What to do when ex-wife secretly refinances the house
Q. While my fiance was married, he and his former wife owned a home together. She was on the title but not on the mortgage. They divorced in 2012, but had separated in 2009. My fiance stayed in the house.
In April 2010, his wife and her current boyfriend refinanced the mortgage without my fiance's knowledge or consent. When his wife refinanced, she put herself on the mortgage, her boyfriend pretended to be my fiance and they took an additional $10,000 in cash for themselves, and added $3,000 in closing costs back into the loan.
My fiance still lives in the same house, and he thought he had settled up with her for the difference in the mortgage and fair market value at the time of their marriage settlement agreement -- additionally, she signed a quitclaim deed, turning over her interest in the property to him.
My fiance discovered the cash-out refinance several weeks ago, nearly two years after his divorce was final, when he tried to refinance the loan. He discovered that his ex-wife is on the current mortgage, which is complicating matters. I should point out that my fiance has never missed or been late with a payment.
Our lender has been resistant to any communication. Thus far, it has sent us copies of the refinanced mortgage and there were no copies of government issued IDs in the packet. Moreover, my fiance was out of the country at the time of the fraudulent refinance and has the credit card statements to prove his whereabouts.
Do you have any suggestions for us on what to do next? Any and all information is greatly appreciated.
A. Mortgage fraud isn't to be trifled with. What we're surprised about is that your fiance is not getting more of a response from the lender.
Your fiance needs more help than we can give you. But you might want to suggest that he hire an attorney to help pursue the lawsuit that is sure to come. He can and should file a police report alleging fraud. And he should work with his divorce attorney in this matter as well. While the lender should not have allowed the loan to close, the lender, unfortunately, used a closing agent who didn't do the homework well enough.
What's unusual in all of this is that your fiance didn't know about the fraud until recently. But the fraud occurred in 2010, nearly four years ago. Since then, loan statements have been delivered, annual tax reporting statements have been sent out, the old mortgage was terminated and a new one started and in all that your fiance's ex-wife's name would have been listed on the documentation -- and he never thought to ask what was going on. (Sounds like he has his head in the sand a bit when it comes to financial matters.)
Your fiance should file a complaint with the OCC, which regulates your national lender, to try to prod the bank into responding. But the problem might not have been the lender's but rather the closing or title agent who handled the refinance transaction.
Real estate closings are generally handled by a closing agent or a title agent. Less often, it is handled directly by attorneys. It's possible the closing agent was careless, made a mistake, or was in on the deal with your fiance's ex-wife and her boyfriend. But if the boyfriend was pretending to be you and they stole $13,000 of value from the property, the entire transaction could be considered mortgage fraud. Moreover, that $13,000 issue could have been addressed in the property settlement during the divorce with your fiance getting that money back.
There are stiff penalties for mortgage fraud, including fines and even jail time. Your fiance will need to hire an attorney who can help. In any case, there's a lot of work that will have to be done to prove fraud and for your fiance to get reimbursed for his loss.
(Ilyce Glink is the creator of an 18-part webinar and e-book series called "The Intentional Investor: How to be wildly successful in real estate," as well as the author of many books on real estate. She also hosts the "Real Estate Minute," on her YouTube.com/expertrealestatetips channel. Call her radio show toll-free (800-972-8255) any Sunday, from 11 a.m. to 1 p.m. New York time.