Free Leads? You've got to be kidding....

"TruClose Financial Services Lead Services" Did I mention that they are a title company?

On the intro to their webpage they mention a possible RESPA violation with their program - http://www.tcfstitle.com/:

"DISCLAIMER: Due to possible RESPA violations in the future, TruClose Financial Services, LLC is no longer offering its lead program as an incentive. Leads can now be purchased from TruClose at very low rates. Please contact President and CEO, Jason Sheppard at 888-510-9665 x 66 for more details."

Yet, in advertisements on other websites I found this:

"We are a nationwide title insurance company who are revolutionizing the industry one loan at a time. We offer free leads in exhange for your title work, best Turn Around Times and cheapest rates. Better than any JV on the market today! We close in all 50 states XXX@besstitle.com

And from the first page of their CURRENT website:

"We specialize in providing ARM mailer lists, Bankruptcy mailer lists, Foreclosure bailout lists as well as complete our own mailers and forward live transfer calls to
our clients. CLICK HERE FOR SAMPLE MAILERS. We only ask that we complete the closing for the borrowers we provide to you."

This is a self proclaimed national title insurance company. And they are (or have been) in the business of paying lead generation kickbacks to loan officers in exchange for title work. Is there a more clear violation of RESPA out there? Or am I missing something?

My questions:
1. Does anyone have a list of favorite class action lawyers to whom they would like to forward this post? This might be worthy of an investigation.

2. When will people figure out that it is just plain wrong on all levels, morally, ethically and legally to pay someone for referring "their" title work business? Remember, it's not "their" business to refer, it is their "clients'" business. It's not "theirs" to refer!

3. Aren't loan officers often (if not almost always) in a position of trust and reliance? Don't they refer to their customers as clients? Don't their clients rely upon them for their expert advice and knowledge? And don't loan officers view themselves as trusted advisors? Doesn't that make most loan officers fiduciaries?

4. I wonder how many state commercial bribery laws this company may have violated? If they do what they say, and pay loan officers leads in exchange for closing business. And loan officers are construed as fiduciaries, well...

Why don't CBA's post their fees and policies?

Why don't real estate related One Stop Shops post their fees? Obtaining a fee quote from a controlled business arrangement in my town is next to impossible. It's as if their fees are a guarded secret. And what type of owner's title insurance policy do they issue? Another well guarded secret at many of these shops dependent upon a highly secret conspiracy for their "revenue streams."

Most of the real estate related Bundled Services in the Minneapolis/ St. Paul area are hidden so deeply within the real estate or mortgage organization that you can't find them in the phone book, on the internet or through any other means. Most have completely different names than the mortgage company and are so well buried in their web of deciet that a search reveals nothing. And as a real estate consumer, you only find out about the Affiliated Business Arrangement when you are told where to show up for closing. You aren't told about their fees, who their underwriter is, what other companies charge, what policy you're going to be issued or the advantages of having an unrelated and unbiased title company close your transaction.

In what other industries are pricing and product kept so well hidden? In what other industries are fiduciaries encouraged to scam their clients? What possible reasons could there be to keep this information secret, aside from an interest in gouging their clients and preventing competition?

Real estate consumers deserve more. They deserve to know before they sign up for a fiduciary relationship that their agent or broker has opted to place huge conflicts of interests between them and their representation. And at the very least, they deserve to know the existence of a captured audience trap and the fees and policy that are going to be forced upon them.

Countrywide - no more broker owned title companies?

It is about time that someone recognized the correlation between controlled business and the mortgage fraud crisis. It is my understanding that Countrywide Home Loans just announced (at least locally) that mortgage brokers will no longer be permitted to use their in-house title companies to close for Countrywide funded transactions.

The role of controlled business in the mortgage fraud crisis has been totally overlooked. If a true survey were to be done, I believe that you would find that most of the mortgage fraud transactions in this country were closed by controlled business (aka Affiliated Business Arrangements, AfBA's, One Stop Shopping, Bundled Services, kickback schemes, sham title companies, One Stop Robbing, Sophisticated Captured Audience Manipulation (S.C.A.M.)).

RESPRO claims that there is only a 25% market penetration of controlled business in this country. So if anything more than 25% of the mortgage fraud transactions has been closed by controlled business, RESPRO would either need to revise their survey (pretty easy for them since they dumpster dive for data) or they would need to admit that controlled business played a role in the current mortgage crisis.

