What’s the worst collateral defect you’ve caught on a note tape?

Question

When auditing loan tapes during due diligence, standard O&E reports often verify that legal title is clean, but miss whether the note itself is properly perfected against the dirt.

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Drop a comment below: If you've been burned by one of these (or caught one just before funding), what was the defect and what did it take to cure?

Don Konipol · Answer

My experience involves a lot of mortgage fraud we caught (mostly) before investing.

• Borrower extorted title fee office owner to “issue” forged title policies appearing to “insure” 7 different loans as first liens against the same property. The attorney/title office agent was paying $20,000.00 monthly for her daughters drug rehab and accepted the bribes.
• Title closer in cahoots with borrower filed deed of trust in the wrong county so that the title report would show up “clean” for the borrower to place another “1st lien” on the subject property
• Borrower created an entire phony title office location, forged title commitment and policy of a soon to be defunct underwriter, created a phony purchase contract for 17 SFR, and successfully borrower $700,000.

Borrower extorted title fee office owner to “issue” forged title policies appearing to “insure” 7 different loans as first liens against the same property. The attorney/title office agent was paying $20,000.00 monthly for her daughters drug rehab and accepted the bribes.

Title closer in cahoots with borrower filed deed of trust in the wrong county so that the title report would show up “clean” for the borrower to place another “1st lien” on the subject property

Borrower created an entire phony title office location, forged title commitment and policy of a soon to be defunct underwriter, created a phony purchase contract for 17 SFR, and successfully borrower $700,000.

Chris Seveney · Answer

Could write a book just on this topic.

Broken chain of assignments and gaps is common. I've seen liens recorded before the mortgage, I've seen someone sneak in a mortgage before the mortgage they were signing up for, and I've seen documents signed by power of attorney with no power of attorney attached. I've seen mortgages recorded before the deeds.

This past year, I have had two fraudulent transfers. Have someone deceased and someone else sign for them, or, if it's heirs, not all of them signing when the property is transferred. I'm sure there is more.

What’s the worst collateral defect you’ve caught on a note tape?

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