There’s another victory to report as Alliant National partners with independent title agents in the ongoing fight against real estate fraud. Alliant National’s Crime program offers a $1,000 reward to Alliant National agents who help prevent a fraudulent transaction from closing. The program has already recognized the prevention of $2 million in attempted fraud, and recently Heritage Title of Austin was honored for stopping a fraudulent transaction from going forward.
Meet Heritage Title of Austin
Heritage Title of Austin is a leading title agency operating in the Austin metropolitan area. For more than 30 years, they have been a dependable partner for aspiring property owners who are looking to secure their investments. Having long adhered to industry best practices and the highest possible standards, Heritage Title was naturally well-positioned to respond swiftly and efficiently when an instance of attempted fraud came across their collective desks.
Obvious red flags
“The order was placed through our website, which is very rare for our company,” said Dan Elkins, Senior VP, Plant Manager, Heritage Title Company of Austin, discussing how he initially became aware of the suspicious transaction. The transaction carried other red flags as well according to Elkins, who stated, “The contract was not a standard TREC form contract. The wording in the contract was a bit unusual in a couple of places, and there was no representation listed in the contract for either party.”
Digging deeper
Once these red flags came into view, Elkins and the Heritage Title Company team began digging deeper. The contract in question only listed one woman as the seller, but an inspection of the tax rolls revealed that the woman and her husband were the owners of the property, as did the last recorded deed.
Therefore, the next step was to run the husband’s name, which unearthed that his will had been probated and explained why he had not signed the contract. The problem, according to Elkins, was that “the wife’s signature on their purchase money deed of trust also did not match the signature on the contract, which raised even more suspicion.”
Heritage Title then contacted the law firm that handled the husband’s probate to see if they could get contact information for the wife independent from the information listed in the contract. However, they were informed by the law firm that the wife had also passed away a few months earlier. This made it impossible for her signature on the contract to be authentic, as it was dated after the date of her death.
Wrapping things up
As Elkins and Heritage Title were conducting their due diligence and discovering the transaction’s clear fraudulence, Russell Gonzales, Assistant Vice President and SW Region Agency Representative at Alliant National Title Insurance Company, was on-site at Heritage Title. After Heritage Title reported the fraud to Gonzales, the company decided to alert other agencies and advise them to be on the lookout for similar scams. Gonzales then encouraged Heritage Title to apply for Alliant National’s crime watch award for having prevented a fraudulent transaction that could have proven to be costly for all involved.
Final thoughts from Heritage Title
In reflecting on the experience, Elkins noted that staying ahead of fraudsters requires a long-term outlook, a comprehensive approach and real investment. “We utilize physical access security at all our locations. We have network security installed on our networks that prevents unauthorized devices from connecting. We run very good software on all endpoints and servers to detect and contain any possible threats. We use top-of-the-line firewalls and mail filters,” he said, listing off a few of the security tools deployed by Heritage Title.
Elkins also made sure to emphasize that the human factor is equally important, and that without those two elements working together harmoniously, an agency can suffer negative financial consequences.
“The most important thing we do is train our personnel to always look for the red flags, whether it is in a phishing email or an impersonation attempt,” he said. “They are the last line of defense. You cannot spend too much on your defense and recovery plan because the monetary and reputational costs of taking even one hit can be enormous.”
As part of its mission to provide valuable help to title industry stakeholders, Alliant National has launched a program incentivizing agencies to report any suspected instances of fraud. Firms that do so are eligible to receive a $1,000 reward.
Since its inception, the program has proven to be a model for how underwriters and agencies can work together to prevent financial malfeasance within the industry and help lower premiums. In the past year alone, Alliant National and its agents have successfully averted over $1.8 million in liability costs.
Those results carried over into 2023 with yet another successful example of how fraud can be effectively detected and prevented when different stakeholders work together proactively and in tandem. Marion Lake Sumter Title, an agency based out of Ocala, Fla., recently noticed a potentially fraudulent transaction regarding a roughly half acre plot of vacant land valued at $20,000. As per the agency’s protocol, Marion Lake contacted the seller about the sale and instructed them to call their office if anything was amiss and if they were not, in fact, selling the property. The agency’s suspicions turned out to be correct, as the owner called back immediately, provided two valid forms of photographic identification and scheduled a video conference call to discuss the matter. Conversely, the fraudulent seller was asked for the same items and never responded.
“As soon as we received a call from the real seller, we notified our underwriter as well as both real estate agents on the transaction,” said Heather Pierport, Manager, Licensed Escrow Agent and Post Closer at Marion Lake Sumter Title, who initially identified the suspicious transaction. When asked about why fraud detection and prevention programs are important, she said, “These types of transactions are emotionally draining and can put agents in a depressive state. Programs like Alliant National’s help keep morale up when dealing with fraudsters.”
“Heather has been instrumental in keeping our underwriting team updated on both the fraudulent seller schemes and fraudulent checks they have encountered. I wish we could clone them!” said Lisa Yates, AVP, Agent Training Manager, Fla., for Alliant National, when discussing the incident.
