If there is a buck to be made, fraudsters will figure out how to lie, cheat, steal, swindle, hoodwink, dupe, con and bamboozle their victims in an effort to drain the bank accounts of homebuyers and sellers, lenders, title agents and real estate agents.
The first step in defeating the criminals is to understand the types of schemes that are afoot. The next step is to educate parties to the real estate transaction, to raise awareness of potential scams, and identify the warning signs.
Here is an overview you can share outlining the most common real estate industry schemes that participants may encounter.
Mortgage fraud scams
There are two basic types of mortgage fraud: fraud for profit and fraud for property.
Fraud for profit often involves real estate professionals or investors, for instance:
Property flipping, where an investor purchases a property and then quickly resells it at a profit after acquiring an inflated appraisal.
Equity skimming, where a team of fraudsters using straw buyers and false documentation acquire – and often quickly transfer a property – for the purpose of collecting rent without ever intending to pay the mortgage or property taxes, eventually letting the property fall into foreclosure.
Air loan, where a fraudster uses a straw or non-existent buyer to acquire mortgage funds for a non-existent property.
Appraisal fraud, where a real estate agent pays off an appraiser to inflate the value of the property for the purpose of increasing their commission.
Fraud for property often involves a buyer providing false information to qualify for a mortgage, for example:
The borrower falsifies employment verification letters or uses stolen pay stubs or tax returns.
The borrower steals someone else’s identity, including Social Security numbers, birth dates, and addresses, to acquire a mortgage.
Real estate scams
In a real estate scam, a fraudster swindles the buyer by misrepresenting the value of the property or by selling a property they do not actually own. Here are a few examples:
Home inspection scams: A fake home inspector is hired to perform an inspection for the purpose of deliberately hiding potential problems with the property.
Vacant lot scams: A fraudster identifies an empty lot free of liens – and often owned by an out of state owner – then pretending to be the owner, lists the property with a real estate agent. The fraudster often lists the property at below market value to ensure a quick sale.
Fraudulent deed scams: Through identity theft or fraudulent deed transfer, the scammer transfers title to a property to themselves and then sells the property out from under the true owner.
Fraud against consumers
Consumers are the most vulnerable targets when it comes to fraudulent activity in the real estate transaction because they generally are not aware of many of the schemes used to infiltrate the deal or prey on their ignorance. Wire transfer fraud and foreclosure rescue schemes continue to be the most damaging and costly to consumers.
Wire transfer fraud is the most devastating of all consumer fraud schemes, as it often wipes out the assets of the individual homebuyer or seller. In a wire fraud scheme, the criminal often infiltrates a real estate transaction through email phishing tactics, then poses as a participant in the transaction for the purpose of convincing the buyer or title company to divert funds to a fraudulent account.
Foreclosure rescue scams are also on the rise. Here are four different tactics fraudsters employ:
Negotiation fake out: The fraudster takes money from a distressed homeowner promising to negotiate an agreement with the servicer or lender and then fails to provide any meaningful assistance.
Bait and switch: The homeowner is asked to sign documents purportedly to bring the mortgage current but in actuality the owner unknowingly signs a document transferring the deed to the fraudster.
Rent-to-own: The homeowner signs a deed to the scammer under a rent-to-own agreement believing they will be able to buy the home back, but instead the fraudster sells the home without the knowledge of the owner.
Equity skimming: The owner signs a deed to the fraudster with the promise they will profit from a refinance, but instead, the fraudster leases back the property to the owner, pockets the owner’s money and eventually lets the property fall into foreclosure.
Text, email or phone scams
Of course, you don’t need to be actively involved in a real estate transaction to be the target of criminals. Text, email and phone scams are also on the rise and victims fall prey to these schemes in alarming numbers. Recent homebuyers and sellers may be particularly vulnerable to these types of scams amidst the commotion of moving and changing information to reflect new residences.
