The first part of the week was spent at the Loews Ventana Canyon Resort, located north of Tucson, where I gave a presentation on leveraging the power of relationships.

A special thanks to my new friends at TitleServ National for the opportunity to work with a top notch marketing team.

The photos in Title-opoly’s sidebar, taken from the resort, are views of the Sonoran Desert and the Catalina Mountains.

I’m in Tuscon today to give a presentation about leveraging the power of relationships.  The title business is a relationship business.  Your success, or failure, is ultimately decided by the people that you associate with.  It’s about a conscious decision to bring some people into your sphere while selectively eliminating others.  The rule applies to every aspect of life. 

It’s important to form professional relationships based on mutual respect and shared values.  You’ve got to make good choices when developing order pipelines or making staffing decisions.  During the presentation, I’m going to discuss subtle signs indicating that something isn’t right about a business relationship.  I’m also going to share methods to create the professional boundaries that are essential to career success.

Readers know that I’m a believer in the power of technology to market title companies and to make internal processes more efficient.  At the same time, we can’t ignore the interactive role of the human element in shaping corporate destiny.

The presentation is approximately 90 minutes in length.  Let me know if you’re interested in a taylored presentation to give your corporate or professional group the edge needed to build successful careers and profitable operations.

 

WFTV.com reported today that the FBI, in cooperation with state authorities, is conducting hyper-localized investigations in Central Florida to hopefully combat a dramatic spike in reported cases involving mortgage fraud. 

The article indicates that investigators, at times posing as consumers and lenders, are targeting foreclosure rescue scams.

I really thought that the worst of this stuff was behind us.  Apparently, it’s not the case. 

As I’ve stated repeatedly while giving presentations, convicted fraudsters will find themselves in very bad places for extended periods of time after being judged first in the court of public opinion.

The Atlanta Business Chronicle reports that a federal judge issued a 28 year prison sentence for the king-pin of a massive property flipping scheme.  Phillip Hill had orchestrated the sale of hundreds of homes and condo units in the Atlanta Area.  The article mentions nothing of title industry involvement in the case, but I suspect that one or more title companies were implicated because flipping schemes can’t exist without the manipulation of Schedule A of title commitments.

My first question to prospective clients: What are your employees trained to do when confronted with fraudulent situations? 

It’s something of a loaded question because it implies that employees are equipped with formal skills to recognize the warning signs of mortgage fraud.  It also implies that management is visibly committed to battling mortgage fraud.  It’s sometimes difficult for title company management to make proper decisions when asked to do something inappropriate by a significant source of business.  I’m basically opposed to reverse competition and the AfBA because both business models severely limit the number of business sources that a title company is likely to have. 

Best practices to employ when dealing with the possibility of mortgage fraud:

Separate the players from the facts.  Mortgage fraudsters are often very charming and persuasive.  They are often important sources of business for title companies.  Cache phrase are often used like: “everybody gets paid”, or “the buyer and seller get what they want”, or “tell me what’s wrong with this deal.”  In effect, the criminal nature of a scheme could easily be blurred by the noise level that’s intentionally created by the fraudster.  Don’t think for a minute that you’re immune to the charismatic qualities of many white collar criminals.  Trust me, you’re not!  These people are natural predators who know how to find human weaknesses and leverage circumstances.  The weak market and plight of many sellers are exactly the types of conditions that incubate fraudulent activity.

Distance yourself from the situation to fairly assess the facts.  When red flags are present you need an opportunity to think clearly.  Don’t rush to judgment at this point.

Compare the circumstances in question to the normal flow of a transaction.  Don’t be afraid to list your concerns about a transaction on a piece of paper.  Create two distinct columns, one that shows things the way they should be and another that shows things the way that they appear to be.  Richard Nixon did this often when making difficult decisions during his presidency.  Visual tools of this type are very useful in revealing the finer points of fraud.  Remember one simple premise: You can’t do indirectly that which you can’t do directly.

Discuss the situation with someone else.  Every title professional needs a trusted someone to rely on as a source of second opinions.  The person can be a spouse, colleague, or friend.  It’s not enough to write an email, the discussion has to take place in person or on the phone.   You might find that answers present themselves while exploring your fears in an environment where honesty is the only expectation.  It’s possible that the other person would simply listen without adding much to the dialog.  Hopefully, you feel comfortable approaching your underwriter when dealing with difficult business situations.

Take a stand.  This seemingly simple statement has far reaching implications.  A title provider’s license is essentially a social contract and a promise to protect the interests of others.  I usually recommend a verbal confrontation with fraudsters with a follow up letter to the FBI. 

