- February 06, 2009
- All Issuing Offices
- Special Alert - Loan Fee Scams
Please alert to "loan fee" scams that are being perpetrated in different parts of the country. Typically, these scams involve purported "lenders" issuing loan commitments to companies or individuals who cannot obtain financing for their projects through conventional sources, and may be desperate. These purported loan commitments can be in large amounts, perhaps several million dollars or more. The "lenders" charge substantial up front commitment fees that are supposed to be used for due diligence investigation. In reality, there is no legitimate lender nor are there actual loan funds. The borrower loses its fees and the "loan" never closes.
To enhance its credibility and give the appearance of legitimacy, the "lender" or loan broker will engage an unknowing title agent to issue commitments and work on title clearance matters.
The following are some indications of this type of scam:
- the loan commitment letter appears sparse, particularly for a transaction of its size and complexity;
- little and/or improper documentation, which appears unprofessional or otherwise unusual;
- the lender is not represented by counsel or its counsel is inexperienced for a transaction of this size, or the lender will not
- allow you to speak with counsel;
- the lender appears to be doing little, if any, due diligence;
- the lender and/or broker provide little information about their companies;
- you cannot locate websites or other information describing the lender or broker;
- the lender and/or broker entities are recently created;
- difficulty in finding information on any of the principals of the lenders;
- the lender will not disclose the source of the loan funds or states that the funds are from a "hedge fund" or "trading platform";
- the loan terms seem unusual or too generous for the current market (i.e. unusually low interest rate, non-recourse loan).
If you become aware of one or more of these factors in your transaction, please contact your Stewart Underwriter immediately.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.