Lakewood title insurance companies lose business over ties to mortgage fraud conspiracy

Two title insurance companies with ties to Lakewood signed off on loans for a real estate investor who later pleaded guilty for participating in a $165 million mortgage fraud conspiracy, federal law authorities said in an announcement that has rippled through the industry.

The two companies, Madison Title Agency and Riverside Abstract, weren't named as defendants, but their alleged role in the scheme could make it more difficult for them to get business.

In a memo obtained by The Real Deal, a trade publication, Fannie Mae, an agency that buys mortgages from lenders, said: "Until further notice, we will not accept delivery of any mortgage loan closed using Madison or Riverside in any capacity."

Madison, headquartered in Lakewood, and Riverside, which has an office in Lakewood, have a big foothold in the title insurance industry. The industry works largely behind the scenes in real estate transactions by researching property histories to make sure there are no other claims to the property, such as a lien or an unknown mortgage.

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The two companies were thrust into the spotlight in December, when Boruch “Barry” Drillman, a New York real estate investor, pleaded guilty to engaging in a conspiracy to obtain more than $165 million in loans and fraudulently acquire apartment buildings and commercial properties.

See a copy of the complaint against Drillman at the end of this story.

A federal lawsuit said Drillman conspired with others from 2018 to 2020 to purchase two properties in what authorities called a "flip" transaction in which buyers obtain loans for more than the properties are worth.

In one instance, Drillman and his partners in 2019 used a stolen identity to purchase a multifamily property called Williamsburg of Cincinnati for $70 million before turning around and selling the property to Drillman for $95.85 million, falsely telling a lender and Fannie Mae that the transaction was at arm's length, the complaint said.

Madison Title performed two closings for the Willliamsburg, the complaint said, one for the seller with a contract price of $74.5 million and one for the lender with a contract price of $95.85 million.

Fannie Mae didn't respond to a request for more information.

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A spokesperson for Madison Title Agency told the Asbury Park Press: "Madison Title has not been accused of any wrongdoing, and we are proud of our record of trustworthiness and integrity. We remain steadfast in our commitment to transparency, telling our story and addressing any concerns."

In another instance, Drillman and his partners in 2020 bought Troy Technology Park in Troy, Michigan, for $42.7 million, before presenting the lender with a fraudulent purchase and sale contract for $70 million, the Department of Justice said.

To justify that price, Drillman and his co-conspirators presented the lender and an appraiser a fraudulent letter of intent from another party seeking to purchase the property for $68.8 million, the Justice Department said.

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Riverside Abstract performed two closings for the technology park, one for the seller with the actual sales price of $42.7 million and one for the lender with the inflated sales price of $70 million, the complaint said.

A person who answered the phone at Riverside's office in Brooklyn declined to comment. The Real Deal reported that executives reached a tentative deal to sell the company to Avery Eisenreich, who owns a chain of nursing homes.

Drillman pleaded guilty to one count to commit wire fraud affecting a financial institution. He is scheduled to be sentenced on April 16 and faces a maximum penalty of five years in prison.

Michael Diamond is a business reporter who has been writing about the New Jersey economy and health care industry for more than 20 years. He can be reached at [email protected].

This article originally appeared on Asbury Park Press: Lakewood title insurance companies lose business over ties to mortgage fraud conspiracy