The Expert Podcast

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Alright welcome to another episode at CarTitles.com One of the most common. Questions that comes to us, has to do with vehicle liens. It could be removing a lien from a vehicle title record, for example a an old. Paid off car loan or a charged off car loan or loan They shouldn't even be on the car. Another lien question that comes up is a mechanics lien.

Can you use a mechanics lien to get a title? And there's some very important. Misconceptions that people have that. At the very least could keep you from getting a title and have you. be reached.

on your title transfer at the worst it could create legal problems Look most people don't intend to do anything illegal or get in trouble, but a lot of times there are urban legends or online forums that tell you can do certain things that might end up getting you into trouble So let's first talk about a vehicle lien. And a vehicle title with a lien on the record and figure out what that is. First of all a vehicle title as you know it's a legal document right Here's what it looks like This is a title for a vehicle. And it's a certificate that's issued by a government agency. Most states they call it department of motor vehicles or DMV something like that.

And that state agency. Keeps track of and issues vehicle titles Now, if you purchase that vehicle, And when you bought it you got a car loan from either the dealership a manufacturer or a bank or somebody like that. Let's say you got a car loan from chase or from Toyota motor credit. That lender is going to put. that lien record on your official title history It's going to go into the government.

Agency record system so that your title will say right on it. Lean Toyota motor credit. In fact in most cases they won't even give you the title because that's being held by the lien holder. In most states…

So…as long as that lien is on the record you can't sell it. Transfer it sometimes you can't even get the title because the bank holds it. Well what happens when you pay that off? Or it's a charge off? And now you have to get it removed from the title record Well in most cases, Let me back up in some cases.

The bank or the lien holder will actually take action to remove that lien from the title record, they'll either send a document they'll do it electronically, or they'll sign an affidavit that the. DMV we'll use to take it off the title Sometimes they give that document to you and then leave it up to you to remove it from the title. Sometimes all they'll do is they'll take that title certificate. Sign it stamp it paid. And send it to you but they'll never clear it off the title record.

That's a problem because if you lose that one single piece of paper, now you're out of luck…

So how do you take it off Well, in almost every state the process goes like this. Some lenders have a direct electronic connection…

To the official DMV records where they can electronically type it in hit enter and it clears it…

Sometimes they require a piece of paper and that's more common. That piece of paper is called a lien release. Document. It's an official form from the DMV that releases that lien from the title record which clears your title And now you can sell it trade it do whatever you want…

How do you get one of those Well, We've talked about it before and don't forget in a minute we're going to talk about mechanics lanes and what that means and how to do a mechanics lien If you can…

Cause the mechanics lane can also result in a bank loan being removed from a title. Right That can happen…

So, how do you get a lien release Well first thing you do is you see if you already have it from the lien holder if you don't have it you need to get it from the lien holder the lien holder bank financial institution whoever they have to sign. That form you can't just print it out yourself and submit it has to be signed by somebody who's verified from the lender…

So what we recommend is don't just call up your bank and say Hey give me a lien release Don't email them. Don't fax them Don't text them I don't send them a Facebook message because in most cases, And can work. The bank is either going to forget about it They won't do it. That whoever you talked to on the phone that's not their job and they'll get lost in the shuffle fall through the cracks. So what should you do?

What you should do is you get that document That form…

Print it out It's a one page form. Fill everything in you can, what you can't do is you can't sign it…

Mail it to the lien holder. With a little arrow sticker saying Hey sign here.

Put a return envelope so that they have a place to send it back to They don't have to do any work put a stamp on that envelope to mail it back to you. That way somebody gets it All they literally have to do is sign it. Look the envelope Boom It goes back to you. If they have to do any more work than that it's possible And likely that that employee at that bank at that financial institution is just going to say well maybe I'll do it later Maybe I'll throw it away. Or maybe I'll pass the buck to somebody else because I don't feel like doing it because all these people are doing some other job.

They're not a lien release department just sitting around waiting to do this…

What about a charge off Well, If you do that same thing many times what happens is that an employee pulls it up They get the VIN. They type it in Yep Charge off sign it send it back…

Now your lien is released because the charge off technically means it's off their books. So it should be released They're not going to take it off the DMV record unless they have an easy way of doing it…

So charge off takes it off In fact…

One of the things you want to do Sometimes people ask us well should I send a certified mail Don't send a certified mail because that's going to probably end up going to the legal department of that lender which means there may be higher scrutiny. It's going to go to some higher level executive higher scrutiny. If you just send it regular mail it'll go to some clerk They look at it charge off you up Sign it Boom. You're good. That's how you do it That's how we do it.