Here are a few of the most common:
Bank fraud alerts: You may receive a text, email or phone call alerting you to “suspicious activity” in your bank account. You may be asked to provide sensitive information to verify your identity or be invited to click on a link that leads you directly into the hands of the fraudster for the purpose of identity theft or getting access to your account.
Delivery problems: We are so accustomed to getting alerts from our delivery services, whether it is the U.S. Postal Service, FedEx or UPS, that we don’t think twice before clicking on a link that alerts us to a delivery problem or delay. A fake alert may direct you to a website that requests a fee to correct the delivery error or requires you to enter a credit card number or provide information that could lead to identity theft.
Fake Amazon orders: You may get a notice from Amazon or other online retail service impersonators asking you to verify an order that you know you never placed. The fraudster will offer to fix the problem for you, if you will just give them information, credit card numbers, or access to your account, all of which spells trouble if you follow through.
Subscription cancellations: Threats are a fraudster’s most effective tactic. When you learn that your subscription to something you rely on every day is about to be cancelled, i.e., video conferencing solution, anti-virus software or a favorite streaming service, you may not think twice before clicking on the re-subscribe button and providing your credit card information.
“Free” gifts: Sometimes fraudsters pretend to be one of your favorite service providers or shopping sites and offer to send a “free” gift if you will just give them your credit card information to pay for the shipping cost.
Red flags of fraud
Scam artists are very adept at preying on the emotions of their victims. Here are a few red flags to be aware of should someone reach out to you under the guise of one of these schemes:
They impersonate a company, organization, or government agency you are connected with.
They instill fear in you by suggesting there is a problem.
They entice you by promising something free or saying you won a prize.
They pressure you by insisting that you must act quickly to avert a disaster.
They require you to provide birth date, social security information or credit card numbers that you know you should never give out.
Fraud schemes like these are successful only when their mark cooperates. In all cases, it is important to slow down and think about what we are being told or asked to do. If your instincts are telling you something is off, it is best to investigate before responding.
If you are concerned that the request that is being made or the information provided may be illegitimate, it is crucial that you reach out directly to the company or individual by a phone number already in your records, rather than respond to an inbound phone call, text or email.
Final note
At Alliant National, we invite agents to share their stories to help us spread the word on how to protect all of our customers from becoming victims of fraud. Please email us your stories at: fraudhotline@alliantnational.com.
In addition, agents who prevent a fraudulent transaction from being insured by Alliant National may qualify for a reward through Alliant National’s Crime Watch Program. Please visit https://alliantnational.com/title-claims/crime-watch-program/ for more information.
This spring, the Financial Crimes Enforcement Network (FinCEN) announced its plan to release over the coming months multiple final rules and proposed regulations required by the Corporate Transparency Act (CTA) and the Anti-Money Laundering Act of 2020 (AMLA), including highly anticipated rules that would codify Geographic Targeting Order (GTO) disclosure requirements.
Congress enacted CTA and AMLA to address the growing problem of criminals and foreign actors funneling illicit funds into the U.S. financial system and, of particular concern, into the U.S. real estate market. It is estimated that more than 2 million corporations and LLCs are formed in the U.S. each year, many established by criminal elements as a cover for terrorist financing, drug dealing or human trafficking. Law makers are hoping the proposed regulations under both CTA and AMLA will make it easier for federal and state law enforcement agencies to track and unmask criminal enterprises.
Among its many obligations under these new laws, FinCEN has been tasked with creating and managing a national registry of beneficial owner information (BOI). Previously, BOI reporting was restricted to larger corporations under SEC regulations, but this has provided a very limited pool of information and was largely ineffective in identifying the true extent of the money laundering activities. Under CTA, Congress is attempting to capture a broader swath of data. FinCEN is required to issue three regulations to implement this new registry.
Under the AMLA, FinCEN is also required to issue regulations addressing whistleblower incentives, real estate transaction reports and records, counter terrorism risk assessments, and more.