When your livelihood is primarily made from the title industry, you need to be very careful with the risks you insure if you plan on staying in business. Despite what you hear, it is a highly risky business with most of the risk being borne by the individual agents and never getting reported to the underwriter. As an independent, you are not going to insure a bad deal because a high producing loan officer pressures you to do it.

However, if you work for a title company and your boss is THE loan officer, you're going to do what you're told. Loan officers who have $5,000 in loan fees riding on a deal for which the only hindrance to closing is a title defect are much more likely to close the deal if they own the title company. If it is their title company, for which they care little, you can bet that they're going to "insure over" that title defect. The "checks and balances" of an independent and impartial title examiner have been excised out of the transaction.

Or an even more likely scenario is the fraudulent misrepresentation of owner occupancy status. Apparently, a large percentage of the foreclosures in Minneapolis (and possibly in the U.S.) involve investors who fraudulently stated on their loan applications that they were the owner occupants of multiple properties. For lending institutions, it is a much higher risk to lend money on a property for which the investor is likely to simply walk away if the deal goes South. So for those deals, they require a much higher down payment and they charge a much higher interest rate.

Not so with someone's home. A homeowner will typically do everything possible to make things work out and are rewarded with much better interest rates and smaller down payment requirements.

So it should come as no surprise that a large portion of the current mortgage fraud crisis involves properties that were falsely claimed to be owner occupied. This is an area that has received little attention and deserves much more investigation.

For loan officers, misrepresenting owner occupied status can be the difference between a commission on a loan or no commission at all. The stakes are huge and the importance of an impartial Closer are quickly demonstrated by the current number of foreclosures that were closed by title companies under the control of loan officers or mortgage companies.

Look at the situation from the perspective of a loan officer who owns a title company. Again, let's assume there are $5000 in fees riding on one seemingly innocuous statement: "owner occupied." Now let's assume the loan officer wants to make the misrepresentation. The question now becomes, who will close this transaction with the "owner occupied" misrepresentation?

If the loan officer has made the decision to make the misrepresentation and he or she owns a title company, the deal is done. There are no checks and balances. On the other hand, if the loan officer wants to commit a fraud and the closing takes place at an independent title company, you have now introduced a very serious "check and balance" that is likely at the very least to be a deterrent and even more likely to stop the misconduct.

If it is true that owner occupancy misrepresentation constitutes a large percentage of the mortgage fraud cases in America and if it is true that most of those transactions were closed by controlled business, then you can conclude that controlled business is responsible for a large portion of the current real estate and mortgage crisis.

Phillip Schulman on the First American Settlement

An excerpt from Phillip L. Schulman on the First American Settlement:

"While this latest settlement may send tremors through the settlement service industries, it is important to remember that affiliated business arrangements remain lawful under RESPA. Both the statute and the implementing regulations expressly permit them, and HUD has provided a template for them in its RESPA Statement of Policy 1996-2. If affiliated businesses are set up properly under the guidelines, there is no reason why they should not continue and flourish."

See his website on this topic: http://www.klgates.com/newsstand/Detail.aspx?publication=4146

Schulman's legal practice includes representing large brokerages. And he gives them advice like this? I think this guy is burying his head in the sand and is just telling his clients what they want to hear.

Why doesn't he mention anything about the fiduciary duties his clients owe to their clients? Isn't he setting up his clients for huge lawsuits like the Burnet class action? If this guy really wanted to represent his clients wouldn't the proper advice be to avoid controlled business at all costs?

He's an attorney so that means he is trained in fiduciary relationships. He is a fiduciary! If there were a job description for an attorney, it would be that they are fiduciaries. And fiduciaries are required to avoid conflicts of interest. So would someone please explain to me why he thinks it is a good practice to place a gigantic financial conflict of interest between a client and their representation? Is Shulman a big fan of dual agency too? Maybe I should hire him to represent me in a lawsuit against one of his clients. I wonder if he would take the case...

I'm sorry Mr. Schulman, but you seem to be prostituting yourself. If you really cared about providing good advice to the large brokerages who depend upon your advice, you would have special advice for your clients who are fiduciaries - RESPA is a MINIMUM standard. And if you're a fiduciary and don't want to lose every lawsuit and possibly expose yourself to class action lawsuits and possibly even criminal liability, then you should avoid conflicts of interest like controlled business. Sophisticated Captured Audience Machines (SCAMs) are terrible conflicts (oh pardon me, I forgot to put the spin on that, I mean "One Stop Shopping"). Now that would be good advice.