We send out a couple of hundred these a week. For clients. That's how you do it now. What about a mechanics lien? Change the subject change gears…

Well a mechanics lien. For those of you don't know most of you do who watch our channel. Is a process. where a licensed garage repair shop storage yard can file a lien on a vehicle that's been brought in for repairs brought in for towing brought in for storage and somebody didn't pay the bill. And that mechanics lien allows them to sell the car.

To pay the bill. Right. And it also clears off any prior liens even if those liens aren't paid. So if there's a lien that's paid that's still open with Toyota motor credit, somebody else 10,000. If the mechanic does it the right way it removes that However here's the thing…

There's a lot of fraud that goes on with that. And it's not something which. The powers that be don't know about In fact here look on the screen. This is from the AAM VA. American association of motor vehicle administrators.

This is the quasi government authority. A lot of law enforcement works in this organization. That works with the DMVs to prevent fraud And that's exactly what this is Prevention of abandoned vehicle a mechanics lien fraud Look, they're not stupid. They know that some auto repair shops I will. File fake mechanics liens Why would they do that?

Well what if your buddy owns a body shop and you say Hey man. I got this 2020 Toyota Camry I owe 15,000 on I don't want to pay my loan anymore. So do this file a fake mechanics lane, sell it back to me I'll give you a couple of hundred bucks and then I get a free car I don't have to pay my loan well on paper That all sounds good. And the, the auto shop can file the right paperwork. They can do everything and try to get you a clear title but here's what's going to happen.

Look. This best practices for preventing fraud This came out in March, 2020 that's more than three years ago…

They've been onto this for awhile. What they're going to do. Anytime a mechanics lien shows up at a DMV. They're going to look. And see if any of it fits this profile of mechanics lien fraud.

Because they know this happens. And the banks are onto this too. A lot of times people will try to send because one of the steps you have to do for mechanics lien is send a notice to the bank improve that you sent them a notice. A lot of these scammers will put a letter to the bank with blank paper in it. So they don't really get a notice but they can show.

Certified mail I sent you a notice You didn't respond to it right? They're not stupid They know how to deal with this Plus the DMV is also going to compare notes They're going to say wait a minute. This little body shop repair shop is filing these mechanics liens. Two or three or four a month. But there are sales tax revenue Their payroll only shows they're a small mom and pop shop.

They shouldn't have this many. And they're going to audit them And if they find out and that which they will, that these are fake they're going to undo the titles of people get into trouble So what are the best practices that they look for to prevent that? And they tell the DMVs look when review practices are limited only a small percentage of applications for mechanics liens are found to be fraudulent, but a closer review reveals that a significant number. Our fraudulent…

And this impacts a lot of people and impacts the banks and the PACS employees at Apax dealerships. So, this is why they look for it. And here's how they identify the fraud and the mechanics lien process First, one of the ways that the reasons they do it is to title brand wash Try to take off a salvage off a title. they also try to remove a lien Like we talked about the act of fraudulently removing a lien holder from a title without a valid lien release This is where people don't want to go through the hassle of getting a lien release from the lender They do a fake mechanics lien, the other the vehicle cloning and title brand avoidance That's not a big deal. Fraud may occur when a lien claimant intentionally circumvents the notification requirement intentionally are leaving out specific vehicle information from the notice.

that's like sending blank papers, intentionally not providing notification intentionally sending empty or junk field envelopes to the title Lienholder. Right This is what they do. They, they send those blank ones out intentionally sending notice to an incorrect address. Right. And then the sale process Look when you do a mechanics lane, you're supposed to offer the property for public auction You're not supposed to just give it to one person or keep it for yourself.

So. You can not advertise it for sale or advertising in a vehicle in a publication where vehicles are not normally bought or sold, not holding a public sale. But you still claim it selling the vehicle to themselves employees relatives or their own business. And do you don't make a reasonable effort to obtain the highest price? Right.

