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LandAmerica Group Inc. suspended by Amtrust: What is the reason? (Updated with new information)

Typically when I receive new updated information I would just edit my blog post but I believe with the information that Adrian Talamantes provided this deserves a new post. I have copied my original post from yesterday below also. I have included a link that Adrian was kind enough to pass along regarding the possible reasoning behind the suspension of LandAmerica Group Inc. by Amtrust, formally Ohio Savings. After reading the article all I can say is WOW and thanks Adrian!

Full Story Here: http://www.sbj.net/article.asp?aID=415814202.338772.1013454.8056256.247289.833&aID2=77949

Also, an anonymous person has commented the following:

"there is ongoing litigation between AmTrust (fka Ohio Savings Bank) and Commonwealth Land Title Insurance Company. This litigation is in Harris County District Court (TX), case 200632092."

PREVIOUS POST BELOW: 07/09/2007

I just received this notification from one of the banks we do a great deal of business with Amtrust, formerly Ohio. Amtrust is an A paper lender that also portfolios Alt A loans. This post is extremely interesting to me in that for such a large company, LandAmerica Group, Inc., to be suspended from such a large bank means there were some MAJOR issues. I hate to speculate but I wonder if there was any fraud related to this suspension. In Nevada the most notable subsidiarys are Land Title of Nevada and Lawyers Title of Nevada. In my experience once one bank cuts company off the others won't be far behind!

---------------From Amtrust website:

Important Notice Regarding LandAmerica:

NOTICE

Effective August 1, 2007, AmTrust Bank will no longer accept LandAmerica Group, Inc., its subsidiaries and affiliated agencies as escrow agents and providers of title commitments and title insurance. This suspension will not apply to title commitments issued before August 1, 2007 and the resulting title insurance policies. Click herefor a list of LandAmerica's subsidiaries (which includes Commonwealth Land Title Insurance Company), as reflected in its 2006 Annual Report.

IMPORTANT

Effective August 1, 2007, AmTrust Bank will not purchase or fund any loan with an escrow, title commitment or title insurance policy from LandAmerica or any subsidiary or affiliated agency, except as provided above. Please make sure that you do not submit any such loan to AmTrust Bank, in order to avoid customer delays and inconvenience.

Your mortgage partner for life,

Rey "Steak Dinner" Gallegos
Senior Loan Officer

Five Star Mortgage
Email: rey@Steak-Dinner.com
Website: http://www.steak-dinner.com/

My Blog: http://activerain.com/blogs/steakdinner
Your complete community mortgage broker!
Thank you for your referrals!

Posted by R O on 07/10/2007 05:29 PM

Comments (61)

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61 Comments on LandAmerica Group Inc. suspended by Amtrust: What is the reason? (Updated with new information)

JUL

2007

Wow. This has to hurt.

Oops..that doesn't sound good at all!!

Rey

The article is unbelievable. Thanks for sharing the link. I don't understand, though, why a lender would stop doing business with an underwriter due to the actions of an agent. Apparently, LandAmerica has some very sloppy auditing standards.

oh my goodness - bad news!!! You'd think that companies would have learned after Enron but I guess not......

Nate, David, Kristen and Kate: Yes this is bad news. You wonder if this is just the tip of the iceberg!

Ed, I asked myself this same question and posed it to others. Why would a Mortgage Company stop doing business with a Title company? My other question that came to mind would be what if LandAmerica folded? What would happen to all of those people that had Title Insurance through them or their subsidiaries?

Holy BEEP.. Something big happened..

Rey

Title insurers are prohibited from halting operations due to their societal importance.

Some years ago, when Ticor Title faced financial difficulties, the feds responded by negotiating a deal where Chicago Title took the company over. Chicago Title was given preferential treatment, in one way or another, for doing so.

Policy holders will fair just fine if LandAmerica is in trouble. The company will simply merge with another company that's solvent.

Ed, Thanks for the info! Maybe Amtrust just didn't want to be associated with them.

Matthew, Did you get a new website?

Do you see this getting any worse? Amtrust is just one lending institution.

