Magazine article American Banker

Norwest Sues Title Insurer in Giant Loan Fraud Case

Magazine article American Banker

Norwest Sues Title Insurer in Giant Loan Fraud Case

Article excerpt

By TIMMONS, HEATHER

Norwest Mortgage Corp. has filed suit against Commonwealth Land Title Co. as part of an effort to recover $40 million in losses from buying fraudulent loans.

The civil suit, filed last week in the Superior Court of California for the County of Los Angeles, alleges that in 1997 several Commonwealth employees took part in a scam that the U.S. Attorney's Office in California called the largest multifamily loan fraud in history.

The suit is the outgrowth of litigation by Norwest charging that 45 defendants, including California appraisers, title companies, and property managers, used phony income documentation, inflated appraisals, and fake borrowers to orchestrate over 300 illegal loans.

Seven people have already been convicted after a government investigation of the scheme, dubbed the "Mortgage Mill." All seven are await sentencing.

According to the Norwest suit, Commonwealth employees "facilitated loan flips on a massive scale," created "false and misleading supplements to preliminary title reports," and disguised the fact that loans did not quality for insurance under the Department of Housing and Urban Development's FHA program.

A representative from Commonwealth's holding company Land America Financial Group, Richmond, Va., said that the company had just received the suit and could not comment until it had time to review it.

Commonwealth, one of the top five title insurers in the country, was bought in February by Lawyers Title Insurance Corp., and the holding company was formed then.

Two of the four employees named in the suit are still working at Commonwealth, according to Land America. The Norwest suit also alleges that 30 unnamed "agents or employees" of Commonwealth were involved.

Last week's suit is the third that Norwest has filed in conjunction with the far-reaching fraud case, which was centered in Southern California. …

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