Monday, February 4, 2013

Closing Agent Gets Two Years For Illegally Dipping Into Escrow Accounts, Pocketing $1.5M+ Intended To Satisfy Prior Liens, Pay Recording Fees, Insurance Premiums; Title Underwriter Left Holding The Bag

From the Office of the U.S. Attorney (Baltimore, Maryland):

  • U.S. District Judge William D. Quarles, Jr. sentenced Harriet M. Taylor, age 57, of Ellicott City, Maryland, [] to two years in prison followed by five years of supervised release for wire fraud in connection with a scheme to use over $1.5 million in mortgage closing funds for her personal use and to operate her title companies. Judge Quarles also ordered Taylor to pay restitution of $1,256,635.70 to Old Republic and $253,750.84 to CAN Surety, the insurer on Taylor’s errors and omissions policies.
  • According to her plea agreement, Taylor co-owned and managed two title insurance companies, Regal Title Company, LLC and Loyalty Title Company, LLC, located in Columbia, Maryland. Pursuant to an agreement with a national title insurance underwriter, and as required by Maryland state law, escrow accounts for Regal and Loyalty were established, separate from company operating accounts, for the purpose of holding and disbursing funds received from lenders for real estate closings.

    Beginning in 2009, however, Taylor caused some mortgage lenders to wire their funds entrusted for real estate settlements to Regal’s operating account, rather than to the escrow accounts. Taylor also caused funds in Regal’s and Loyalty’s escrow accounts to be transferred back and forth to the companies’ respective operating accounts. By using commingled funds throughout 2009, Taylor kept her two businesses afloat, while enriching herself with both company and escrow funds. From January through December 2009, Taylor paid herself $477,877.50 from three company operating accounts.

    As shortfalls in the escrow accounts increased, Taylor failed to remit insurance premiums to the title insurance underwriter, Old Republic National Title Insurance Company (Old Republic), pay recording fees for deeds and pay off prior liens, including four of which belonged to the government sponsored entities, Fannie Mae and Freddie Mac.

    Old Republic learned of the commingling of escrow and operating funds during a 2009 audit of Regal. They directed Taylor to stop the practice. Five months later during a further audit of both companies, Old Republic discovered that in nine cases Taylor used the payoff checks that were supposed to pay prior lien holders, and immediately terminated her as an agent.

    Old Republic was obligated to satisfy the prior liens against the properties affected by the misuse of settlement funds and to complete other transactions Regal and Loyalty failed to perform. Accordingly, in January 2010, Old Republic incurred a total loss of $1,518,532 which resulted from paying off prior liens, paying recording fees, and for insurance premiums collected by Regal and Loyalty but not forwarded to Old Republic.
For the U.S. Attorney press release, see Title Company Owner Sentenced in $1.5 Million Fraud Scheme.

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