JUL

2007

Ed's right. The lender is entirely protected by their loan policies AND CSLs - closing services letters. We are agents for both Landamerica and Old Republic. I received a fax from Landamerica yesterday saying:

"Ohio Savings Bank, now known as AmTrust, has sued Commonwealth Land Title Insurance and others - including its own loan correspondent - in state district court in Houston, Texas. The suit involves disputed issues of fact and law which are subject to continuing communication between Commonwealth and AmTrust. While we refrain from publicly discussing matters of ongoing litigation, it is important for you to know that we will vigorously defend our position based on the law and the facts.'

The fact that a loan correspondent was sued makes me think this is a claim related issue. Guess we'll all have to wait and see.

Oh, and by the way, I don't know a single title underwriter who has good auditing standards. They have all turned a blind eye to bad actors inthe quest for volume. That is being remedied in the new environment and I laud Landamerica for shutting down this title agent. We had one here in our area a few years ago - Sue Dougherty - and while one title underwriter pulled its policies andshut her off, Stewart kept her in business for many more months. I'll never figure that one out. She's serving time, finally, and owes Stewart over a million.

So, though we can blame underwriters for creating much of the mess, we should be thankful that some are stepping up to the plate and fixing the messes they made.

Hey Rey,

A tempest in a teapot. At first I was concerned by your post. Then after reading the article I was a little bit irritated at the lender for over-reacting. The comments by Diane and Ed bring the issue into focus for us.

Thanks for opening this up.

Bill Roberts

Bill, When I first posted this I was simply passing on information. The reaction to this information has been interesting to say the least. Overnight there were some extremely derogatory comments made about this. They weren't comments on the information they were personal attacks about me posting the information. It makes me wonder if they were potentially people that had some type of interest in LandAmerica Group, Inc. I guess this is just another example about the state of mind people in the industry are in.

I am also glad that Ed and Diane helped clarify what may happen should in a situation like this.

Finally, I did not know what your phase "A tempest in a teapot" meant so I looked it up and I would say this is very applicable to the situaton:

a tempest in a teapot (American) a situation where people get very angry or worried about something that is not important. The whole affair is just a tempest in a teapot. In a couple of months everyone will have forgotten about it. (not used with the)

Cambridge International Dictionary of Idioms © Cambridge University Press 1998

Uh Oh! They need to pay close attention to the details.

The post by Diane Cip 07/11/2007 has it right. AmTrust is refusing to LandAmerica Title Policies on account of a lawsuit in Houston, Texas. (My local LandAmerica rep stated that the suspension was due to a claim that is currently in litigation. Essentially, Amtrust is blackballing LandAmerica's refusal to pay a claim.)

The article on what happened in Missouri is run of the mill stuff and $4.5M exposure is something they should be able to handle. (Every so often, attorneys are disbarred and sometimes jailed for absconding with client's money.)

I'd love to know more on the details of the case in Houston. LandAmerica must be arguing they are not required to pay a claim due to fraud on the part of the loan correspondent and Amtrust must be arguing that the fraud took place in cohoots with the title escrow officer. It will be an interesting case to determine what the closing protection letter truly covers. And, it will be interesting to see how other title insurers redefine the language in closing protection letters to limit their exposure.

Well there sure are alot of people looking at this. Is this due to Fraud or is it simply two Industry Titans in a pissing match? Needles to say, I have edited this post several times due to new information. I had no idea that this post would get so much attention.

LandAmerica is broke.

I have as good a sense of humor as the next guy! Why don't you stop hiding behind anonymous names and stand behind your comments? Otherwise, I will continue to delete your comments!

JUL

2007

Rey:

I'm glad you posted the issue. Always good to have a real life situation for discussion.

AmTrust purchased a number of bad loans from ABM AMRO. AmTrust is now trying to figure out what to do with this major league loss and legal counsel at AFSI recommended suing LandAmerica who underwrote a large number of these loans. LandAmerica has taken the stance that they will not payout on these bad loans because fraud, etc were involved by the banks/mortgage brokers who brokered these turkeys. LandAm appears to have the upper hand on this suit and AmTrust knows that so they decided to up the ante so to speak to force LandAm to give them some money.

Stewart, First American, Old Republic, Fidelity are all watching this suit carefully because they know they are next if LandAm does settle, which is something they won't do. It opens up the title insurance underwriters to the tune of hundreds of billions of dollars in losses.

My personal opinion is that AmTrust is in a great deal of financial trouble here and is resorting to any tactic available to help them stay in business. Problem is that AmTrust didn't realize just how much of a negative reaction they are recieving here from other non-affiliated LandAm companies.

