The company had been dropped by the insurance companies whose title insurance it placed in real estate sales transactions, and more recently was blacklisted by major banks for which it provided mortgage settlement services, according to several sources in the title insurance industry.
Titleserv closed its doors Friday, according to a woman who answered the telephone at the company on Monday afternoon. The person, who would not disclose her identity, said that employees had been told the company was ceasing operations, an abrupt decision that she said caught many by surprise and that came with no forewarning. James Conway, the company’s chief executive, could not be reached for comment, nor could Brian Pasley, a company senior vice president.
According to a person familiar with the firm’s problems, three banks, JP Morgan Chase, Wells Fargo, and Citibank, recently sent out internal emails to personnel involved in mortgage transactions and origination at the banks, prohibiting them from usuing Titleserv’s services. The move was a death stroke to Titleserv’s business, sources say.
The company, based in Woodbury, Long Island, was one of the largest title agencies in the region, primarily handling residential real estate deals on a national basis. According to people familiar with the matter, the banks discovered irregularities in Titleserv’s settlement business. Settlement companies are used in refinance transactions to handle the administrative processes of paying off the original mortgage with the new loan and reserving money in the transaction for closing costs and other expenses like transfer and mortgage recording taxes.
Titleserv had been engaging in chicanery with the new funds, according to several people familiar with the firm. According to these people, Titleserv failed to alert mortgage lenders in a timely fashion when a new loan was being put on a property. By not cancelling out the old loan, the company could service that outstanding debt on a property itself and hold onto the new pool of funds. The practice, which is illegal, could have been done for a host of reasons, either to allow the company to essentially steal money, or, more likely, to temporarily use the funds to pay operating expenses or other charges or to deposit into accounts that would allow it to collect interest on the money for a time before closing out the original mortgage.
Update, April 12, 1:40 pm: According to a source familiar with the situation, employees of the company were given no advance warning of the closing and had no involvement in any unethical or illegal practices. According to the same source, there has been no criminal investigation involving the company.