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Claims Stories: A Naked Release Should Trigger a Red Flag

In our continued effort to keep our agents and escrow officers apprised of trends in the title industry, our claims counsels and administrators have provided the following claim summaries. It is our goal to share these stories and help you avoid similar scenarios in the future.

In this story we describe a scenario where a naked release was used by a couple in an attempt to defraud a title agent.

A naked release is a release of a lien or mortgage that is not done in connection with a sale or refinance transaction. These releases are a red flag and merit further investigation. Naked releases often involve forgery which are expensive to resolve and cause significant losses.

Here’s how it played out:

Annie conveys to Billy and his Wife Sally in 2015. Billy and Sally take out a $1.5 million dollar purchase money mortgage. In 2016, a release (satisfaction) is recorded. There were no refinances or sales of record.

Billy and Sally send the title agent a contract to sell the property. In this scenario the release was a naked release, and it was forged by Billy and Sally.

The title agent commented that Billy and Sally appeared to be very wealthy and credible. While in rare instances borrowers will pay off their loan prior to the sale, it is not common. If you see a naked release of record, contact the bank that released the mortgage for the payoff.

If the borrowers do not want to give you authorization to contact their bank, stop the transaction and contact Underwriting.

For more information, please see Alliant National Underwriting Bulletin # 15-01.

The Independent Underwriter for the Independent Agent®