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November 2006
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Ed Rybczynski on Real Estate Fraud

Prior to his conviction, Baltimore, Maryland’s, Ed Rybczynski was a licensed title agent and the owner of a successful title company. Nowadays, during his presentations, Ed speaks candidly about his role in a well publicized flipping scheme that resulted in his imprisonment in a federal prison camp. Ed’s message is a simple one: That real estate fraud prevention can only be accomplished through personal accountability and responsible corporate citizenship.

In his own words, from a comment Ed left here on just a few days ago (in case anyone missed it):


I would like to comment on the newly released statistics for mortgage related fraud. I’m not sure if the statistics apply only to instances where a lender is victimized during the loan application process or if they include predatory lending practices and other types of fraud where a consumer is targeted by a lender. It’s probably safe to assume that the report encompassed any and all suspicious activity reports (SARs). An often cited FBI report states that 80 percent of all mortgage fraud involves the tacit participation of a real estate professional. I personally believe that the percentage is much closer to 100 percent. A real estate professional who fails to ask questions or exercise due diligence is in fact an active participant in the fraud. I feel uniquely qualified to comment on these matters. I was a title industry insider for 20 years and also did time in a federal prison camp for my role in a fraudulent scheme involving property flipping and loan fraud.

It comes as no surprise to me that the incidence of fraud has climbed so dramatically. In fact, I believe the numbers are understated as a substantial amount of mortgage fraud remains undetected and/or unreported. Most people, industry insiders included, have no idea of how to properly report complex schemes of this type. Along the same lines, very few people are able to recognize the warning signs of fraud which are often subtle. It’s my opinion that real estate related crime will continue as an accelerating epidemic in this country. I do not believe that changes in interest rates or the economy will have any diminishing effects on the two broad categories of fraud identified by the FBI – fraud for housing and fraud for profit. The lending industry and title industry have decided to look to technology as a solution to an overwhelmingly complicated situation with human nature at its core. A data base – search engine is no match for many white collar criminals.

The problem worsens as the technology used to process a loan or title file reduces the consumer to a faceless and ambiguous name on a computer screen. It’s time for the real estate industry to address fraud in a realistic manner by taking an honest look at its hideous effects on real people. A study released on 5/31/06 by the Center for Responsible Lending entitled “Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages” finds that predatory lending activities are most often targeted at minority groups with an ethnic bias. Real estate related crime is still perceived as being benign and victim-less. It’s not true; every aspect of our society suffers when a home is foreclosed and a family displaced. We’ve all heard the cache phrases that tell us much. No one will know! Everybody gets paid! What difference does it make! The buyer gets the house!

The statistics concerning the licensing of mortgage brokers are alarming. A similar situation exists within the title industry. Keep in mind that federal prosecutors view the role of a title agent as having the social importance of a doctor or a lawyer. Title agents not only examine title, they are also responsible for managing enormous escrow accounts and for guarantying the secured interest of the source of funds. It’s a technical and serious job that’s accompanied by a great deal of risk. In the context of fraud prevention, the title agent is the final stop in a transaction with a serious obligation to detect and report fraud. Yet, 3 states plus the District of Columbia do not require that title agents be licensed; 18 states and the District of Columbia do not require a title agent to pass a test to become licensed; only 20 states have an educational requirement as a pre-requisite to licensing. My source for the above information was a report released on 4/26/2006 by the Government Accountability Office entitled “Title Insurance: Preliminary Views and Issues for Further Study”.

I agree with you that mortgage brokers should be subject to national standards for licensing and oversight. I also feel that national standards must be established for title agents. The professional development of title agents and mortgage brokers is the critical first step to fraud prevention. Continuing education as it exists today for the title agent is simply ineffective. Professional education should be substantive and emphasize best practices. I’m particularly alarmed by the recent findings of an 18 month investigation conducted by the Insurance Commissioner of the state of Washington. A number of national title insurers and title companies were caught in the act of paying illegal inducements and incentives in return for title orders. All title agents look to their underwriters to set the highest possible standard for proper and ethical behavior. Where do we go from here?

The use of technology is just one vital aspect of mortgage fraud prevention. Uniform licensing standards for professionals and background checks are equally as important. But, when dealing with a topic matter as important as a home we cannot ignore the power of the human condition. Awareness is the key. Through training, title agents and mortgage brokers must be exposed to the possible consequences of their professional decisions. They must learn that an over inflated appraisal or falsified bank verification can cause real harm (and pain) to children, families, communities, etc. Additionally, real estate professionals must be exposed to the personal consequences of improper behavior including the payment of restitution, incarceration, the loss of a career and the loss of professional legitimacy. Then, and only then, will title agents and loan brokers fully recognize the need to develop a decision making model based on core values. Then, and only then, will mortgage fraud statistics begin to decline. Remember, mortgage fraud cannot exist without the participation of real estate professionals.