Outside:

So you're saying LandAmerica underwrote the title insurance or did contract due diligence mortgage underwriting on the package?

Outside: Is this is a seperate issue that the Guaranty Issue in the article above? If so, do you have links to any articles or publications that may help us shed more light on this. I will post them in my blog if you do.

As Diane Cipa has stated, there is ongoing litigation between AmTrust (fka Ohio Savings Bank) and Commonwealth Land Title Insurance Company. This litigation is in Harris County District Court (TX), case 200632092. As this case originated in July of 2006, I think the Guaranty Title matter is just a coincidence. Does anyone have information showing that AmTrust was a significant client of Guaranty Title?

"Problem is that AmTrust didn't realize just how much of a negative reaction they are recieving here from other non-affiliated LandAm companies."

So, other title underwriters may back off writing their policies?

If memory serves, a whole 2% of all claims get paid. Maybe AmTrust is planning to try and bypass title insurance, thinking it unnecessary ...

I think Outside's comments are fascinating. I can not imagine Amtrust telling ALL of their correspondents and brokers nationwide that they won't do a loan if you're using a LandAmerica affiliate to be a "strong arm" tactic. I don't believe they came to this decision lightly or as a knee-jerk reaction. They're bound to lose THOUSANDS of loans nationwide because of this decision. My OPINION is that the exposure is on the part of LandAmerica and/or their affiliates and AmTrust is trying to minimize the exposure as much as possible and this was the "safest" way to do so. As BAD as the loans were from ABM AMRO from the news articles I've read they didn't come across as threatening to close them down. Again, my OPINION is that when one company makes this type of decision others are sure to follow... (I think someone already said that). Thank you SO MUCH for posting this subject Rey!

Its definitely something that Amtrust wanted ALL of its brokers and correspondent lenders to know about because when you log in to Amtrust Gemstone (The back office system) it pops up in a separate POP UP window and its posted again on the landing page.

Also, I agree about one entity doing something then others will follow. In the industry, everyone is trying to mitigate their exposure and the easiest way to do so is by halting activities with a potential risk. It isn't always fair but it is a reality!

I am taking no sides in this one I am merely passing on the info!

This post is amazing. I love how everyone throws their opinions in when they don't know all the exact details in regard to the law suit. How can someone say that AmTrust is "financial trouble"? If you know something, please fill us in rather than making assumptions.

How do we know what's going to come of all of this? I'll bet this is going to open the eyes to other lenders in the industry to be cautious when dealing with Land America. Because a large lender like AmTrust/OHIO would not let 1000's of loans go to other investors because they are trying to "strong arm".

Other title underwriters have got to love this. They are going to gain business during a soft market when times are slow. Stewart, First American, Old Republic and Fidelity are likely lickin' their chops waiting for the loyal AmTrust clients to place their orders with them.

This is a speed bump for Amtrusts brokers. It started with a bunch of fraud from a broker in Texas. The broker doesn't have any money and Amtrust if after LandAmerica for cash. Many title agencies write more than LandAmerica or Commonwealth policies so you are screwed if you have a LandAmerica or Commonwealth purchase.

Someone needs to grow up. This is serious stuff. I don't like it.

JUL

2007

Wow this is nuts! Maturity you probably posted the pictures but it is getting funny.

AmTrust is probably not at great risk of losing loans when they instruct their brokers to place title insurance through carriers other than LandAmerica. In our state, most attorneys are signed up with with multiple carriers.

Outside poses the more interesting question, other title insurance carriers are "watching this suit carefully." By the way, I have seen title insurance carriers act collectively. In our state, they refused to issue title insurance in several towns and counties until the legislators enacted some changes. The governor stepped up.

I'd love to more on the details of the fraud case in Texas. What type of loans originated and did the broker have a "controlled business arrangement" with the title escrow company underwritten by LandAmerica or its subsidiary. From what I understand, the lending and insurance industry doesn't like to disclose too much detail because it can inadvertently educate others on how to commit fraud.

The above pictures are cute but I don't really get the point.

October Research has an article pending. Can't wait to get the facts of the case.

Thank you for all of your very informative posts. Please continue to pass them on.

