If there is one thing real estate and title insurance professionals know, it’s that fraud is a massive problem. In fact, nearly 3 in 4 firms reported in 2023 that they had experienced an increase in seller impersonation. The serious threat has long been on the radar of the folks who work at Texas Secure Title Insurance Agency. “We put the security of our transactions at the top of our priority list. This is a shared responsibility – from the time the file opens until it is closed,” said Renee Hicks, Vice President of Operations.
Having a collective commitment to security paid off recently when Texas Secure confronted two suspicious real estate deals. By adhering to their tried-and-true policies, they foiled the fraudulent transactions and were recognized by the Alliant National Crime Watch program. Let’s look at what happened during each transaction.
Well-founded caution
Texas Secure’s title examiner was already on high alert when they began working on the first of the two fraudulent transactions, as it was vacant property. Their caution soon proved well founded. Worrisome details emerged during the initial examination process. When the examiner searched for more information about the owner, they found a court history littered with fraudulent deeds. One of these deeds shared the same notary public and GF number as the deed involved in Texas Secure’s file. The transaction’s deed had also been submitted by the owner and not the title company – a peculiar feature that further indicated the deal was likely fraudulent.
Teasing out the connections
The second fraudulent transaction also had clear red flags, including a possible connection to the first property described above. “The Affidavit of Heirship used had a ‘GF Number’ that looked like those used in the fraudulent deeds our examiner had seen the day before,” Hicks explained. The fact that the property was conveyed outside of the title company was another strike against it.
Digging into the details, Texas Secure found that the property owner had allegedly signed a “Texas General Warranty Deed” in 2022 to another party and filed an Affidavit of Heirship (AOH) for someone deemed to be his wife. By utilizing the online database “Find a Grave,” Texas Secure cross-referenced the name of the owner’s wife and discovered that the owner had died in 2018 – meaning that he could not have signed the deed, and that the transaction was fraudulent. Corroborating this further was that signatures on the deed and the AOH did not match.
Always adhere to policy and protocol
“It can be tempting to bypass certain standards, steps, or protocols to save time or because of long-standing relationships with other real estate or financial professionals,” said Hicks, reflecting upon the fraudulent transactions. “However, our team understands the impacts to all stakeholders when proper protocols are not followed. There is more at stake than closing the deal.”
Indeed, Texas Secure’s experience during this ordeal is a crucial reminder of how important it is to scrutinize each aspect of a given transaction. Moving methodically and always adhering to protocol is key to combatting fraud, preventing future claims, and most importantly, protecting transaction stakeholders from becoming victims.
A never-ending fight and a worthy payoff
Texas Secure’s story also speaks to the frustrating, albeit necessary, fight against fraud within the title industry. As Hicks remarked, “Will we ever be able to eliminate fraud? Of course not! However, we as an industry can rally together and have each title professional accountable for carrying out the necessary steps to secure real estate transactions.”
While there may never be a cure-all for this endemic problem, adhering to company policies, staying mindful of industry best practices, and remembering the stakes involved for property buyers and sellers can make a major difference.
And as Hicks highlighted, the emotional payoff for doing so can be tremendous. “It is rewarding to know the efforts and time we put into continuously creating new policies and procedures to safeguard our company and our underwriters is paying off,” she said. “Our examiner, Lizzie Angle, was especially excited. She felt her daily efforts were validated. Thorough, accurate and proper examination is part of the defense strategy against fraudsters.”
Want to learn more about the Alliant National Crime Watch program or submit your agency’s story. Check out the details here.
With fraud rising across the title industry, it’s important to watch for both red and pink flags.
While working on a recent vacant lot transaction, Tirey Smith and Joe Fernandez of Lone Star Title Company of El Paso came to a similar conclusion about the property’s seller: something was up. Sure enough, their intuition soon proved right. The transaction’s seller was indeed a fraudster. By stopping the fraud, Smith and Fernandez became the latest honorees of Alliant National’s Crime Watch program, receiving $1,000 for their efforts.
Long before deeming the transaction fraudulent, Lone Star Title had been having trouble with their supposed seller. For one thing, they found it challenging to connect with the individual via phone. “This was very unusual because our voice messages usually get a call back, but in this transaction, the seller wouldn’t call back,” said Smith and Fernandez. “She only communicated through emails, including with her own agent!”