Here is an overview of FinCEN’s timeline.
July 2023 – Whistleblower incentives and protections
FinCEN has created an Office of the Whistleblower and currently accepts tips while they are developing formal regulations under the Anti-Money Laundering Whistleblower Improvement Act, which was signed into law on December 29, 2022.
The agency intends to issue an NPRM in July to address provisions of the Act entitling whistleblowers to an award of between 10 and 30 percent of the value of monetary sanctions above $1 million collected as a result of an enforcement action. Provisions will include the establishment of a Financial Integrity Fund to be administered by the Treasury Department.
August 2023 – Real estate transaction reports and records
In December 2021, FinCEN issued an advance notice of proposed rulemaking (ANPRM) to solicit public comment on potential requirements under the Bank Secrecy Act (BSA) and AMLA for certain persons involved in real estate transactions to collect, report, and retain information. In August, FinCEN will release a NPRM that will address the scope of the BSA requirements, for instance the type of real estate transactions affected, i.e. residential or commercial and any monetary thresholds, as well as what persons or entities involved in the real estate transaction will be responsible for the reporting requirements.
Senator Sheldon Whitehouse (D-RI) submitted a comment to FinCEN highlighting the Geographic Targeting Orders (GTOs) program established in 2016 and asked the agency to codify and strengthen the disclosure requirements beyond the pilot program. The GTOs require title insurance companies to report identifying information about the individuals who own 25% or more of the equity interest of a corporate entity used in all-cash purchases of residential real estate in the geographic regions and monetary thresholds identified in the pilot program.
Look for the August NPRM to include elements of the GTO pilot program.
September 2023 – BOI Access and Safeguards Final Rule
A final rule entitled Beneficial Ownership Information Access and Safeguards, and Use of FinCEN Identifiers for Entities will be issued by FinCEN in September.
The proposed regulations will establish protocols to protect the security and confidentiality of the BOI that will be reported to FinCEN pursuant to Section 6403 of the CTA and will establish the framework for authorized recipients’ access to the BOI reported. The final rule will also specify when and how reporting companies can use FinCEN identifiers to report the BOI of entities.
This rule is the second of three rulemakings FinCEN is required to issue under the CTA. The first rule, the BOI Reporting Rule, was issued on September 30, 2022, and requires most corporations, limited liability companies, and other similar entities created in or registered to do business in the United States to report information about their beneficial owners to FinCEN.
November 2023 – SARs pilot program
In November, FinCEN will issue a final rule establishing a limited-duration pilot program for sharing suspicious activity reports (SARs), in accordance with Section 6212 of AMLA.
The pilot program permits a financial institution with a SAR reporting obligation to share SARs and information related to SARs with the institution’s foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks, subject to approval and conditions set by FinCEN. The rule aims to ensure that the sharing of information is limited by the requirements of federal and state law enforcement. It addresses potential concerns of the intelligence community and is subject to appropriate standards and requirements regarding data security and the confidentiality of personally identifiable information.
December 2023 – National exam and supervision priorities
In December, FinCEN is expected to issue an NPRM implementing section 6101(b) of the AMLA that establishes national exam and supervision priorities.
The proposed rule incorporates a risk assessment requirement for financial institutions and requires financial institutions to incorporate AML/CFT Priorities into risk-based programs. Once finalized, this proposed rule will affect all financial institutions subject to regulations under the BSA and have AML/CFT program obligations.
December 2023 – Customer Due Diligence Rule
The third required rulemaking in the BOI series, the Customer Due Diligence (CDD) NPRM is expected to be issued in December. Section 6403(d) of the CTA requires FinCEN to revise its CDD requirements for financial institutions to account for the changes created by the two other rulemakings in the BOI series. This rule is significant because it will address discrepancies between how the CDD Rule and the CTA define beneficial owner and questions regarding how financial institutions can or should access BOI to comply with the CDD Rule.