Ed Rybczynski

Posted By: Ralph Roberts @ 12:11 am Comments (6)
Filed under: Ed Rybczynski,Mortgage Fraud,Real Estate Fraud,Subprime Mortgages


  1. Thanks for posting Ralph.

    I agree with nearly everything said here. Mr Rybcynski is articulate and makes a persuasive argument.

    I wonder if Colorado is one of the states with little or no requirements to be a title agent. In my expereince, the “typical” mortgage fraud (if there is such a thing) involves the active cooperation of several real estate professionals. The system is set up so that team work is needed. It takes 2 real estate agents, a mortgage broker, lender, title company, appraiser, the buyer/borrower, and to some extent, even the Seller. Here in Denver, I see lots of teamwork.

    See (for example) this list of 10 houses bought in 7 months by Young Kim.

    This is a problem that affects everyone – and it’s getting worse every day.

    Comment by phil rice — November 15, 2006 @ 1:10 pm

  2. [...] Ralph Roberts has an interesting post about the importance of the title company.  The post is made by: Baltimore, Maryland’s, Ed Rybczynski was a licensed title agent and the owner of a successful title company. Nowadays, during his presentations, Ed speaks candidly about his role in a well publicized flipping scheme that resulted in his imprisonment in a federal prison camp. [...]

    Pingback by phil.rice » Blog Archive » Rybczynski — November 15, 2006 @ 1:27 pm

  3. Ralph

    I would like thank Mr. Rice for his kind comments. Rybczynski Consulting ( will research the licensing and continuing education requirements for Colorado title agents and get back to you with the info. The licensing of title professionals is an important issue that needs to be addressed by legislators, prosecutors and investigators. Truth be known: the public deserves proper representation when closing on a home. I stongly encourage all readers to take a couple of minutes to visit the website for the Government Accountability Office ( and to download the report entitled “Title Insurance: Preliminary Views and Issues for Further Study”. The report is a real “eyeopener”. I applaud Congressman Michael Oxley for initiating the study. Congressman Oxley was a Special Agent for the FBI before entering politics. Along similar lines, I have a strong suspicion that there is direct corelation between notary public requirements in any given state and the statistical incidence of mortgage fraud in the same state. Again, notary standards are something that cannot be ignored when contemplating a fraud prevention strategy for the real estate industry.

    Until next time
    Ed Rybczynski

    Comment by Ed Rybczynski — November 16, 2006 @ 12:13 pm

  4. Ralph

    In regards to Mr. Rice’s question concerning licensing requirements for Colorado title agents, there is a pre-licensing testing requirement. For certain types of insurance there is a pre-licensing training requirement; title insurance is not one of them. Colorado title agents must take 24 hours of approved continuing education courses every two years. Of these, 3 hours must be a course(s) in ethics.

    Colorado notaries are commissioned for 4 year terms. A notary candidate must: be a resident of the state; be at least 18 years of age; read and write English; be without a prior felony conviction; be without a prior notary revocation. Training is voluntary, however it appears that Colorado strongly encourages notary training. The state requires that a notary maintain a journal (log).

    I would like to add that a notary log is not required in every state. Because the FBI considers the notary log an important investigative tool it’s something that cannot be avoided.


    Judy Stricklin-Barton
    Rybczynski Consulting

    Comment by Judy Stricklin-Barton — November 21, 2006 @ 11:31 am

  5. I’m impressed the professional nature of this blog/thread. As an appraiser of 25 years experience, I would like to offer the view from that corner, if you will.

    The Appraiser, along with the Realtor, the Mortgage Broker, and the Title company/Closing agent are very likely to be New and far less Experienced during such times as we experienced in over half of the states – about 100 bubble markets were identified about 6-8 months ago by CNN Money reporting of various industry experts. Why? Because we never Needed so many of every Type of real estate industry professional (and the term is used loosely, when the licensing requirements are so very Inconsistent with the Trust of the public) Until the buying and flipping frenzy started.

    For starters, contrast the mortgage broker’s Weekend course, and his/her Multiple Percentage of loan value fees, with the Appraiser’s LESS Than ONE TENTH of ONE percent fee, and that individual’s several Weeks of training, just to pass the licensing test. Appraisers are taught ZERO about measuring homes, taking photos, neighborhood data collection/research and analysis, form-filling, software, websites, MLS or Anything else one needs to actually DO the work. And after all that, the appraiser enables the broker to make 20 to 50 times his own fee, by assuring the lender of the collateral value.

    Why do appraisers stretch value? We are Not viewed as a person of any significance by the public. They resent the few hundred we are paid, and they place all their trust in the Commission-driven realtor and mortgage broker/loan officer. Most appraisers who do this are simply overwhelmed by the typical 10 man hours and the overhead costs of the typical appraisal. With gas at $3 a gallon, we must pack in as many appointments as we can.

    Banks then open AMC subsidiaries, who assign appraisals to the low bidder, or those willing to accept the AMC/Lender’s version of “market fees”, which are typically 55% of Real market fees. Then the appraiser must do Twice the work in a week or month. They get jaded, they imagine their work does not make a difference. They’re overworked, underpaid and under-educated. Nobody “had time” to train appraisers in how to really analyze the market and its underlying economics trends, so appraisers in boom markets become simply form-fillers, to pay their own bills.