My points:

• Mortgage fraud convictions are much harsher today than in the past.
• Mortgage fraud can’t exist without title company involvement.
• Title industry models lack competitive attributes to deter mortgage fraud.
• Corporate culture presents a practical dynamic for mortgage fraud prevention.
• Best practices that identify and prevent mortgage fraud can be implemented through training.

 

On May 11, 2006, I had the pleasure of addressing a group of title professionals in Roanoke, VA.  This morning, by chance, I came across my speaking points from the event.  My introduction, which is rewritten for every presentation, was a bit surprising and revealing given the nature of recent discussions on this site.  The consumer was the primary focus of my talk.  I surmised then, as I fully accept now, that the future of the title professional lies solely in the consumer.

In Roanoke, I said:

My goal is to convince each of you of the need to step out of the role of a business person and assume the more serious role of a professional. 

A professional earns respect. 

A professional understands that there will be times when the answer must be no. 

A professional understands that all decisions aren’t necessarily business decisions. 

A professional places the interests of others ahead of personal interests. 

A professional understands that his, or her, services have great meaning to the community and are of great importance to others.

A professional weighs the moral and ethical implications of every decision.

Today you will frequently hear words that aren’t often used in our industry, words like: accountability, loyalty, duty, credibility, respect, obligation, responsibility, and courage.

Focus only on the consumer and you will depart this earth having left behind the legacy of a professional triumph.

Focus only on the consumer and you will be able to sleep at night.

Focus only on the consumer and your children will respect you and you will respect yourself.

My thoughts nearly two years later: 

My greatest fear is the industry’s subversion of professional standards to strictly pecuniary pursuits.  I feel that it’s possible for professionalism and business practices to converge and exist harmoniously, but I reject any argument that the title industry has attained such lofty heights, nor does it have the potential of doing so any time soon.  For the title community, the word “professionalism” only has meaning in the context of the consumer.   As the trend towards the foreign production of title abstracts and commitments gains popularity, the professional endeavor that is a title examination will follow the path of the horse drawn carriage.  Of course claims statistics will increase dramatically causing great harm to consumers.  

That is, unless title professionals set aside their differences to unite for a cause greater than themselves.

 The public at large, inclusive of public officials, has fallen prey to a canard that deceitfully portrays a title policy as having merit in and of itself.  You and I know that a title policy is worthless, possibly dangerous, if the process leading to its completion is dysfunctional.  And dysfunctional it is in January, 2008.  The public isn’t aware of the critical “back room” activities performed by “traditional” title agents because the activities have inexplicably been kept secret.  We’ve made the grievous, possibly fatal, error of selling title policies and settlement convenience, when we should have been been selling the importance of our skills, judgment, and experience.

At the end of the day, it could be said that the industry’s leadership is concerned only about the interests of the five largest players, soon to be four.

Recently, I was asked if I’ve published a list of upcoming speaking engagements.  I have not to date and probably won’t in the future.  Most of my speaking invitations come from corporations or professional trade associations.  The events are typically closed to the public.  My unusual credentials almost always draw a full house.

As you might imagine, the current housing crises has been “center stage” during my recent presentations.

This past Wednesday, I spoke to a responsive group of real estate agents in Frederick, Md.  The elevated degree of receptiveness to my perspectives was a pleasant surprise.

My talking points:

• Only by examining its causes do we surmise that mortgage fraud is properly characterized as a national epidemic, not a series of isolated incidents.  
• Only by scrutinizing the motives of mortgage fraudsters do we recognize the cultural corruption of an entire industry. 
• Mortgage fraud statistics correlate directly to foreclosure statistics which in turn point to a breakdown of professional protocol, and standards, in residential real estate markets.
• The disparities between mortgage fraud and predatory lending are academic at best.  Unethical, often criminal, behavior demonstrated by loan originators, appraisers, real estate agents, and title professionals is the real world nexus that definitively binds mortgage fraud to predatory lending. 
• Legislation and judicial interpretation are not the answers.  Heightened professional standards among real estate practitioners are the crux of the solution.
• Class action litigation will change the form and function of the real estate industry in the next decade.

In light of the subsequently released Bush initiative, I would add that it’s apparent that the feds don’t see housing values rebounding anytime soon.  If they did, the proposal would include a recapture provision if gains were realized when the select group of properties were sold.
  
Bob Carney, who extended the invitation to speak, graciously wrote a post about the presentation for his blog, Focus On Frederick.com.

Click here to read Bob’s thoughts about the lecture.

While preparing for the Frederick invitation, I prepared my own analysis of current foreclosure statistics. 