Lisa then addressed Marion Lake Sumter’s anti-fraud efforts more broadly: “The way they strive for attention to detail and research each order is such a benefit to customers, underwriters and the title industry as a whole. Heather and her team have the best ‘trust your gut’ reactions to questionable transactions. As fraud continues to plague our industry, it is very important to double-check transaction details to make sure they all match-up.”
For her part, Heather concurred with how important it is to catch fraud before it occurs for the larger title insurance industry, taking the time to explain how continuing education and digital solutions have also made a positive difference: “We are constantly learning about the latest fraud trends. We also use Positive Pay to catch fraudulent checks that may try to post to our escrow account. This November, for example, we had almost $90,000 in fraudulent checks try to come through our account. With Positive Pay, I rejected those items, and we never lost any funds. I truly believe that solution should be a requirement for every escrow account.”
As the country’s leading independent title insurance underwriter for the independent title agent, Alliant National has a responsibility to help confront the growing threat of fraud in our industry. One way we do this is through our Crime Watch program, which incentivizes agencies to report instances of fraud that they encounter. As part of the program, firms that prevent a fraudulent transaction that was to be insured by Alliant National may be eligible to receive a reward of $1,000.
Coffelt Title – An Active Partner In Fraud Detection
Coffelt Land Title, Inc., a title insurance agency that does business throughout Missouri and Kansas, recently detected three instances of fraud, and submitted them to Alliant National for award consideration.
Jessica Wackerman, who works at Coffelt as a title searcher and examiner, noticed a potentially fraudulent transaction while examining a series of files on three properties involving one buyer. “Looking at all of them together, I noticed some issues with the deeds as far as the same formatting, the spelling of grantor and grantee names, as well as notary names,” she said. “I then did some digging and found lots of issues – such as finding death information on one individual.” After noticing this and collecting the requisite information, she quickly notified her contact at Alliant National and sent in copies of the deeds and commitments.
Taken together, these various properties represented a potential fraud amount of nearly $20,000, pointing to the importance of vigilance when it comes to detecting and reporting fraud. As Jessica explains: “Alliant National’s Crime Watch program is a great thing for the agents and underwriter. It protects everyone, but it also ensures that the agents are looking into anything that might seem a little suspicious. The incentive is a nice reward for doing the research to produce all the information.”
Of course, no single program can entirely prevent or mitigate a problem as endemic as real estate fraud, which is why agencies must take other steps to protect themselves and the customers they serve. Coffelt Title itself has taken that idea to heart, investing in staff training and education to help employees catch fraud before it is too late.
Alliant National Is Making A Difference In Fraud Prevention
“I think all title companies need to be more aware of the fraud that is happening in their markets. They should not act under the assumption that it won’t happen to them or their customers,” said Jessica when asked about fraud in the title industry.
We couldn’t agree more, which is why Alliant National launched the Crime Watch program in the first place. Over the past year, we have seen the program pay off in spades. In 2022, Alliant National agents, through this program, collectively reported to us 12 instances of attempted fraud, totaling a potential liability amount of $1.8 million. In recognition of these agent sleuths, we have issued $12,000 in awards. We’re proud of our agents’ efforts to combat this systemic problem in the industry and, as this year draws to a close, would like to thank the following Crime Watch award recipients for making title insurance a safer and more sustainable field:
Siesta Title Escrow and Services LLC | FL | Amanda Pertuch
Title Professionals of Florida (TPF) | FL | David D. Lanaux
Alliance Nationwide Title Agency, LLC | MO | Daniel Onwiler
Alliance Nationwide Title Agency, LLC | KS | Ben Chapman
Siesta Title Escrow and Services LLC | FL | Claire Hooper
Coastal Title Services | FL | Brianna Steel
Legacy Title & Escrow, LLC | FL | Kathy Morgan
Caldwell County Abstract and Title Company, LLC | MO | Megan Eitel and Amanda McGinley
The relationship between an independent title agency and its title insurer is a unique one; we rely on each other for our mutual success. So when a claim occurs, it’s no fun for anyone. Claims are a fact of life for any insurer, but thankfully, some of the costliest claims are entirely preventable if time is taken to appropriately review and analyze information that is part of the transaction.
What are these costly and preventable claims? Based on our experience at Alliant National, the top five categories for claim files over the last three years have been in the following areas:
Missing or erroneous legal descriptions,
Lack of capacity or authority to convey title or release a lien,
Unreleased mortgages or deed of trust,
All other unreleased liens and judgments, and
Unpaid taxes and assessments.
To take this a step further, when we compared all of our closed claim files against closed claim files classified as “agent error,” we found that claims involving “agent error” tend to be more costly, particularly when it comes to the top five claims categories.
You ask, what can I do to reduce these preventable claims and thereby reduce the costs and other impacts of claims? Based on our experience, here are a few items to consider in every transaction:
Carefully read documents. Real estate transactions involve a lot of detail, and all those details are important. Take time to carefully read what the prepared instruments and documents say. This includes those that may have been delivered to you by a party to the transaction, a third-party or within a lender’s package. Do not assume anything. Here’s one example. Let’s say the lender does not include a spouse or a co-titleholder’s name on the mortgage or deed of trust. In several states, if the borrower is married, the spouse must join on the mortgage or deed of trust. Just because their name was not originally included, the lender may fall back on what the closing instructions required. In this case, it would be important to take a minute to contact the lender and make the necessary adjustments.