    Florida has very recently Finally closed a loophole where the Trainee can’t own the office and hire the supervisory appraiser to “sign off” on the work. Some other states (and I’d like to know how many nationally) have tougher requirements, including that the Trainee must complete 2 years under a mentor, and Then he is prohibited from hiring others to supervise, until he’s been responsible for himself for a year. Florida has no such law, and they hold the Supervisor completely responsible for the Trainee’s errors, omissions and even fraud. Had they been trained right, they would not have done that, is their logic. Finally after 10 years of talking about it, an Associate’s degree is required to become an appraisal Trainee – After the boom, when “all the horses escaped the barn”, now they close the barn door, metaphorically.

    Now there will be a big demand for Forensic Appraisals, and very few who are Qualified for them. In this case, the industry continues to amaze me with its stupidity and duplicity. Lenders are now assigning those reviews (crucial in fraud investigation) to the very same Low-bid New guys who made the mess! Why? to line their own pockets with the profits from the new diversified appraisal practice. I guess PMI makes up some losses and the rest is shortfall/deficiency judgements (the public’s nightmare) and Now, just as hazard insurance companies are routinely bailed out in Florida, PMI companies will be bailed out by Taxpayer dollars. What a country!

    We already had a plastic debt crisis and now we were exhorted and encouraged to bankrupt our home’s equity. Maybe when the citizens are all covered in red ink, they will shut up about balancing the budget and be happy to see more money printed?

    I am very interested in joint seminars with someone like Mr Rybczynski, or others who educate the public and industry groups on Fraud Prevention/Detection. As noted, it typically takes teamwork, but not always – someone who works for $200 may be just too beat down to care or notice. NAR has a huge and very wealthy/powerful lobby, as typical sale commissions are in the tens of thousands per transaction. A few hundred does not afford the appraiser the luxury of a social conscience or educated opinion. We hardly have time to formulate them, or to network with our peers or educate the public. I’d like to see that change, and to gain back the respect we had 2 decades ago, before I retire. There is, not surprisingly, no consumer advocacy that I am able to find, to protect the public or to educate them about their (cliche but So true) biggest single investment and expense, and what they can or should learn to do to protect themselves.

    Doreen Campbell
    SE Florida Forensic Appraiser

    Comment by Doreen Campbell — December 21, 2006 @ 9:28 pm

  6. Response to Doreen Campbell’s comments

    Doreen touches on a very important point when she mentions the powerful lobbying capacity of the National Association of Realtors and the inability of the title and appraisal industries to do the same. I believe the transactional control excercised by realtors in the form of joint ventures creates real opportunities for fraudsters. A more viable fraud prevention model would encourage the buyer to chose lender and title company without interference by the realtor. The three distinct professionals would then work independently within their respective disciplinces and in the best interest of a mutual customer. Currently, the title agent serves the interests of the realtor; the appraisor serves the interests of the lender. What about the interests of the consumer? The steller fraud and foreclosure statistics bear witness to the incredible inefficiency of the business model presently strangling professional protocol from real estate deals.

    Settlement service providers (appraisers) are forced to do whatever it takes to remain in business. In a research project undertaken by October Research in 2003, a surprising 55 percent of professional appraisers felt they had been pressured to inflate property values. Over 25 percent of the appraisers surveyed said that they felt the pressure to inflate values on almost half of the orders that they received. In the end, fraud prevention strategies will need to focus on control, manipulation and vulnerability. It’s wrong to assume that incarcerating fruadsters will have any measurable effect on fraud numbers overall. The motives governing white collar crime encompass a range of human motives that include greed along with many others.

    Realtors as a group have successfully eliminated new forms of competition in their own industry by oppoing a rule promulgated by the Federal Reserve and Treasury Department that would introduce federally chartered banks into the world of real estate brokerage and property management. Congress has barred national banks from competing with real estate companies by denying yearly funds to finalize the proposed federal bill. Representative Kanjorski ( D- Pennsylvania ) said “Our local communities are best supported by local businesses like hometown realtors who serve as leaders, volunteers, fundraisers and boosters. In addition, local realtors who live and work in the same neighborhoods as their customers are best positioned to provide personal customer service”. Kanjorski and others have introduced legislation, Community Choice of Real Estate Act”, that indefinitely provides a safe harbor for realtors while title agents and appraisers are essentially foundering in troubled waters. Title agents and appraisers have standing and importance in the community equal to that of realtors. It takes a team of properly paid independent professionals to protect the interests of consumers in real estate transactions. Doreen is correct to suggest that realtors are afforded a favorable position due to their commission structure and ability to fuel a monsterous lobbying machine. Legislatively force the realtors to take their hands out of the pockets of title agents and fraud statistics will decline immediately. The joint venture is not the only contributing factor to the mortgage fraud epidemic crippling our society; but it’s certainly one of them.

    Comment by Ed Rybczynski — December 22, 2006 @ 7:04 pm

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