The results are startling:

It’s a generally accepted fact that 1 in every 196 U.S. households is currently in foreclosure.  Notice I said households.

The U.S. Census Bureau estimates that there were 116,011,000 households in this country in 2006.

Using that number as the basis, simple math tells us that 591,893 U.S. households face the distinct possibility of losing their homes at this time.

A recently released study commissioned by the The United States Conference of Mayors estimates that an additional 1,400,000 at least, will occur in 2008 representing a market value of $316,000,000,000.  You read it correctly, I said 316 billion dollars.

What’s all this mean in practical terms?  In the absence of intervention in one form or another, roughly 5,178,922 men, women, and children could lose their homes between now and the end of next year, or sometime soon thereafter.

The numbers above represent a situation where every person living in the Washington Metropolitan Area were to almost simultaneously lose their homes.  The densely populated area includes the District of Columbia, 5 Maryland counties, 9 Virginia counties, and 1 county in West Virginia.

It’s as though every person living in the Tampa - St. Petersburg Clearwater Area and the Denver - Aurora Area combined were to lose their homes.

It’s the numerical equivalent to every person residing in the state of Minnesota finding themselves without a place to live.

In 2008, a citizen of this country will be 9.25 times more likely to lose their home to foreclosure than to die of cancer in any form.

I still have date availability for 2008.  Let me know if your professional group, learning institution, non-profit, or company is interested in bringing me in for a presentation.

 

On Friday, July 13,  I’ll be a featured speaker at the Illinois Land Title Association’s centennial celebration.

Place: President Abraham Lincoln Hotel, Springfield, Illinois

Time:  1:00 PM - 4:00 PM

Click here to view the published brochure. 

I’ve been studying foreclosure statistics and trends to enhance my presentations.  Amazingly, less of a historical correlation exists between economic factors and foreclosure rates than one might think.  An exception would be the effect of rising interest rates on the vast number of outstanding adjustable rate mortgages.  Much of the data predates subprime lending application and it’s confusing array of products.

An indisputable link can be established between subprime lending, mortgage fraud, and foreclosure rates. 

The leadership of the title industry remains disturbing silent even though it’s positioned to make an important contribution in regards to mortgage fraud prevention.  One can only surmise the immense magnitude of financial losses suffered each year by underwriters due to foreclosures and classic forms of mortgage fraud.  What’s the problem?  Is it possible for an entire industry to be completely indifferent?  Is the working relationship between the title and mortgage industries foundering to a degree that viable solutions can’t be discussed?

I really have to point a finger of blame at the leadership of the title industry, or the lack thereof.  Sadly, only analytical solutions are publicly proposed at this time.  Tagging individual and properties as high risk factors has done little, if anything, to diminish the incidence of mortgage fraud and it’s impact on foreclosures.  In other words, if the approach didn’t work last year,and it didn’t, there would be no reason to assume that it will work this year.  An algorithm is no match for a fraudster intent on manipulation.

The U.S. Justice Department continues a misguided agenda of prosecuting mostly notorious fraudsters in metropolitan areas.  It’s a robotic and bureaucratic approach that makes for good political talking points, but has very little practical effect in a real world setting.

State and local authorities often recognize the existence of a problem, but lack the resources to confront this sophisticated form of theft.  

Title insurers must take a visible stand if the situation is to change.  Regardless of individual state guidelines, insurers need to raise their own standards regarding agent recruitment, professional development for agents, and auditing protocol.  We all know that mortgage fraud can’t exist without the tacit cooperation of title professionals.  

Why not do something about it? 

 

On June 13, 2007, I’ll be speaking at the Renaissance Hotel, 1230 South Pine Island Road, Plantation, Florida.  The following day, June 14, 2007, I’ll be at the Hilton Garden Inn, Tampa North, 13305 Tampa Oaks Blvd., Temple Terrace, Florida.  Both events are being hosted by Southern Title.  For more information, contact Gene Mccullough @ emccullough@southerntitletn.com.

I’m excited about spending a couple of days with my new friends at Southern Title.  The presentations next week are the 1st and 2nd of 4 that I’m scheduled to give for the company.  Southern Title describes itself as a regional underwriter doing business in 20 states and the District of Columbia.

Excerpt from Southern Title’s website:

We distribute title insurance primarily through our agencies.  We are an agency-driven company, therefore, we spend our resources making the independent agent successful. Our motto is not to compete with our business partners. We try to use the dollars paid to us by our agencies in ways that will support our agents. Our agents agree that they would rather have an underwriter that works for them than one who competes against them.

