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Mortgage Fraud Trend Highlights Investigative Value Of Notarial Recordkeeping

Mortgage fraud investigations jumped 88 percent in the second quarter of 2011 compared to the same period last year, and the overwhelming majority of those reports involve loans that originated three or more years ago, according to a federal government report.

A key piece of evidence that investigators rely upon is a Notary’s journal record, which captures identifying information about the document signer who appeared before the Notary, as well as their signature and, in some states, a thumbprint. In cases of mortgage fraud, the journal record would capture valuable evidence about the perpetrator, who often appears before the Notary as an impostor.

This new wave of cases illustrates that mortgage fraud can go undetected for years, which makes a Notary’s complete and accurate archival records vital for law enforcement investigations.

James H. Freis Jr., Director of the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), said the surge indicates that “financial institutions are uncovering fraud as they sift through defaulted mortgages.” Overall, more than 81 percent of all suspected fraud reports for the quarter involved activity that occurred prior to 2008.

David Fleck, former Los Angeles Deputy District Attorney who specializes in real estate fraud, said the information in a Notary’s journal is vital to unraveling mortgage fraud. One Southern California case involved scam artists who forged the signatures of an elderly widow and her deceased husband on a grant deed. Detectives used the journal information to identify a person who had been paid $100 to impersonate the deceased man, and the perpetrators were eventually caught.

A journal kept by the National Notary Association’s 2007 Notary of the Year Joan Sampson also helped solve a high profile mortgage fraud case and protected her from both criminal and civil liability. Sampson, a long-time employee of a Northern California real estate developer and NNA Certified Notary Signing Agent, was contacted by a title company about her notarizations on a number of questionable mortgage documents. She checked her journal and found no record of the notarizations, and she had a rock-solid reputation for keeping meticulous records.

It was soon discovered that members of a fraud ring allegedly forged her seal and signature on a host of bogus documents. The case made headlines and several of the accused recently pleaded guilty.

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