Podcast
Questions and Answers
Patrick Lester received a postcard from Sunny Title about a title agent who was almost a victim of fraud. (Attention Check Question)
Patrick Lester received a postcard from Sunny Title about a title agent who was almost a victim of fraud. (Attention Check Question)
True
Florida Title & Trust is a FNF agent that was recently almost duped by a fraudster.
Florida Title & Trust is a FNF agent that was recently almost duped by a fraudster.
False
The courts always place the burden of loss from fraud with the party who has the deepest pockets.
The courts always place the burden of loss from fraud with the party who has the deepest pockets.
False
Banks are never held liable in cases of fraud because they are heavily regulated.
Banks are never held liable in cases of fraud because they are heavily regulated.
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What should you, as a closing agent, understand regarding the liability of real estate professionals in fraud cases?
What should you, as a closing agent, understand regarding the liability of real estate professionals in fraud cases?
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In the Approved Mortgage case, what was the initial point of compromise that led to the fraudulent wire transfer?
In the Approved Mortgage case, what was the initial point of compromise that led to the fraudulent wire transfer?
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In the case involving the buyer and PNC Bank, what was the primary reason the buyer sued PNC?
In the case involving the buyer and PNC Bank, what was the primary reason the buyer sued PNC?
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In the case involving the buyer and PNC Bank, what action did PNC Bank take that led to the buyer's lawsuit?
In the case involving the buyer and PNC Bank, what action did PNC Bank take that led to the buyer's lawsuit?
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In the Approved Mortgage case, what was the basis for the court allowing the negligence claim against Truist to proceed to trial?
In the Approved Mortgage case, what was the basis for the court allowing the negligence claim against Truist to proceed to trial?
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What was the specific trigger that caused Truist to request that PNC Bank return funds in the buyer/PNC case?
What was the specific trigger that caused Truist to request that PNC Bank return funds in the buyer/PNC case?
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What is the main focus of the discussion regarding real estate professionals and fraud?
What is the main focus of the discussion regarding real estate professionals and fraud?
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What aspect will be explored first in the discussion about fraud cases?
What aspect will be explored first in the discussion about fraud cases?
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Which specific case is expected to highlight the liability of real estate professionals?
Which specific case is expected to highlight the liability of real estate professionals?
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What recent event has caused title agents to become frightened or worried?
What recent event has caused title agents to become frightened or worried?
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Which of the following will the discussion NOT cover?
Which of the following will the discussion NOT cover?
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Study Notes
Title Agent Fraud Cases: Key Takeaways
- Title agents face increasing fraudulent activities resulting in substantial financial losses.
- Florida Title & Trust successfully thwarted a wire fraud scheme, garnering favorable media coverage.
- Focus on analyzing recent cases and preventative measures.
- Cases examine responsibility in fraudulent transactions: victims, institutions, or other parties.
- Banks are increasingly involved in lawsuits regarding fraudulent wire transfers, sometimes even suing one another.
- Real estate professionals face liability for fraud, adhering to a defined standard of care.
- Courts evaluate insurance coverage (Errors & Omissions, Cyber) for title agents.
- Crucial steps to secure businesses and customer relationships are laid out based on court decisions.
- Title agents are concerned about the rising tide of fraud, as evidenced by Sunny Title's warning about a nearly successful fraud targeting another agent.
Case Example 1: Mortgage Lender Compromise
- Approved Mortgage received fraudulent wire instructions from a compromised system.
- Parties involved: Approved Mortgage, Huntington Mortgage, Truist, Bank United, AER Operations.
- Funds wired to Truist, then to a fraudulent account (AER Operations) converted into cryptocurrency.
- Approved Mortgage bears some responsibility for the initial compromise.
- Truist potentially liable for negligence (not fraudulent transfer); liability centered on general duty of care regarding subsequent fund withdrawal.
- UCC claims against Truist dismissed due to lack of direct relationship (privity) between the banks.
- Negligence claim against Truist remains, focusing on general duty of care following the initial compromise.
- A delay in discovering fraud, possibly due to a holiday operation gap, likely contributed to substantial losses.
- Significant losses, with potential for partial recovery but time-sensitive.
- Discrepancies between wire instructions and account information (e.g., different address) noted by Truist; they flagged the account two weeks earlier, stopping a $115,000 wire.
- Truist employees dispersed almost $550,000 in cashier's checks to fraudsters.
- Approved Mortgage had to cover the lost funds.
- Case ongoing, pleadings filed recently. Timing of response (action taken) is crucial for recovery.
- Cases highlight potential bank-on-bank litigation and the limitations and gaps in UCC provisions regarding wire transfers.
Case Example 2: Buyer Fraud and Bank Liability
- Buyer's funds wired to a fraudulent account via compromised title company instructions.
- Parties involved: Buyer, PNC Bank, Truist, Compromised Title Company.
- Buyer wired funds following fraudulent instructions.
- PNC Bank was not held liable for the breach; liability restricted to conduct after funds were retrieved.
- Buyer received almost all funds from Truist via mediation and indemnity agreement.
- Fraud occurred two days before Christmas; holidays pose vulnerabilities.
- Prompt action (freezing funds within a day or two) and early intervention crucial for recovery; only partial recovery often possible.
- Buyer's recovery against a bank is very limited due to robust bank defenses.
- Buyer sued PNC for breach of contract focusing on post-retrieval conduct; and alleged discrepancy in account numbers; this was dismissed based on account agreements between the buyer and PNC.
- The buyer likely settled with the compromised title company.
- Case highlights difficulty in recovering funds from banks, even with clear fraud evidence.
- Fregell v. Wells Fargo: Court dismissed claim as the buyer was not a bank customer.
Key Observations & Takeaways
- Bank liability in fraudulent transactions is limited; complex lawsuits and potential bank-on-bank litigation arise.
- Holidays present heightened risks for fraudsters; vigilance and prompt action are essential..
- Immediate action and ongoing vigilance are vital in detecting and mitigating fraud.
- Bank recovery is often limited or impossible.
- Title companies should review and strengthen wire transfer policies.
- Customers should meticulously verify and confirm all wire instructions.
- Fraudsters exploit institution unavailability, frequently coinciding with holidays.
- Tight timeframes exist for funds recovery; only partial recovery is typically possible due to the quick nature of fraud.
- Early intervention in detecting fraud is crucial.
Additional Points (from new material)
- Title agents are very concerned about these cases.
- Recent case examples highlight the importance of diligence and verifying instructions.
- Timing (prompt action) is critical to minimizing losses.
- Holiday periods present vulnerabilities for fraudsters.
- Difficulty recovering from banks, especially if one is not a customer.
- Cases include instances where banks sued each other; further instances of complex legal battles involving multiple parties are likely.
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Description
This quiz covers key takeaways regarding fraud incidents faced by title agents, emphasizing prevention strategies against fraudulent schemes. It also discusses the burden of loss in fraudulent transactions, bank liability, and the responsibility of real estate professionals. Learn about the legal implications and insurance coverage related to these cases.