LandAm & their companies are instructing their agents to tell the mortgage companies that send them business who only work with AmTrust to send their loans to other mortgage service providers. We are now seeing a push back effect by LandAm against AmTrust. The real result here is that both companies are going to lose business to their competitors.

Weren't there a few major investors who wanted to sell Land America? I heard that back in June...is the timing a coincidence?

Thats not good at all

As a CB with Amtrust I do care about there financial health, however this no Commonwealth LandAmerica sucks. Amtrust is updating all the cpl's so the process of drawing documents and funding a loan is horrible. If you use Amtrust you know what I am talking about. If you don't welcome to the gossip column.

JUL

2007

This is big. More to come.

JUL

2007

Paul - Answer this, how hard is it to update a CPL? And other title companies insure though other providers. It's not as big of a deal as you're making it.

Paul: "I'd like to order title for the Jones loan."

Title: "Great! We'll get that for you in 24 hours."

Paul: "Please order title insurance through Fidelity and send me a CPL."

Now, how long did that take!?

I have been doing business with AmTrust for almost 10-years now. I stand behind them 100%.

FYI - I work with 2 realtors who use a specific branch of LandAmerican (that's the sign on the front of the building) on their purchases. I just received an email from my escrow officer at LandAmerica who wants to use First American when ordering title insurance. Now I don't know if that's even possible, nor do I know if senior managment at LandAmerica will allow this, but I thought it was interesting. Guess we'll see who wins this battle. AmTrust +1.

JUL

2007

Im shocked. Loyal you do business with Amtrust and do not use Amtrust Title? You order title via phone and not a click? You obtain a cpl via telephone? Yes, getting a cpl is cake getting it in Gemstone that's another matter. You may be loyal but another veteran that is clueless. What a surprise.

CPL faxed and emailed four days ago, loyal your flat wrong.

Come on folks, don't be naive. This is not mysterious. AmTrust is just sick and tired of what so many before them have had to deal with. LandAmerica DOES NOT PAY CLAIMS, which is entirely their perogative. DOn't be idealistic and ask - "but what do I buy title insurance for anyway then?" It's way more economical to force claimants into a position where they have to decide to fight, knowing that they will likely settle.

People and companies either stand behind their work and their policies, or they do not! Integrity - it matters!

Someone previously said with eager anticipation that October Research (The Legal Description and The Title Report) have an article pending. I hope he/she wasn't inferring that it will shed any light on the truth. LandAmerica is a huge advertiser and supporter of that fish-wrap. I'll bet dollars to doughnuts that the article (if one is published) will come out heavily in favor of LandAmerica. Just a guess (now that's sarcasim) !! The truth is only a secondary goal in those publications.

If you look carefully, I bet you'll find that this is big and invoves the industry. Banks don't drop title companies every day, or because of one claim or lawsuit. This is about what kinds of things the title company can do when it handles a bank's money for a customer who's getting a loan. Banks want things to be done by the book (accounting for the money, not hiding problems or side deals, signing everything). Does Amtrust think it won't be safe with the way Landamerica handles loan closings? Anybody hear anything about this? I am getting bits and pieces.

Landamerica has taken the position that it has no fiduciary duty to a wholesaler in a table funded transaction. Now you can understand why Amtrust Bank was forced to suspend Landamerica. Amtrust would have no protection for funds wired to the closing table. The question is: does this position apply to all funders and how would this affect the industry was a whole? This makes no sense that a title company would take such a crazy position. This could turn out to be a big industry problem.

JUL

2007

Anon: I think it depends on the underlying issue. Title companies do have a fiduciary duty to a wholesaler, the lender, in a table funded transaction. The fiduciary duty is limited in scope. If fiduciary duty is at the heart of this suit, do you know what matter they are accused of overlooking?

BTW - I agree somewhat with your comment on October Research, but I have to offer some defense. Big pockets support the magazines so they ride a fine line with their reporting. Since I started Radical Title Talk I've had a chance to watch their coverage more closely. As you would expect, much of what I said on Radical was outside of the establishment title "group think" but the folks at October Research covered it. They got pressure from the big boys but they still sought out and found others who have opposing viewpoints. Considering that their advertising revenue comes from underwriters and vendors, I think they bravely reported both sides, unlike ALTA who religiously only reports establishment propaganda.

I'm really not sure if October used to cover both sides or not because, frankly, before my anger overflowed and I started posting Radical, I thought they were pretty boring.