This is, they know this and this is what they look for in these lean sales. So the DMVs the licensing authority, the recommended best practice is how they train law enforcement on. conduct physical vehicle inspections prior to making the mechanics lien title application So what they're saying is if they get a mechanic's lien title application, they're going to send out a law enforcement agent to.

inspect the vehicle First of all I want to make sure it's there A lot of times these mechanics liens the fake ones the car's not even at the dealership or the repair shop, somebody driving it around. Right It's not even there. They're also going to check to make sure that you have a repair order…

That you actually have authorized. repair. Verification that somebody wanted that car in your shop. And then what they're going to do is that they're kind of attained vehicle records They're going to find the last owner and they're going to look up the new owner to see if there's any relationship between the two They're going to see if there's a common element for other vehicles that were transferred through that mechanic shop, then they're going to audit the notices to owners and lien holders, anybody with an interest in the vehicle. this supposed to be noticed and have the opportunity to redeem the VA.

and get it back, they're going to make sure that that notice was done properly If they find out it wasn't they can avoid the lien sale They're also going to be very suspicious of lean title services and third-party agents So if there are companies that are hired. Conduct a mechanics lien process A lot of those companies are sketchy. You know and they may not do it the right way either intentionally or unintentionally. And they're going to verify that all of the records were done properly. If you're a repair shop.

You want to be at least signing the paperwork You don't want to leave that to somebody else. Then they're going to verify the timeline This is an important part. Every state has required timelines that you have to wait Once you file that mechanics lane, you have to wait. Maybe 30 days to get the notices out then you have to wait 30 more days for the auction Then you have to wait 45 days for VIN verification. They're going to make sure all those timelines were met.

And if they see any of the paperwork was done too soon. They're going to avoid it or if it's took too long a lot of times these repair shops. We'll sit on a vehicle. for a year before they file it because they want all the claimants to go away So they're going to make sure the timelines were met properly. When you do your lien sale they're going to make sure that a defined sale process was in place They're going to make sure it was at a certain date Certain time was advertised.

They're going to provide information about the sales process who was there, who was present who signed the documents and also sales proceeds that car supposed to be auctioned off to somebody. And they're going to make sure that the name of the person auctioned off there's a receipt for money changing hands for those proceeds, so that the recovery of expenses. Is not a windfall So they want to make sure that the vehicle didn't become a free vehicle for the owner or for the lien.

claimants or they're going to want to make sure that money actually changed hands but not too much. And here's where the fraud comes in the types of fraud. First of all there's fraud in advertising Right? Lifting an incorrect VIN number or VIN number missing characters that keeps people from actually. due diligence on the vehicle, changing the description So it doesn't sound as, appealing providing a false address with no association with the lien applicant submitting a counterfeit sales ad.

So this is where a lot of. fraudulent mechanics liens run into problems You say oh I held this sale and I advertise it in the paper. And you Photoshop. A advertisement to show that these were, placed when they actually they weren't. This is where most of the fraud happens collusion between lien claimant and buyer.

So this is where the person who ends up with the vehicle is in cahoots with the, with the repair shop to either get a lean taken off their car or a closed bid So nobody will pay too much for it. Maybe it really was brought in for service but they don't want to,

really have somebody else buy the car They want to make sure they give it to somebody who they know in a. In quote winning bid by circumventing the sales process happens. You also want to make sure that. you don't have an unauthorized lien removal This is where you have a car loan, you know, It could be up to five years and mechanics liens on late model cars should receive extra scrutiny from MBA staff that tells you right there what's going to happen. If there's a mechanics lien on a late model vehicle it's going to have extra scrutiny from the motor vehicle department.

These applications are tried to wash a lien from the title…

That's exactly what happens…

You have a lien on a vehicle you want to make it go away So you do a fake mechanics lane You're going to have extra scrutiny on a late model vehicle with a lien on it. The last thing they're going to look at is your storage fees. Intentionally holding the vehicle. there are situations when a lien claimant the body shop or repair shop will intentionally hold a vehicle in their possession to increase storage costs. Conceal a stolen vehicle or conceal the vehicle from a lien holder looking to repossess it.

And this exaggerates the claim and defrauds. the system again whether you agree or not with the system how it should be, this is what they're going to do. They're going to get these applications for mechanics lien and they're going to scrutinize them heavy duty because they know there's a lot of fraud when they get the final application for title. They're going to look at things like. we view the mechanics link title application.

Process the. All the details the dates the times, and make sure you have enough resources to go through that with a fine tooth comb. You want to do good training for employees so they know how to review them. You're going to look for receipts, for service to provide it If you're a repair shop and you say Hey I fixed this, this vehicle I put in new transmission They're going to look for receipts where you bought parts for it

or that you have a repair order. They're going to make sure that the repair shop actually did an N and M VTIs check. they're going to look for lien notice forms. They're going to look for a bill of sale for chain of ownership. They're going to look for things like.

the prior title, registration. And they're going to verify that everything was done according to what the laws are in the state review laws and rules referencing lean release. If for some reason there's any question they're going to flag it pull it out of the system They're going to audit not only that one, but every other lien re. Mechanic's lane that that repair shop did or even the customer did once they find any kind of red flag or suspicion they're going to do a stop title, meaning that they're going to put it at administrative stop on the application on that VIN number. And it will stop the application applicant from using any other title method.

