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Rachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of Smith Dollar, PC, is licensed to practice law in California and maintains offices in Santa Rosa, California. Email Ms. Dollar
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Appellate Court Defines Requirements for CPL Coverage
New Freedom Mortgage Corporation filed a contractual indemnification claim against Lawyers Title Insurance Corporation. New Freedom brought the action against Lawyers Title to recover indemnity under the closing protection letter for an attorney’s alleged fraud at a real estate closing.
The CPL obligated Lawyers Title to indemnify New Freedom for actual losses incurred in connection with residential real estate closings arising out of, among other things, (1) the issuing agent’s or approved attorney’s failure to comply with written closing instructions regarding the payment or collection of funds, or (2) Fraud or dishonesty of the issuing agent or approved attorney in handling New Freedom‘s funds or documents in connection with such closings. The parties concede that the CPL was in effect and that its terms applied to the closing.
The evidence adduced at trial showed that the property sale at issue involved mortgage fraud with a significantly inflated property appraisal. The buyer defaulted on the loan, resulting in the foreclosure and sale of the property for significantly less than the appraised value as listed on the HUD-1 settlement statement, and this caused substantial losses to New Freedom. The principal issue at trial was whether the actions of the closing attorney involved in the sale of the property at the inflated price--a lawyer with Brochstein & Bantley--required Lawyers Title to indemnify New Freedom for its losses under the CPL. The jury found that it did and awarded $308,242.55 to New Freedom.
The Georgia Superior Court, Fulton County, entered judgment on the jury’s verdict for New Freedom. Lawyers Title appealed.
The Appellate Court reversed the Superior Court holding that in order to trigger coverage under the CPL for fraud at a real estate closing, the following elements must be proven:
(1) proof of fraudulent intent by attorney was necessary for mortgagee to recover indemnity;
(2) instruction defining legal fraud to include misrepresentation of a material fact, whether intentional or not, was substantially erroneous and harmful; and
(3) instruction that mortgagee did not have duty to mitigate or lessen damages was permissible.
The Appellate Court found that, in this case, the jury instructions given to the Fulton County jurors did not emphasize the “intent” elements of the first requirement to trigger coverage. As a result of the faulty jury instructions, the Appellate Court was required to reverse the Superior Court judgment becuase it was more than liekly that the jurors arrived at their decision without correct instruction as to what was required to prove the elements.
Failed Mortgage Firm Trustee Allowed $50,000 in Fees Union Leader
U.S. Bankruptcy Court Judge J. Michael Deasy will approve $50,000 in legal fees for the trustee of failed mortgage brokerage businesses Financial Resources Mortgage Inc. and CL&M Inc.
Bend Oregon Event to Help Homeowners Prevent Foreclosures Oregon.Gov
As part of an ongoing effort to help homeowners avoid foreclosure, state agencies are organizing a foreclosure-prevention event in Bend on Saturday, March 27, 2010.
Shelbyville Man Gets 2-Year Sentence For Loan Fraud Chattanoogan.Com
Prosecutor Gary Humble said the lost was approximately $2.3 million in the mortgage fraud involving hundreds of homes in the Shelbyville area.
Lend America, VP Ashley Banned from FHA Housing Wire
Michael Ashley, the embattled former vice president of Federal Housing Administration (FHA)-backed mortgage originator Lend America, and the company he worked for, were permanently banned from doing business in the industry last week.
Countrywide Tries to Pin Blame on Insurer Court House News
Countrywide Home Loans demands $111 million from Triad Guaranty Insurance, claiming Triad is trying to blame mortgage lenders for the insurer's role in the housing bubble and collapse.
Investors Say They Were Swindled in Property Scheme Fox 13 Now
Utah Division of Consumer Protection is joining forces with a few investors who claim they have been cheated by an agency called "Utah Mini Ranches.
Greenfield Man Accused of Housing Scam The Republic
A former real estate agent conned at least eight people by renting them properties actually owned by a federal agency and then running off with their deposits, prosecutors said.
Appraisal Institute Opposes Obama Administration's Plan for Homeowner 'Short Sales' PR News Wire
Citing concerns about increased mortgage fraud, four organizations representing more than 35,000 real estate appraisers today voiced their opposition to changes to an Obama administration program that will encourage "short sales" of homes.
Ownership Rights to Get Another Look TBO.Com
State lawmakers may beef up protections of property owners' rights by rewriting a law this spring that is at the center of a case of alleged fraud in Pasco County.
Thursday, February 18, 2010 F. Jeffrey Miller Trial Continued Testimony
As reported by Anne Mitchell, who viewed the trial:
Angela Parenza worked for Jeff Miller as the office manager for 7 or 8 years beginning in 1998. Parenza was indicted along with Miller and pled guilty to conspiracy to commit bank fraud and money laundering. Parenza testified that Miller or his contractors allegedly preferred to build all the...
Wednesday, February 10, 2010 F. Jeffrey Miller Trial Coverage Continued - Witness Testimony
Steve Middleton Testimony - Coverage Provided by Anne Mitchell
The Government continued in its cross examination of Steve Middleton. He was shown several HUD-1 statements involving sales of homes located in Overland Park, KS, and Olathe, KS. The HUD statements each allegedly showed line items of payments to (James) Moser & Associates, LLC's...
Monday, February 01, 2010 F. Jeffrey Miller Trial Coverage - Continued Witness Examination
According to Anne Mitchell, who is present in court for the trial:
Next Witness: Kelly Sanford
Kelly Sanford of the Federal Reserve was a short witness for the Government. Sanford manages electronic payments between banks and member financial institutions. He was shown copies of wire transfers and asked whether they coincided with the counts in...
Wednesday, January 27, 2010 F. Jeffrey Miller Trial - Prosecution Witnesses Continued
According to Anne Mitchell, who is viewing the trial:
January 13, 2010
Witness: Rick Hayes
Rick Hayes testified that on the day that he closed on his Miller Enterprise home, he received a phone call from the Kansas Banking Commission informing him that his loan was fraudulent. After the Hayes responded to a classified ad, they met with John...
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The information and notices contained on Mortgage Fraud Blog are intended to summarize recent developments in mortgage fraud cases and mortgage banking matters nationwide. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about mortgage banking, mortgage fraud matters or who believe they require legal counsel should seek the advice of an attorney. The creators, editors and sponsors of Mortgage Fraud Blog do not intend to create a confidential relationship or an attorney-client relationship by communication via or arising from this site.
Rachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of 
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