securing a
loan from an institutional lender.
2.
A new fraudulent mortgage is recorded. The
fraudulent mortgage has no title company identifiers
and appears to be uninsured. The lender shown on the
fraudulent mortgage is a private lender not an
institutional lender.
3.
A fraudulent release of the first lien mortgage is
recorded.
4.
A few months after the fraudulent mortgage is
recorded, we are asked to insure a short sale where
the purported new lender on the fraudulent mortgage
is accepting less than the amount owed.
5.
The lender holding the first lien mortgage, which
was actually never released, starts foreclosure.
The fraudulent mortgage is often signed by the owner
as part of a foreclosure rescue scam, but of course
there is no actual loan and the first lien mortgage
was never paid.
The release is a very good forgery and gives the
illusion that the fraudulent mortgage was a
refinance of the first lien mortgage. Below are red
flags that can help you identify this type of fraud.
 Red
Flag #1
The new fraudulent mortgage appears to be uninsured.
Red
Flag #2
The new lender on the fraudulent mortgage is a
private lender.
Red
Flag #3
The lender is allegedly agreeing to a short sale
only a few months after making the loan. Short
sales typically do not involve recent loans.
If you are asked to insure a short sale where the
loan was made within the last two years please be
cautious of these red flags indicating a possible
fraudulent transaction and do not hesitate to
contact underwriting for assistance.
Please contact
the underwriting department at Old Republic Title with any
questions
or give us a call at 610-251-1160 or
800-842-2080.
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