Do not be afraid to communicate. We’re all in a hurry, but it’s important to take the time to ask questions and be willing to ask for clarification when something is not clear. Then, of course, we need to listen to what is being said. In some cases, there may be disclosures of matters – not known until that moment – which can alter the transaction. Also, it’s helpful to consider whether everyone is using the same terminology to describe the same thing. We use a lot of jargon in this industry, so be careful not to think that “everyone uses this term” or that they understand things the same way you do.
Avoid being solely persuaded by the seller or borrower not to collect funds required at the closing. We oftentimes hear that the seller or borrower told the closer that the delinquent taxes, mortgage, or homeowner assessment was already paid outside of closing and to just disregard any payoff or estoppel letter that was previously collected. Experience tells us that you should not just take the person’s word but instead contact the creditor, lienor, or lender that is owed the funds, at a properly verified number, and confirm whether a payment has resolved or made current an amount owed. If appropriate, it may be good practice to hold back those collected funds until a certain time has passed, and it is confirmed that the account is current and/or the lien has been satisfied or released.
Spend time in understanding the subject of the closing. This includes the parties in the transaction and the property. Understanding the intricacies can help you spot types of fraud involving the conveyance of title or unpaid liens and taxes. With a critical eye, review the person’s ID and other documents that are presented since a number of fraudsters and imposters are impersonating others in transactions.
Promptly discuss concerns and matters with the underwriting and claim teams. We at Alliant National are always ready to review and discuss issues and matters of concern with our agents. Please don’t hesitate to call us. Waiting until the last minute or after closing to discuss a known issue may cause problems. In some cases, it may be too late to deal with an issue brought to the title underwriting team after the closing, as a claim may now exist.
Everyone is excited when a closing occurs and funds are disbursed, but this enthusiasm can quickly change to concern when a title matter is submitted involving that transaction. Thankfully, taking time to review, understand and analyze transaction information can reduce the possibility of errors and help avoid those top-five pesky and preventable title claims.
If you have questions, please contact the Alliant National claims team.
The Federal Bureau of Investigation (FBI) has labeled business email compromise (BEC)/email account compromise (EAC) as “one of the most financially damaging online crimes” as it is “the top cyber threat.” BEC/EAC is a scam in which fraudsters trick an unsuspecting party, typically by using a variety of social engineering and phishing tactics, into making payments to fraudulent accounts.
Since 2016, over $43 billion has been lost through BEC/EAC attacks. In 2021, U.S. losses attributed to BEC/EAC cybercrimes were reported to be almost $2.4 Billion. This is more than one-third of the total cost of all cybercrimes reported to the IC3 in 2021. In a recent article from Security Magazine, the author noted that email cyberattacks have increased by 48% in just the first half of 2022. It is no surprise that the title insurance industry has been the target of fraud schemes for many years, especially with wire transfers being utilized more often.
Some common schemes we continue to see include:
Seller Spoof – fraudsters impersonate the seller (using an email address that may only be slightly different from the original, or using the actual seller’s email), and provide alternate bank account information for the seller proceeds.
Lender Spoof – in a transaction involving the payoff of a prior lender, fraudsters impersonate the prior lender. They often modify the original payoff provided by the prior lender (or create one) with wiring instructions for a fraudulent account.
Buyer Beware – fraudsters pose as the settlement or real estate agent using a similar email address, and instruct the buyer to wire their down payment funds to a fraudulent bank account.
There are many ways to protect a person or a business from becoming a victim of these costly schemes. A few tips include:
Meticulously examine the email address, URL, and spelling used in any correspondence. Fraudsters use only slight differences hoping you do not critically analyze the spelling.
Be suspicious about opening any email attachments from someone you don’t know and be wary of email attachments forwarded to you as they may include malware or other malicious software.
View all changes to wire instruction with extreme caution.
Always independently verify with the company any payments or wires being sent to a third-party by contacting them at a legitimate number, and be leery of any last-minute changes to account numbers or payment procedures.
Confirm with the intended recipient that the wire was received.
Be extremely suspicious if the requestor is pressuring you to act quickly.
If you do become a victim, do not wait to take the next steps since time is critical in this process. Have a plan in place and be prepared to:
Notify your office management.
Notify your financial institution and the recipient’s financial institution.
Contact local law enforcement.
Contact your local FBI field office.
Contact your cyber-insurance, escrow security bond, and error and omissions provider.
File a complaint with Internet Crime Complaint Center (IC3).
Contact your title underwriter.
With our increased dependency on technology and the pace of our industry, we cannot let down our guard – we must stay vigilant! Heed the warning that fraudsters are not slowing down or giving up on these fraudulent schemes. If you are presented with any of these situations, the key is to be able to recognize the scam and then shut it down before it can infiltrate your transaction and create a web of issues.
