Ch-1 - TF

Title Agent Fraud Cases: Cases Analysis

• Title agents experience increased fraud, leading to substantial financial losses.
• Florida Title & Trust (FNF agent) successfully thwarted a wire fraud scheme, garnering positive media coverage.
• Training sessions address fraud prevention techniques. This session analyzes recent cases to prevent future incidents.
• Courts balance loss burden among victim and potentially wealthier party.
• Detailed case information available in the study guide.
• Title agents express concern and fear regarding current fraudulent activity. Sunny Title reported to Patrick Lester about a near-successful fraud against another title agent, resulting in a complete loss. This demonstrates the severity of the situation.
• Prompt action is critical for recovering fraudulently obtained funds.
• Increased vigilance around holidays (e.g., holiday season) is crucial because of increased fraud attempts.

Bank Liability in Wire Fraud Schemes

• Case Study 1 (Mortgage Lender Compromise):

  • Approved Mortgage's compromised system led to fraudulent wire instructions to Truist, causing significant financial loss; title company and bank acted as intermediaries.
  • Approved Mortgage sued Truist, but the court dismissed Uniform Commercial Code (UCC) claims due to a lack of privity between the banks.
  • The negligence claim proceeds, focusing on whether Truist had a duty of care in handling the wire transfer.
  • Fraudsters changed payoff instructions from Huntington Mortgage to Truist.
  • Approved Mortgage sent fraudulent wire instructions to the title company, which forwarded them to Bank United, which in turn sent funds to Truist. Truist deposited funds into an account flagged suspicious a couple of weeks earlier.
  • Truist then disbursed funds to the fraudster via cashier's checks, which were converted to cryptocurrency.
  • The plaintiff, Approved Mortgage, was forced to pay off the loans themselves. Important note: The fraud occurred two days before Christmas, and the time lag in the banking system (holidays) complicated attempts to freeze funds and recover them.

• Case Study 2 (Buyer Reliance on Fake Email):

  • Buyer wired nearly $150,000 to a fraudulent account after receiving compromised title company email.
  • PNC Bank, the buyer's bank, recovered most funds from Truist.
  • Buyer sued PNC for breach of contract (post-transfer actions).
  • The court ruled in favor of PNC, emphasizing the buyer's account agreement limiting bank responsibility.
  • Court limited the decision scope to events post-transfer and recovery efforts.
  • This case illustrates limited recovery potential against banks, especially when guided by an account agreement.
  • Buyer relied on fraudulent wire instructions from a compromised title company initiating a wire via PNC to Truist.
  • PNC and Truist initiated recovery efforts; PNC agreed to indemnify Truist for fund recovery.
  • Fund recovery was hampered by the timing (two days before Christmas), as banking systems were closed or operating with reduced staff, increasing difficulties in timely response.
  • The buyer learned of the fraud and notified PNC Bank, seeking recovery.
  • Recovery was incomplete: only about half the funds were recovered.
  • Important Note: The case highlights the critical importance of prompt action in fraud cases, as the longer the delay, the lower the chance of recovery. Holidays are particularly vulnerable times and fraudsters often exploit these periods.

• Case Study comparison (Fregell v. Wells Fargo):

  • In this case, a buyer (not a Wells Fargo customer) could not recover for bank negligence due to the lack of an account agreement.
  • This demonstrates limited bank liability without an account agreement.

Real Estate Professional Liability for Fraud

• Analysis of real estate professional liability in fraud cases, highlighting the standard of care.

Title Agent Insurance Coverage

• Case Study (E&O and Cyber Protection):
  • Daniel discusses title agent insurance (errors & omissions, cyber protection) handling fraud claims in court.

Protecting Your Business and Customers

• Courts prioritize timing in fraud responses, urgent action is critical for recovery, particularly during holidays.
• The timeframe of the fraud (e.g., close to holidays) is significant; cases illustrate the difficulties in achieving timely recovery when banking systems are down or staff minimized.
• Urgent action for recovery is key; delay diminishes chances for recovery.
• Vigilance is essential, especially during holidays, as fraudsters exploit such periods.

Explore recent case analyses on title agent fraud, focusing on the financial impacts and preventive measures against wire fraud schemes. This quiz examines significant cases, such as Approved Mortgage's experience with Truist, highlighting the complexities of liability and negligence in banking. Gain insights from court rulings that influence the industry.