High-Profile Notary Crimes Illustrate Need For Mandatory Annual Background Checks By Kelle Clarke on July 31, 2014 in Notary News Stop FraudAn Indiana signing agent who more than a year ago admitted to selling the social security numbers of borrowers still has her Notary commission and could conceivably take on new loan signing assignments. This case is probably one of the worst nightmares a borrower and lender can face in the mortgage origination process. It also highlights why many mortgage lenders are requiring annual background checks for the signing agents who handle their loans. Melissa Hodge of Indianapolis pled guilty to an identity theft-related charge in June 2013. She was later sentenced to probation and ordered to pay $85,000 in restitution, according to a spokesperson for the U.S. Attorney’s Office for the Southern District of Indiana. Federal investigators initially accused Hodge of selling the social security numbers of 16 borrowers for about $20 a piece to an identity theft gang. The gang then opened up credit card accounts in the borrowers’ names and racked up $160,000 in charges. A spokesperson for the Indiana Secretary of State’s office said the agency was working to revoke Hodge’s commission. Until then, she remains listed as an “active” Notary and may continue performing notarial acts until her eight-year appointment expires in 2018. Because most states do not require background screenings for Notary commission applicants, Hodge conceivably could move to one of those states and get another commission. Lenders are increasingly sensitive to fraud While the Hodge case may not be the norm, it’s far from an isolated incident. Earlier this year, authorities in Florida sought to revoke the commissions of 33 Notaries, including many with criminal records. The move came after an Orlando television station reported it discovered over 400 active Notaries in the sunshine state were convicted felons. Florida, like Indiana, is among the approximately 40 states that do not require background checks for Notaries. Lenders and title companies have a lot at stake when they hire Notaries. In April 2013, the Consumer Financial Protection Bureau (CFPB) issued a bulletin reminding financial institutions that they are ultimately responsible for the proper vetting and supervision of all third party contractors hired — including signing agents. “Today, the regulators make it very, very clear that the lender is accountable for anything that a third-party service provider does throughout the life of the loan process,” Sally Freudenberg, Vice President of Wells Fargo Home Mortgage, said during the industry panel discussion at NNA 2014 in June. “We’re sending you to the borrower’s house,” ValuAmerica Executive Vice President Shawn Murphy said during the same event. “It is important that we’re not sending convicted felons.” In the current regulatory environment, lenders want to make sure that signing agents meet more stringent, industry-specific standards — including more frequent background screenings. That way companies can be sure they have more current and accurate information about the NSAs they hire. State qualifications fall short A common misconception is that current state Notary qualification requirements are stringent enough. As mentioned, most states do not require Notaries to undergo background screenings. Most states also do not require any training or testing to become a Notary. In 2013, a consortium of mortgage lenders and title insurance companies, with the National Notary Association serving as advisor, formed the Signing Professionals Workgroup to create a set of five broad standards for signing agents. The first standard establishes the criteria for annual background screenings. The criteria states use to determine if a Notary applicant passes a background check is usually kept confidential. In contrast, the criteria used by the SPW are publicly available and custom-tailored to meet the specific needs of the mortgage finance and settlement services industries. In addition, annual screenings will make it more difficult for signing agents like Hodge to continue working in the industry and gain access to borrowers’ personal information.
Posted on: Mon, 04 Aug 2014 15:41:27 +0000
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