Final note
Each of these rules carries unknown and potentially weighty requirements for the mortgage and real estate industries in general and in some aspects specifically for the title insurance industry. At Alliant National, we are committed to keeping you informed about regulatory requirements that could affect your operations. Stay tuned for more updates as FinCEN continues to move through the rulemaking process.
Younger generations are increasingly striving for homeownership. Here’s how you can reach them!
Millennials and Gen Z are entering the housing market in greater numbers, and it’s a big opportunity for agents who know how to respond. Successfully courting these younger homebuyers starts by shifting your marketing mindset and adopting new tools and strategies in the process.
Many millennials were slow to enter the homeownership game, although not for lack of trying, and not due to eating too much avocado toast as a young Australian millionaire famously suggested in 2017. Having come of age during the financial crisis of 2007-2008, home ownership amongst this generational demographic has often lagged behind its predecessors, with educational debt being cited as one of the biggest contributing factors.
In recent years, however, the picture has changed, with nearly 62% of 40-year-olds now owning their own home. Right behind them is Gen Z, with data showing that 30% of 25-year-olds are homeowners, which is 3% higher than their Gen X parents when they were the same age.[i]
The implications for those in the real estate community are obvious. To connect with and convert this demographic, you need to reevaluate your marketing programs. By taking intentional steps to promote your services through channels these younger generations use, you can be better positioned for business success both today and tomorrow.
Social media
Let’s begin by focusing on social media. Although we have covered social in a variety of other blog posts, it merits repeating here. Why? Because it remains an incredibly important channel for younger individuals. Over 1 in 4 millennials use social media to find products and services, and nearly half use different social platforms to conduct research.[ii] By developing your presence on these channels, and by interweaving multi-media attributes like short-form video, you can make a larger impact and grow your brand awareness.
Mobile-friendliness
These days, having a mobile-friendly online presence is a must, especially if you are trying to reach millennials and Gen Z. Research shows that over 96% of internet users ages 16-64 own a smartphone[iii] and well over 50% of people use these devices to access websites.[iv]
What does this mean for title agencies? Just put yourself in the mindset of a consumer! Let’s say title agency #1 has a website that looks great on your device while title agency #2 does not, which one would you think is going to take care of your needs while closing on a new home? I would suspect you know the answer, and that should tell you everything you need to know about why a mobile website matters.
Online reviews
If there is one thing you need to know about younger generations like millennials and Gen Z it is that they grew up doing a lot of comparative analysis via review sites like Yelp, Google, Foursquare, etc. Take some time to establish a presence across these review sites and stay active by responding to user comments and complaints. The benefits of doing so are two-fold: Not only will you become more visible to younger users who are using the sites, but you will also showcase that you are a responsive, reliable company committed to customer satisfaction.
Partnerships
Even in a heavily digitized economy like ours, good old word-of-mouth marketing still can’t be beaten. One of the best ways to build this positive buzz is by developing relationships with real estate agents who help guide customers through the home-buying process.
As anyone who has been involved in real estate for a while knows, this is an industry that is forever changing. The rise of millennials and Gen Z home buyers is just one recent development. By getting digitally savvy and making an honest effort to create positive word-of-mouth, you can capitalize on this opportunity and capture more of their business.
Longmont, Colo. – (July 19, 2023) – Alliant National Title Insurance Company, the title insurer that is uniquely responsive to the needs of independent agents, is pleased to announce the hiring of Sheila Thiele as Underwriting Counsel for the Central West and Great Lakes Regions.
Thiele comes to Alliant National after building a long and accomplished career, having worked in the title insurance field since 2009 in a variety of roles. Before that, Thiele was in private practice, where she focused her efforts on commercial real estate transactions.
“I am looking forward to joining the team at Alliant National,” said Thiele. “Not only is this one of the best groups of professionals in the business, but we also support some of the hardest-working agents out there. I can’t wait to help them with whatever they need to close more business and grow their profitability.”