You are an attorney Mr. Schulman but you seem to be talking out of both sides of your mouth. If you were in the same situation and representing a vulnerable buyer in a residential transaction, would you really rely upon the RESPA disclosure as you instructed your client to close at your title company? Would you engage in these same conflicts when representing your clients? Or does RESPA trump your duties to your clients too? I challenge you to do it. I'll file the professional responsibility complaint myself.

Fiduciaries are to be relied upon for their expert advice. Your clients often become fiduciaries because their clients are vulnerable and need someone who will give them absolute fidelity and impartiality when it comes to guiding them in the very complex real estate decision process.

Mr. Schulman, you went to law school right? So what about the most important parts about representing your clients? What about those duties of diligence, care, and loyalty? Do you remember how important it is to represent your client's best interests above all others, ESPECIALLY your own (anything else would be self-dealing)? Are you really a fan of telling your clients that you have a multitude of conflicts, but you would still be happy to represent them because it really helps your bottom line? Or rather, didn't you learn that you're supposed to back off from representation when a major conflict presents itself?

I don't know, maybe my recollection of fiduciary law is out of date. Or maybe no one has paid me enough to change my opinion...

First American Title Needs to Remove "American" from their name

What could be more un-American then removing competition from the American free market system? That's exactly what First American has done. Instead of competing for title insurance business, First American has a "business model" of bribing Realtors and Loan Officers to "advise" their clients to select First American as their title company. For the record First American, if you’re listening, commercial bribery is a violation of criminal law.

For those of you who haven't heard, First American Title is in hot water AGAIN for setting up sham title companies to try and skirt federal and state laws forbidding kickbacks. These sham title companies exist for no other purpose but to funnel kickbacks to real estate professionals. Florida just fined them five million dollars and required them to close down all 84 of their "sham" title companies there.

Here's the HUD Settlement Order

Last year, Minnesota fined them five hundred thousand dollars and required them to close down 35 shame - oops pardon me "sham" - title companies. Same laws, same violations. Wasn't that sufficient to put them on notice that their conduct was illegal? What is the matter with you First American? Are you that stupid, or are you completely without ethics? I vote the latter.

How much more egregious does their conduct have to be before they throw one of their executives in jail? Bribery is serious stuff. Imagine bribing an opposing attorney to advise their client to settle a lawsuit with you. Imagine bribing a doctor to advise their patients to see a certain psychiatrist who is known to prescribe your drugs. Imagine finding the real estate consumer's weakest point and then bribing a trusted financial advisor (Realtor or Loan Officer) to exploit it. Imagine no more.

Instead of trying to find good, ethical and honest business models to embrace the purpose of the anti-kickback laws, First American choose to just find another way to pay the kickbacks. Mel Boise, wherever you are, damn you for creating this.

What kind of arrogance does it take to have complete disregard for honest, ethical and moral conduct? Their conduct was already condemned as being reprehensible by Minnesota and HUD and yet they do it over and over again in other states until they are caught. Is profit that much of a motive that it trumps ethics for them?

It is their brand of corrupt business practices that is destroying our free market system. Good, honest competitors are losing their ability to compete on the things that should matter and as a result consumers are getting ripped off. No longer do price, service and product matter when First American is "competing." For them it’s all about finding the threshold of bribery dollars that will convince a trusted real estate professional to betray their clients.

Why bother competing for business on service, product and price when you can buy the business by just paying off a person in a position of trust and reliance? Why respect the duties of fidelity that a real estate professional owes their client, when a few dollars in their pocket will result in a referral?

I'm tired of you First American. And I have sympathy only for the poor consumers and real estate professionals who got ripped off by you. How many real estate professionals did you seduce by telling them that everything you were doing was ethical and legal? How many of them are now in trouble because of you? I hope these licensing prosecutions spawn into class action lawsuits and unfair business practice lawsuits for you. And I should be one of them.

My company tried for years to compete against your firm only to be told by real estate professionals that they had their "own" title company. Nothing could have been farther from the truth. They didn't care that your company cost more. They didn't care what was best for their clients because the success of your bribery scheme required them to send all their business to you. Please tell me how I am supposed to compete with that? Please tell me how a consumer is supposed to ever find out that there are other options out there when you've bought their advisor?

If First American feels that they can take "competition" out of the American free market system, then I say let's take "American" out of First American. Or at least change it to First Un-American.