Loan Officers Abscond With Broker Fees

We have an internal publication called “Fraud Insights”. This article appeared in the most recent issue and I thought I’d pass it along.

Loan officers from two different states embezzled funds from their employers by redirecting the payments to themselves at closing. These actions caused mortgage brokerages to implement tighter controls.

One of our operations in Georgia received a call from the owner of a local mortgage brokerage. He asked if we could run a search in our system to locate the transactions closed with his brokerage and how much was paid to his company in broker fees. The owner of the brokerage had discovered his branch offices had been instructing settlement agents to deliver the broker checks to their branch office. In some cases, they would forward the checks to their corporate office, and in other cases, simply endorse the checks over to themselves and cash them. The brokerage owner was in the process of contacting all the title companies in town to gather his evidence, determine the extent to which this occurred and file charges against loan officers guilty of this theft.

Not long after this request, a similar inquiry came in from another mortgage broker from Washington. His loan officer opened his own bank account in the brokerage name. This loan officer was originating loans and having the checks sent to his attention so he could negotiate the checks and disburse the funds to himself.

The owners of these brokerages learned a valuable lesson. They knew the settlement agents were not to blame since they simply followed the loan instructions by making the check payable to the brokerage. Unfortunately, these owners did not have the proper checks and balances in place to know when a loan was originated in their brokerage’s name. This would have allowed the owners to provide the settlement agent directly with written instructions for where to send the broker package and check. In both instances, these owners said they would make sure, in the future, that the settlement agent would know where to send the checks.

Although Our Company did not suffer any losses as a result of the wrongdoing of these loan officers, our customers were impacted.