This case study walks an illustrative private lender through an identity-verification breakdown on the loan-boarding cycle, the wrong-entity funding event, the secondary-market discovery framework, and the corrective framework against the lender’s identity-verification framework. The facts are illustrative and run against a composite of recurring identity-verification breakdowns on the private-lending framework.

The lender

A private lender runs the loan-funding framework against a commercial real-estate first-position note. The borrower runs the entity-borrower framework on a limited liability company framework. The lender runs the loan-boarding framework against the borrower’s drivers license, the operating agreement, and the articles of organization on the framework.

The boarding event

The lender runs the entity-borrower framework on the boarding cycle. The articles of organization framework runs against a limited liability company name framework that runs against a similar name framework — the lender runs the loan-boarding framework against an entity-name framework that runs against a different entity from the entity that runs the real-estate-title framework. The lender runs no certificate-of-good-standing framework against the entity formation framework and runs no FinCEN Beneficial Ownership Information framework against the entity-borrower framework.

The funding cycle

The lender runs the loan-funding framework against the entity-borrower wire framework. The wire framework runs against a closing-cycle wire instruction that runs against the title-company framework. The title company runs the deed-of-trust framework against the entity that runs the real-estate-title framework — the entity that runs the deed-of-trust framework runs a different framework from the entity that runs the loan-document framework on the lender’s boarding file. The lender runs the loan-funding framework against the wrong entity-borrower framework on the closing cycle.

The discovery framework

The lender runs the secondary-market framework against the loan-sale framework. The secondary-market buyer runs the due-diligence framework against the loan file. The due-diligence framework runs the entity-borrower name framework against the deed-of-trust framework — the entity on the note framework runs against a different framework from the entity on the deed-of-trust framework. The buyer runs the loan-sale framework on a price-reduction framework against the lender. The lender runs the loan-repurchase framework against the secondary-market buyer on the framework.

The corrective framework

The lender runs the corrective framework against the entity-borrower identity-verification framework. First, the lender runs the certificate-of-good-standing framework against the secretary-of-state framework on each entity borrower. Second, the lender runs the FinCEN Beneficial Ownership Information framework against each entity borrower on the boarding cycle. Third, the lender runs the entity-name-cross-check framework against the real-estate-title framework, the loan-document framework, and the deed-of-trust framework on each loan closing. Fourth, the lender runs the entity-authority-documentation framework against the corporate-resolution, manager-resolution, or trustee-certification framework on each loan closing.

The recurring lessons

Three lessons run against the lender’s framework. First, the entity-borrower-name cross-check framework runs the loan-funding framework against the real-estate-title framework — the entity that runs the note framework runs the same framework against the deed-of-trust framework and the real-estate-title framework on the standard. Second, the certificate-of-good-standing framework runs the entity-formation verification framework against the secretary-of-state framework on each entity borrower. Third, the FinCEN Beneficial Ownership Information framework runs the beneficial-ownership verification framework against the entity-borrower framework on the boarding cycle.

Related Topics

• Identity Verification at Loan Boarding
• Five Wire Fraud Defenses for Private Lenders
• Mortgage Fund Subservicing Done Right
• Multi-Lender Notes With Up to 10 Investors
• Fidelity Bonds for Trust Account Signatories

This article is educational and does not constitute legal, regulatory, or tax advice. The identity-verification framework runs against the Bank Secrecy Act framework. The framework runs against the USA PATRIOT Act §326 Customer Identification Program framework. The framework runs against the Corporate Transparency Act beneficial-ownership framework. The framework runs against the OFAC sanctions-screening framework and the IRS framework on the lender’s recurring compliance cycle. Consult qualified legal counsel and a tax adviser on the specific identity-verification framework against any private-lending operation.

Sources

• USA PATRIOT Act §326 — Customer Identification Program. Financial Crimes Enforcement Network.
• FinCEN Beneficial Ownership Information Reporting Rule. Financial Crimes Enforcement Network.
• Office of Foreign Assets Control — Specially Designated Nationals List. U.S. Department of the Treasury.
• IRS TIN Matching Program. Internal Revenue Service.
• FFIEC Bank Secrecy Act / Anti-Money Laundering Examination Manual. Federal Financial Institutions Examination Council.