OCEAN CITY – An Ocean City real estate title company last week was shut down by state insurance administrators after it was found to have misappropriated as much as $3 million in mortgage settlement transactions.
Maryland Insurance Commissioner Ralph S. Tyler last week handed down significant administrative action against Day Title Inc. of Ocean City and Severna Park, Md. and its owner Deborah Williams, for misappropriating anywhere from $1.5 million to $3 million in funds from multiple mortgage settlements handled by the company. Day Title and Williams are based in Severna Park, but maintain an office on 120th Street in Ocean City out of which a significant amount of mortgage settlement business was conducted.
Tyler last week issued an Order of Summary Suspension to immediately terminate both Day Title and Williams’ ability to conduct title insurance business anywhere in Maryland including Ocean City.
An order to revoke the licenses permanently has also been issued and is subject to appeal. No criminal charges against Williams have been filed at this time, although Tyler has said his agency’s fraud division is taking a close look at the alleged embezzlement of mortgage insurance funds to determine what course of action should be taken.
Williams, as owner of Day Title, was allegedly improperly diverting funds from the agency’s escrow accounts to the tune of as much as $3 million. The escrow fund account is supposed to be used to pay off debts from various mortgage settlements. As a result, funds that should have been there for mortgage holders to pay off previous mortgages, pay real estate agents and other expenses associated with the sale and purchase or property were not available.
Many property owners who used Day Title and Williams for their settlements found themselves in a financial bind because funds they paid into escrow accounts were misappropriated by the company.
Tyler said this week his action to suspend and ultimately revoke Day Title and Williams’ license was taken to prevent the company and its owner from putting other property buyers and sellers at risk.
“This is behavior that preys on consumers, which cannot and will not be tolerated in Maryland,” he said. “I am taking this administrative action immediately to prevent other consumers from harm. The agency’s investigation is continuing and I intend to see that affected consumers are made whole and that our fullest administrative and prosecutorial resources are brought to bear in this case.”
At the same time, he handed down his suspension and revocation orders for Day Title, Tyler also obtained the commitment of a responsible title insurer to repay any third-party losses caused by the representatives of their company. The title insurance company in this case, the Security Title Guarantee Corporation of Baltimore, has provided a letter to the state’s insurance administration committing to pay all losses of third parties and others. Essentially, the company has guaranteed it will step in allow affected property owners to have clean titles to their property and clear any other open debts that should have been resolved with the escrow funds that were missing.
“The danger for consumers in a case like this is that without proper handling, a homeowner or their lender may not really have a clean title to their house and can be left with debts they thought were settled,” said Tyler.
The state insurance commission is using the case as an example for consumers, who are being urged to take various steps to ensure they are protected in settlement transactions. The agency suggests checking references when picking a settlement agent because there are often vast amounts of money at stake. The agency is also suggesting consumers follow through with their settlements even after they step away from the table to ensure the funds are directed to the appropriate areas.