In her new position at Alliant National, Thiele will be primarily responsible for supporting agent needs throughout Central West and Great Lakes states, includingrisk analysis and insurability determinations. She will also develop continuing education materials and underwriting resources, helping Alliant National’s policy-issuing agents achieve more on behalf of aspiring property owners.
“We are all very excited to have Sheila join our underwriting team,” said Jeff Stein, Chief Underwriting Counsel and Senior Vice President for Alliant National. “Her background as a practicing attorney, agency counsel, claims counsel and most recently underwriting counsel for another national underwriter will be invaluable in helping our agents with any issues they may have.”
Thiele graduated from Missouri Western State University before attending the University of Missouri-Kansas City School of Law, where she earned her Juris Doctor. She also obtained her Master of Public Administration (MPA) degree from Bellevue University in 2014. Thiele is a member of the Missouri Land Title Association and lives in Jackson, Mo.
Alliant National supports its independent agents by combining expert residential and commercial underwriting with a passionate heart for service. The company delivers uncommon help that promotes the well-being of agents and the communities they serve.
Alliant National is on a mission to empower independent agents while protecting property owners with secure title insurance. The company partners with its agents and never competes against them with direct or affiliate operations. Alliant National serves thousands of title professionals as a licensed underwriter in 32 states and the District of Columbia.
In recent years, cloud computing has exploded into the mainstream, with companies across different verticals moving swiftly to transition to cloud networks. However, there is another technology called edge computing that is not as well-known. This is unfortunate because edge computing can also bring benefits to companies that want to accelerate their growth and increase efficiency. In this blog, we will look at this form of technology, how it differs from something like cloud computing, and whether you should consider incorporating it into your IT stack in the future.
What exactly is edge computing?
As its name suggests, edge computing occurs at the edge of your business’s network. More specifically, it refers to computing adjacent to end users or data sources – such as sensors, mobile phones or other connected devices.
Edge versus cloud computing
Edge computing is related to cloud computing in that edge resources can be shared across a distributed cloud network, but they can also be separate entities or processes. Another way to conceptualize the difference is to think about edge computing in terms of time and volume. Typically, businesses deploy edge solutions when they need to deal with data quickly and efficiently, and where accessing the data over the cloud is not practical.
The edge can offer big benefits
Smaller businesses can gain from making edge computing part of their IT business stack. Edge computing helps businesses process data and applications faster. By not relying on the cloud, companies can also improve efficiencies, while enjoying peace of mind through enhanced security. In addition, edge-powered businesses can keep operating and serving their customers even when internet connectivity is limited. And these advantages can translate to sizable cost savings.
What about for title agents?
For those working in the real estate and title insurance industries, edge computing has a lot of potential benefit. The real estate industry is notoriously document-heavy, dealing with contracts, deeds and other legal documents. Edge computing speeds up document processing significantly, allowing agents to deal with certain workflows locally rather than relying on cloud computing.
Given the sensitive nature of the information title professionals routinely deal with, having robust security measures in place is an absolute necessity. By keeping data closer to its source and not having to run it through the cloud, agencies can reduce their ecosystem’s potential attack surface and minimize their vulnerability to cyberattacks or breaches.
For agents who operate in the field, having the right mobile solutions can make a real difference in productivity and customer experience they provide. Edge computing is a catalyst for enabling mobile efficiency and linking employees to the data, applications and information they need to unlock anywhere, anytime connectivity.
Last but certainly not least, edge computing has been associated with sizable cost savings by reducing storage, networking and downtime costs.
Take things to the edge
Edge computing can help agencies overcome some of the cloud’s limitations. By bringing computing closer to its source, the edge often results in higher efficiency, lower costs and greater productivity. And in doing so, it helps forward-thinking agencies become more innovative and obtain additional market share.
This blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on this blog.
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