The map isn’t very clear, but Southern Title has agency operations in the states colored green with a license pending in the state of Illinois.  The underwriter’s commitment to it’s agent base is refreshing and commendable.   If you’re interested in becoming an agent or learning more about the company, I’m sure that Gene Mccullough would be more than happy to speak with you.

 

On another topic:  The Mortgage Asset Research Institute recently released a study naming Florida as the state with the highest incidence of mortgage fraud followed by the states of California, Michigan, Georgia, Utah, New York, Illinois, Minnesota, Colorado, Nevada.

Last week, I wrote about the mortgage fraud concerns that were shared anonymously by Michigan title agents.  Click here to view previous post.   I also asked my Active Rain audience to share their concerns and experiences.  The result was overwhelming to the point that I’ve been unable to respond to everyone.  Click here to view Active Rain post.

I spent Saturday morning categorizing the information provided to date.  My original thought was to provide an educational resource in the form of a Squidoo Lens.  Click here to view.   I’ll continue to maintain the Lens in a general sense, but it’s simply an inadequate platform for the task at hand.  

A blog titled Mortgage Fraud Forum has been launched to hopefully share mortgage fraud concerns in an open and direct manner.  The added versatility and flexibility of a blog over a Lens is indisputable.  Questions will be posed anonymously based loosely on the actual experiences of real estate insiders.  Answers will be published that address the issues first from your perspective and then from the perspective of a consumer.  

The first post on Mortgage Fraud Forum is aptly named In the beginning.  It was also the name of the first post on Title-opoly.  Your input concerning the enhancement of the new site and the vision of the project is very important to me.   Mortgage Fraud Forum belongs to all of us, so please take the initiative to contribute and comment as often as you like.  My concern is an enormous influx of governmental intrusion with long term detrimental effects to our profession if we don’t do something soon.  If ever there was a time to act; it’s now. I believe that mortgage fraud can only be conquered through the education of our industry and the consumer.  A community based approach to fraud prevention provides each of us with an opportunity to reach out to our neighbors.  An aware consumer may, in time, prove to be the fraudsters worst enemy.  

I’m convinced that our collective voice can be heard and that it can make a difference. 

… is one that’s done with one eye closed.  I’d like to thank my new friends in Grand Rapids, MI, for sharing this insightful and accurate statement with me.  I’d never heard it before and had to laugh.  Obviously, all of us have confronted title issues that were better left undisturbed.   Professional judgement sometimes dictates that silence is the appropriate response when a matter is certain to rectify itself in time.  I’m not sure that the title insurers reading this post will agree.

We started something new in Michigan over the past several weeks.  Index cards were made available to audience members who were then able to ask questions anonymously.  It’s a really great idea considering the serious nature of my presentation.  A significant number of very relevant questions were asked.  As time permits, I’ll present each question along with my response for the benefit of Title-opoly readers.  The questions themselves offer a glimpse of the real world issues facing the title community at the street level.  Ultimately, I’ll launch a Squidoo Lens containing the questions and answers in aggregate as a reference tool for all title agents.  Please feel free to enhance this project by adding your opinions or experiences.   Your questions are always welcome.

A question was asked on Title-opoly by a reader that I assume was at yesterday’s presentation.  I’ve decided to use it as the beginning point of this series. 

Question:  I’ve been verbally instructed to facilitate a cash contribution of $5,000 from seller to buyer.  The lender is aware of the contribution, but will not approve it in writing or allow it to show on the settlement sheet.  Is it a problem if I comply with the seller’s request to pay the buyer $5,000 from seller’s proceeds if it doesn’t appear on the settlement sheet?

Answer:  This is an excellent example of mortgage fraud where the title agent is exposed to criminal and financial liability while the mastermind lender goes to great lengths to shelter itself from culpability.   A verbal instruction from a  lender means nothing to a title agent until such time that it is formally reduced to writing.  Keep in mind:  The lender is the actual source of funds and is not often the loan officer, or processor, who might have referred the order.  A crime is committed every time money is exchanged in a fashion that’s not explicitly reflected on the settlement sheet.  Specifically, postal inspectors have jurisdiction when the fraudulently prepared settlement statement is delivered to the lender via US Mail, Federal Express, UPS, etc.  Quickly report this scenario to your title underwriter who has serious exposure due to the terms of it’s Insured Closing Letter.  Report this transaction to the FBI in writing if you later gain actual knowledge that it closed through another title company or law office.

Oscar Beasley, now deceased, is a hero of mine and a giant of the title industry. I often mention him during presentations to inspire others to strive to emulate the professional standards that he personified.

This recording was made last May in Norfolk, VA. I've mentioned Oscar numerous times since then, but the sound quality of this segment works best. (Length 2 min 10 sec)