Indiana Victims Of Escrow Fraud Receive $125,000 In Restitution

One benefit of the federal system in which we live is that there are 50 different state “laboratories” that can come up with their own solutions to the problems we face. Indiana has created a rather interesting method for solving a troublesome issue stemming from the failure of American Escrow, a Chicago-based company. Indiana Attorney General Greg Zoeller says that 97 financial fraud victims recently received $125,679.22 in restitution for taxes and insurance bills that went unpaid by defunct American Escrow, a Chicago-based company.

“Paying property taxes and insurance is not optional for homeowners. Escrow accounts give people a peace of mind that critical bills will be paid on time by money held in trust. That peace of mind turned into a nightmare for thousands of homeowners all over the country when they discovered their tax and insurance bills had not been paid and the money had been squandered," Zoeller said. "This restitution will not undo the stress or erase the experience of being defrauded, but it will hopefully allow them an opportunity to gain back the financial stability for which they have been fighting."
 
In early 2009, angry homeowners from dozens of states flocked to the internet to trade stories about what losing their escrow money meant for their families and to file complaints against the company. Attorneys General in Illinois, Iowa, Michigan and Pennsylvania soon filed lawsuits against the crumbling escrow company, which, according to Zoeller, had already been plagued by internal fraud and embezzlement. Zoeller filed suit against American Escrow in June 2009 for violations of state consumer protection laws. A court judgment was ordered in January requiring the company to pay more than $600,000 in fines, attorneys' fees and consumer restitution.
 
Zoeller says that the judgment proved uncollectible because the company had no assets, so the state legislature passed a new law making restitution funds available for the fraud victims. The new law, House Enrolled Act 1332, set aside $150,000 out of a loan broker account held by the securities division of Secretary of State Todd Rokita's office. The account is funded from license registration and renewal fees collected from loan brokers, mortgage loan originators, and principal managers.
 
In addition to providing restitution to victims, House Enrolled Act 1332 states only a financial institution or title insurance company can maintain a borrower's escrow account and all others are prohibited from doing so. This new provision in the law is expected to curb practices that could lead to abuses, according to Zoeller.