However, a lack of communication was the tip of the iceberg. From the beginning, the transaction raised numerous questions. As a vacant lot, the property was assessed to have a low tax value. Yet at the same time, it carried several liens – including one for a substantial amount of $15 million. Additionally, the Deed of Trust for this lien revealed that the seller had used the property as collateral for an equipment loan. Smith and Fernandez indicated that several other notes for equipment loans existed and were connected to the $15 million loan.
The agents thankfully recognized several of the entities listed as the note’s borrower, as Lone Star Title Insurance had done business with them in the past. Because of this connection, Smith and Fernandez were able to speak directly to their point of contact. They confirmed that his wife’s name was the same as their seller’s, that she owned the property in question, and that the property had been given as collateral for the equipment loan.
While all of this checked out, other aspects of the transaction did not. The two agents determined, for instance, that the wife of their contact had an email address that did not match what they had on file. Perhaps most importantly, they discovered that her property was not actually listed for sale. The supposed seller became pushy when later confronted by these facts. She also behaved suspiciously by not wanting to go to the title company to sign and floating the idea of getting their own notary. At this point, Smith and Fernandez determined they had seen enough. They stopped the transaction from going forward and began informing all relevant parties of what had occurred.
“There is a certain feeling of satisfaction when you [help] stop a fraudulent transaction from happening,” said Smith and Fernandez, reflecting on the experience. “[We were] proud that this fraudster couldn’t get one by us.” This perspective is reflected in the larger culture of Lone Star Title Insurance, which has invested significantly in education to ensure that agents are adequately equipped to detect and prevent fraud. Yet as Smith and Fernandez pointed out, cutting down on fraud in the title insurance industry requires a broader approach. All industry stakeholders must come together to stop bad actors and lower the cost of claims. “Programs like Alliant National’s that tackle fraud prevention are both helpful and necessary for the protection of the title agent and the client,” they said.
In short, these programs act as an additional incentive for agents to remain watchful throughout the lifecycle of each transaction, which, according to Smith and Fernandez, can make all the difference in the world. “The only way to guard against fraud is to stay vigilant, ask questions, and always trust your ‘gut,’” they said. “Don’t ignore [any] red flags – or pink ones for that matter!”
By staying vigilant, Smith and Fernandez exemplified what the title industry can be at its best. It is a critical vanguard that protects property rights and makes a positive and tangible difference in the lives of its customers. “The agents and the actual owners of the property were very surprised and grateful that we had paid close attention to what was happening on the seller’s side of this transaction,” they said, echoing this sentiment.
Are you an Alliant National agent that has stopped a fraudulent transaction from moving forward? Learn more about our Crime Watch program!
As borrowers struggle with increased prices for almost everything, it’s no surprise that making monthly mortgage payments has also been an issue. In the last few years, it has been reported that foreclosures have steadily increased.[1] Thus, lenders have sought to exercise their rights granted under either a mortgage, security deed, or deed of trust to force a sale of the collateral due to the non-payment of the debt.
In many cases, whether it is a purchase money loan or a refinance, the lender may purchase and obtain a loan policy of title insurance to protect the lender’s interest from a variety of covered risks.
As a lender prepares to initiate a foreclosure either by a judicial foreclosure or a non-judicial foreclosure, it may run a title search on the property to determine ownership along with other liens, judgments, encumbrances, and easements involving the property and the borrower. Title matters that present themselves involving the validity, enforceability or priority of the insured mortgage lien that were not excepted or excluded from coverage, and occurred prior to the date of the title policy, may lead the lender to submit a notice of claim to the title insurer seeking a coverage determination under the title policy.
The top seven title issues submitted by lenders to the Alliant National claims team include:
Unreleased prior lien or mortgage;
Spousal marital status is missing or is incorrect on mortgage;
Spouse does not execute the mortgage;
A notary acknowledgment issue;
Error in the legal description or the legal description is missing;
The mortgage was not timely recorded; and
A complete copy of the mortgage was not recorded (i.e., missing a page).
Happily, strong post-closing procedures and attention to detail can easily prevent each of these issues. Let’s look at a scenario and use it to analyze a few different situations.
Scenario
An unmarried couple – we’ll call them the “buyers” – enter into a purchase contract with John Doe (the “seller”). The sale is scheduled to occur in 30 days. The buyers let you know that they are so excited as they are getting married in two weeks and that this is going to be their first home. The seller has two mortgages or deeds of trust on the property, as well as a recorded monetary judgment. All are properly indexed in the county land records. The parties are ready to close on schedule.
First situation: Thirty days later, the buyers are now married; however, the prepared deed to vest title to the buyers, and the new mortgage or deed of trust shows them as unmarried. What do you do?
