Contrary to what is reported by the owner of the Mortgage Electronic Registration System, Inc.—potential and existing homeowners should be warned that prior to, at, or after loan closing, and during the life of the pledged mortgage loan, the originator lender, a Member of the MERS® System, a consumer home buyer is not always notified each and every time an assignment, a sale, or transfer of purported servicing rights and ownership of his or her mortgage loan also linked to pledged real property, including the underlying debt (promissory note) registered in the MERS® System.
One red flag strategy used by real estate developer (builder) is to attract potential and existing homeowners seeking a brand new construction home to use its preferred lender, title insurance company, and title agent, by offering him or her concessions and incentives for the purchase of a new home. If potential and existing homeowners accepts the offer, he or she signs a purchase agreement (contract) for the real property and bound to use the Seller’s preferred lender, title insurance company, and title agent.
Title Land Edification has directly linked to most states local government: counties and municipalities—new home residential land developers (builders), taxing authorities, and financial mortgage lending institutions to fraudulent mortgage loan origination and a double-sold loan or double selling, and fraudulent closing practices affecting tens of millions homebuyers.
Mortgage loan origination fraud is primarily committed by or with the assistance of local government agencies such as counties and municipalities or industry insiders such as real estate developers, builders, property sellers, financial institutions, funding lenders, appraisers, realtors, attorneys, mortgage originators, title insurance companies, or title agents by way of the third-party National Mortgage Rights Registry (more commonly known as Mortgage Electronic Registration System, Inc. (MERS)® System.
One strategy used by new construction real estate developers via their preferred lenders, title insurance companies, and title agents, usually a member of MERS® System, to raise capital is to sell the same mortgage loan to more than one secondary-market investor (also a MERS member) via the MERS® System—this is known as a double-sold loan or double selling. A mortgage loan originator accepts a legitimate application and related documentation from a consumer borrower, reproduces or copies the loan file, and sends the loan package to separate warehouse lenders for each to fund the same loan. The original loan application documentation in which real property is pledged is duplicated and sold (or traded) more than once amongst MERS members on the secondary market via the MERS® System.
To conceal the strategy, the developer’s preferred lender remits the scheduled principal and interest payments to the purported servicer, a member of the MERS® System. Since all loans remain current, the consumer borrower is unaware that his or her mortgage has been double pledged at the time of closing.
See our patterns and red flags that may indicate real estate settlement (closing) or escrow accounting and settlement fraud.