Co-Owner Gets Reduced Penalty In Title Agency Scam; Mortgages Unrecorded On 3000+ Deals, Insurer Stiffed On Premiums, Lienholders Left Unpaid

In St. Paul, Minnesota, the Star Tribune reports:

• The Minnesota Commerce Department, which has accused a Twin Cities title company and an affiliated insurance company of keeping the money from more than 3,000 real estate mortgage transactions, has agreed to a settlement with a co-owner in which she'll pay a fraction of her penalty as long as she stays out of the business.

• In an enforcement action [in August] against Jennifer K. Frantz, the department listed her penalty at $500,000 but said that she'll only have to pay $7,500 of it as long as she complies with other parts of the settlement. Frantz was a co-owner of Zen Title and TitleSource, doing business as TitleDirect. Besides keeping mortgage money, the Commerce Department said it failed to remit $196,000 in premiums to an insurer and failed to make $1.3 million in mortgage payoffs to prior lenders. The companies are in Mounds View.

• In addition, Frantz's license as a real estate closer and notary were revoked and she is barred from any work that requires a license from the department. "She's been barred from the industry. That's her main penalty," said department spokesman Bill Walsh.
  Frantz's attorney, Tom Kelly of Minneapolis, said the settlement reflects that she was a minor stakeholder in the company.

• In March 2008, the department ordered the companies to pay $2 million in civil penalties.(1) After negotiations, Frantz reached the August settlement. Walsh said that order still stands against the other two owners, Charles E. Bethel and Trent C. Jonas.

• In the document ordering the $2 million in penalties, the department said the companies caused losses to lenders and exposed homeowners to disputes that can cloud property titles. It also said an $800,000 mortgage that wasn't recorded was for one of the owners. Walsh said the department has referred the case for criminal prosecution. "What they did was criminal. They essentially closed mortgages and did not finish. They did not send the money on, they did not pay the loans," Walsh said, calling it a "huge fraud." Some of the mortgages were in Minnesota and some in other states, he said. Kelly said he did not expect criminal charges to be brought against his client. Neither Bethel nor Jonas could be reached for comment [...].(2)

Source: State OKs deal in real estate loan case (A settlement with a co-owner of Zen Title and TitleSource cuts her share of a $2 million penalty to $7,500 and a ban from the industry).

See also, Minneapolis/St. Paul Business Journal: Title firms co-owner settles with state.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) See Minneapolis/St. Paul Business Journal: Title firms hit with $2M fines (The DOC contends that the companies, which operated out of the same office, failed to record more than 3,000 mortgages on real estate deals they closed and failed to make more than $1.5 million in payments to mortgage lenders and insurers, among other charges).

(2) According to the Minnesota Department of Commerce website, all licenses held by this outfit have been revoked. EscrowRipOffKappa title insurance legal issues