Stewart Title Sues Elderly Couple for $4.2 million

Did you catch the New York Times story about an elderly couple being sued by Stewart Title? This title company does business in California. Stewart Title is holding the couple (Rita Starr and Ivor Rose) liable for fraudulent mortgage loans against properties they own, but were taken out by a convicted swindler, Michael A. Stern. This tangled story has locked this Miami Beach couple into a five-year legal battle with Stewart Title.

Wasn’t title insurance intended to protect buyers when a loss on a loan arises from forgery? This story is a powerful reminder that title insurance protects a lender not the individual buyer.

Please weigh in on this story – what we are hearing is a secret in the industry – that individuals can also purchase the same title insurance that is normally purchased for the lender for as little as $25 to protect themselves from situations like what’s happening in the Stewart Title lawsuit.

Most home buyers don’t shop around for a title company – rather they work with a title company recommended by their real estate agent. It is not widely known that buyers can purchase these individual or borrower policies which are very inexpensive, but could save the agent and borrower from getting locked up in lawsuits just like this one.

Here’s the story:

Ivor Rose and Rita Starr were real estate investors in, who accumulated about $15 million of income producing properties in Florida without debt before they ever met Michael Stern. They eventually became business partners in several unrelated properties, which were also bought without debt.

The trouble started when Stern began obtaining mortgages on their joint properties and the couple’s other holdings using a forged signature. Stewart Title does not dispute that Rose and Starr never benefitted from any of the loan proceeds.

For example Stewart Title is suing the couple demanding that they pay $4.2 million to cover its losses on a loan received by the swindler Stern. Never mind that the court documents show that a signature by Mr. Rose, executed in Florida, was on the same day he was in a New York City hospital having heart surgery.

The troubles began as early as 2009, when Rose and Starr started receiving foreclosure notices from institutions claiming to hold mortgages on properties the couple had owned outright. They thought it was some kind of mistake.

If only.

Michael Stern, aka “The Swindler” had left Florida for Uruguay, and had stopped paying on the mortgages. Now the banks were coming after Rose & Starr. “Michael Stern was smooth and we’re not that perceptive,” Ms. Starr said. “He played us.”

Last October, Michael Stern was sentenced to five years in prison for swindling Dwight Freeney, a linebacker for the San Diego Chargers, out of $3 million. In California, Mr. Stern went by the name of Michael Millar. He will soon face prosecution in the Florida matter, said the prosecutor in California.

But the federal indictment didn’t end the troubles for the couple.

They could lose all their properties and also be on the hook for millions of dollars. This is because Stewart Title, the company that insured the fraudulent mortgage loans — and whose policies require it to cover all the losses on the loans arising from forgeries and other defects — has refused to make a settlement on most of the properties.

And Stewart Title is also asserting, in another court venue, that one of its own agents helped Michael Stern secure bogus loans. It is suing that agent.

Shouldn’t the title insurer step in to payoff these fraudulent mortgages to prevent foreclosure?

Stewart Title has settled with Rose and Starr on three of the fraudulent loans, returning the properties to the couple free and clear and absorbing the loss. But the title company has refused to settle with the couple on the 12 remaining loans.

Moreover, it has turned around and hired a foreclosure counsel to sue on behalf of the entities that hold the notes backing the properties. If the couple lose these suits, those entities will be able to take ownership of the properties and Stewart will not have to pay out the roughly $8 million in title insurance that it has written on them.
Moreover, because the properties are now worth less than the dollar amounts that the swindler Michael Stern received on the fraudulent mortgages, Rose and Starr could also face lawsuits demanding them to make good on the difference, known as a deficiency. Their lawyer estimates that the deficiencies on the properties could reach $5 million.

Bewildered by Stewart’s legal tactics, Ms. Starr said: “I don’t know how they could try to collect millions of dollars” for other people’s behavior “and try to take our properties, too.”

What do you think of Stewart Title’s actions in this matter? We’d like to hear from you.

To read the full story click here:

  • Terry Day

    It would seem that the couple would have a nice lawsuit themselves against Stewart for employing an accomplice in this scam.

  • M altnam

    Its interesting the article does not say what stewart is actually suing for. Just that they are “suing the couple demanding that they pay $4.2 million to cover its losses on a loan received by the swindler Stern”. What are the grounds for the suit?

    • RE_Insider

      I’m not sure what the grounds are for the suit only that they are demanding the couple make good on one of the loans taken out by Stern for $4.2 million that the couple did not benefit from. This seems ridiculous considering that the defendant was having surgery in a New Your on the day the documents were supposedly signed by him!

  • SofiesVoice

    The way I see it, Stewart has admitted wrong doing by settling with Rose and Starr on three of the fraudulent loans, returning properties to the couple…..does this set precedence for the rest of the lawsuit???….Attorneys out there, what say you????

  • Stuart Groten

    Stewart Title appears to be fully responsible for the title coverage. To go after the couple, who had nothing to do with the problem, shows they are reaching for straws. Having dealt with Title Companies for the past 50 years I would remove them from my list of acceptable companies.

  • Deborah McKnight

    I’d like to hear more about this supplemental Title policy that is mentioned in the article…I think I saw a charge of $25 for that. I will follow this story!

    • RE_Insider

      Deborah $25 is the cost for this individual policy in Florida. The costs vary from state to state but they are quite low compared to the policies required to protect the lenders. These are regulated by the state as well.

  • Wayne K

    The insurance company is “working for you” when they take your money. But, when you have a claim, they are looking out for their own best interests. They have more money than you. Being right has nothing to do with it. This is not the type of case that an attorney is likely to take on a contingency basis. It would probably be pay as you go with a huge retainer up front. They can just keep litigating until you can’t afford to fight any more. Then, they win by default.

    I lost a few hundred thousand over an easement issue that should have been covered by title insurance. I ended up settling after two years because I couldn’t afford to pay any more attorneys fees. In the end – the insurance company wants it to cost them as little as possible. They are looking out for their own interests – not yours. The big winners are the attorneys. No matter which party they represent- they all get paid handsomely.

  • Ed171

    Interesting article but not all sides are represented properly. Who knows maybe the elder victims are still in partnership with the swindler and the intended victim is the Title company ? I wouldn’t rule anything out.

  • 805Lifestyle

    It is interesting to see that the couple is not protected from the forged signatures even though there is proof of not evening being in the same state at the time of the signings.

  • Alan Brave

    the elderly couple are a bunch of thieves anyways.

  • Truth Matters

    We are in the process of getting our home robbed by a gang of white collar criminals/drug dealers who have forged documents and illegally transferred our notes and mortgage. Stewart Title was our title company. They never told us there was encumberances when we purchased the property. They refuse to assist us and told us that it is our fault our title has been stolen. Stewart Title company is crooked. I believe this couple.