To get ownership transferred It's going to alert the MBA staff. There's an issue with your insurance action in any other pending application. So once your VIN number is flagged, it's going to put it in the system. And if you try to do something different or switch it around or do a shell game, they're going to have that VIN number as a red flag And they're not going to let that. A new title be issued a matter what you do.

And then once that happens they're going to take that title application If it's suspected fraud and retain it. For criminal prosecution…

It says right here criminal prosecution. If you have a file that's flagged, you may not even know about it until they either have a warrant for your arrest or they. come inspect the vehicle They may do a search warrant on your premises because they don't. This is this is like grand larceny If you have a vehicle that's $10,000 and you're trying to…improperly transfer a title, that's like stealing $10,000 So you want to do it the right way. Sure Doing a mechanics lien might seem like a simpler way than having to deal with the actual lien holder or deal with a bonded title or a court order title.

A lot of times people look at it as a shortcut or a loophole, but…

There's investigators and law enforcement and prosecutors that are all over this So unless you are actually a repair shop, That actually had a vehicle brought in for service. and you did everything right. You didn't wait too long You didn't sit on the car for two years. You filed the right paperwork. You have a repair order You did the proper notifications.

Don't use a mechanics lien as a shortcut because. It's kind of take longer. And it's kind of require more risk than just doing a bonded title or a court order title or one of the other more legitimate ways of getting a title. And a lot of people don't want to do that because. Some people just feel like if you're getting away with something it's better than doing it the right way, but…they have bulletins This was written three years ago.

Every DMV employee has it and they know to look for it. And here's some cases successful enforcement efforts. I remember this case happened about five years ago. they were charged with 14 count federal indictment These are federal charges, conspiracy to commit mail fraud and other things. These defendants obtain motor vehicles with active liens.

Some were purchased from dealerships by straw buyers. They prepared and mailed false and fraudulent lien sale notices to lienholders. They hid the motor vehicles in south Florida to record our to to prevent repossession. And they. Transferred up to themselves in total the vehicles are valued at 1.7 million There was almost 200 vehicles.

It was organized fraud scheme. And us secret service got involved. Us attorney general. In jail. Right.

There's many other cases we'll go through some of these other videos, but they don't play Indiana state police and FBI.

Missouri highway patrol all the states do this Nevada DMV This was actually a big case. 32 felony counts, a towing scam. They offered false documents are falling a record. In order to transfer titles, the lien holders never received any notice of the auction. And they were deprived of thousands of dollars.

out of their lanes. And…again, you got an indictment…

A couple in Oregon. There was a big case. And I remember this from…the mid two thousands. There was a group of people in south Texas I think San Antonio. That we're actually putting ads on Craigslist that said, if you have a vehicle with a lien, Either you pay us a few hundred bucks and we'll remove the lien or we'll pay you.

A thousand dollars for the vehicle and you give us the vehicle And what they were doing is they were moving the lien and keeping it for themselves. So…these cases are prosecuted on a regular basis. You don't want to get involved with it intentionally or accidentally. There are legal legitimate ways to take a lean off of a title. Doing a mechanics Lien is a recipe for disaster.

And remember this best practices document was issued to the DMVs in 2020. And they've had plenty of time to put these into place. And we have a lot of clients that are repair shops and body shops. And these are ones who are doing legitimate mechanics lanes, and they tell us all the time, every time we send one in we get phone calls we get people coming out to look at the VIN numbers. We get scrutiny of our documents and our records, even if they're just filing one at a time because they know that there's a lot of fraud And if you're doing everything on the up and up everything will go through, but you're going to get inquiries.

And if they find any one thing wrong I not dotted T's not crossed. They're going to void out your sale Sale and puts you under further investigation. So if you have more questions you can reach our website. CarTitles.com You can get more instruction to how to file a mechanic's lien You can get instructions on how to do a lien release. We also have title services that will do either one of those for you.

We also have consultation If you want to book a consultation with a title agent to go over your particular case, you'll see on the website There's a link for that as well. Watch our channel We'll see you on the next video.