So, Anon, back to the issue. What's at the core? I have found that blogs get a lot of attention and if there is an important underlying issue to hash out, this is as good a place as any - especially if you don't trust print media to cover it.

What a pissing contest! Just think of all the counter claims by agencies that simply had nothing to do with this fiasco but are being impacted. Settle up boys - we got work to do. Or is it something bigger brewing?

Diane,

As is the case with most comments on this subject, i believe your speculation is just that, speculation. I don't know anything about why AmTrust did what they did. It's their perogative, and I applaud them for it. My speculation (and it's just that, speculation) is that LandAmerica simply failed to stand behind their actions and/or their policies. it is the LandAmerica way!. Just my opinion, I could be wrong.

I absolutely disagree with calling October Research brave. I too have had a chance to watch their coverage closely. To myopically believe that they somehow are entitle to be considered as un-biased, simply because their advertising revenues come from the people they report on. Follow the money. It's not an unbiased publication. It is a ruse, a shill for whoever sends the dough $$$ It is what it is. What it isn't - is a legitimate newspaper.

Landamerica has taken the position that it has no fiduciary duty to a wholesaler in a table funded transaction.

That's fairly broad. Can you elaborate?

JUL

2007

October Research has posted their article in The Legal Description. The short of it is that AmTrust is looking for compensation from LandAmerica with respect to a hugh fraud loss and LandAmerica is stating they were not party to the fraud and should not pay.

JUL

2007

Sorry I can't share the article. You'll have to subscribe too get the story.

This case reminds me of one we found back in my old mortgage lending days. My friend, CM, in her routine quality control audits uncovered a scam in a large condo complex on the eastern shore. The mortgage originator was selling these mortgages to us as second homes. Turned out the developer was advertising for investors. The purchasers put up some cash and closed remotely having never seen the property. The units were sold fully furnished (another problem) which the appraiser failed to report. The project was basically to be run like a hotel with short term rentals. It took the cooperation of the appraiser, originator, developer, and real estate agents to pull it off and keep it hidden from us. I don't think we ever really thought about the title agent as a potential co-conspirator.

The loans performed and senior management decided to portfolio the paper rather than sell it as it didn't meet agency criteria. The originators were dealt with privately, there was a parting of company and the matter was put to rest. I think they got off easily.

Both of these cases show how effective a good quality control program can be. Reading the case details in The Legal Description makes me think OSB/AmTrust had good quality control in place. They responded to first payment defaults with the correct auditing procedure. I'll lay odds that they are using an inside QC department and not a vendor managed outside service. If I'm wrong I'd like to know who they do use for QC because I'm impressed.

AUG

2007

AmTrust's QC is better than the CIA and FBI.

AUG

2007

I'm impressed. A good in-house quality control program run by people who care = safe lending. The crappy standard mentality that pushed QC into the vendor management arena effectively neutralized QC. I guess I am presuming AmTrust is doing its QC in-house.

wow...........that's quite an article........I've seen some scams, but nothing that entangled.....

JUN

2008

JUST ANNOUNCED!!! LandAmerica is pleased to announce that it has reached an agreement to settle its dispute with AmTrust Bank in the Texas litigation and AmTrust has lifted the suspension against LandAmerica

JUN

2008

MO - What is the source of your information?

JUL

2008

On June 6, 2008 The following message was posted by AmTrust on its business website.

Effective immediately, the suspension previously announced is lifted and AmTrust Bank will resume accepting LandAmerica [Financial] Group, Inc., its subsidiaries and affiliated agencies as approved escrow agents and providers of title insurance and real estate related services. The litigation between AmTrust Bank and certain LandAmerica subsidiaries has been resolved to their mutual satisfaction.

SEP

2008

Title Insurance is a scam! Yes I know real estate people don't like to hear that.

SEP

2008

Is there a reason why?

OCT

2008

I noticed that IGI Insurance company in the UK who is owned by AMTRUST in the US is providing cover for any airline going bust, it looks like they will be the next to follow AIG taking AMTRUST US down with them ?

It's amazing that in these times of such uncertainties and when the aviation industry is in its worst financial disaster in history that an insurer like AMTRUST is taking such risks only to ultimately leave the tax payer bailing them out also, when will it end ?

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