Of course, one should not proceed with having the documents executed until they are corrected to reflect the proper marital status as of the date of closing. It is also important to mention here that one should also verify the proper names of the parties (including business names, trust, etc.), and that the names are correctly spelled.
Second situation: The closing occurs. The documents are executed but the notary misses acknowledging one of the pages in the mortgage or deed of trust for one of the buyers. The instrument is then recorded.
In this case, it’s important to have the mortgage or deed of trust re-executed, re-acknowledged and then recorded in the county land records. However, in some states, there may be an option to have the notary execute a Notary Affidavit. Check with your state to see if the latter is available and the cases for which it is appropriate.
Third situation: The closing occurs. The instruments are not sent to the county land records for recording until 60 days later.
Because of the delay in recording, it’s possible for another interest holder or lienholder to record an instrument in the “gap period,” the time between the closing date and the recording date. Keeping the gap period small lowers the risk that someone else will record an instrument that could challenge the lender’s priority.
Fourth situation: The closing occurs. The lender prepared the mortgage, and it identifies that an Exhibit A will be attached to show the property’s legal description. The mortgage is recorded without Exhibit A being attached.
In this case, it’s important to promptly have the mortgage or deed of trust re-executed, re-acknowledged and attach Exhibit A with the legal description; and then record in the county land records. In a few states, there may be an option to remedy the matter with a correction affidavit. Check with your state to see if the latter is available.
Fifth situation: The closing occurs, and the funds are disbursed. No additional review or follow up with the prior lenders or judgment creditor is conducted for the recorded release or satisfaction of the lien. One year later, these have not been released in the county land records. The current lender is now foreclosing, and the new foreclosure title search shows the items as unreleased in the county land records.
We understand that there may be challenges in getting the respective party (lender or creditor) to record a release or satisfaction if it is on that party to do so; however, this is part of the post-closing process. Being persistent and diligent will help ensure that the county land records accurately reflect the status of the mortgage or lien. There are several states that have enacted statutes that impose on lenders and creditors a prescribed time limit to record a release after payment. Also, in a few other states, a title company or a title insurer may have the ability to execute a release if certain requirements are met and if the lender or creditor fails to do so. Check with your state to see what options are available.
As you can see, title companies can impact the lender’s foreclosure process in a big way. By taking the time to catch the “little” things, you can help reduce the likelihood of claims submitted by lenders under loan policies.
If you have any questions, we’re here to help! Please feel free to reach out to me at: mhawkins@alliantnational.com.
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.
[1] Bates, M. (2024, April 11). ATTOM: Foreclosure Filings Increased 3 Percent in Q1
Brick City Title, a full-service title insurance agency, is a loyal member of the Ocala, Florida, business community and dedicated to protecting the integrity of its customers’ transactions. This commitment served them well recently when a fraudulent transaction came across the desks of two of the agency’s title professionals. By working together and proactively communicating with other transaction stakeholders, the agency foiled the fraudster and received recognition through Alliant National’s crime watch program, which offers a $1,000 reward to agents who help prevent a fraudulent transaction from closing.
A suspicious package
When the package first arrived from the buyer, Brick City Title’s Gina Preston and Cherie Breitenbecker felt like it was a step in the right direction. For some time, their agency had been attempting to collect a deposit from a cash buyer of a residential property who claimed to be conducting the deal through a trust.
Any positive feelings quickly dissipated, however, once they opened the parcel. While the sales contract for the transaction was included, there was no form of currency. Instead, the buyer had tucked several postal stamps inside the package.
Alarm bells
Naturally, receiving such a bizarre item immediately set off alarm bells for Preston and Breitenbecker, especially since Brick City Title had repeatedly clarified to the buyer about which forms of payment the agency could accept. “If we feel or suspect anything unusual, we dig into available resources to resolve any possible fraudulent dealings,” said Preston, reflecting upon the incident. The next step for both professionals was to get on the horn to the buyer’s agent and reiterate which forms of payment were permissible – including a bank wire or a cashier’s check. A three-way call between the agent, Brick City Title and the buyer followed shortly after.
Any title agent who has been in Preston’s and Breitenbecker’s shoes will likely be able to predict what happened next. The buyer was incensed about being called out for the package and that Brick City Title was asking for more information about the trust involved in executing the transaction. After some back and forth, the buyer clammed up and ended the call. Preston, Breitenbecker and Brick City Title then took stock of what happened. A consensus quickly emerged that the whole transaction was highly suspect. The experience of other parties in the transaction further supported this view, with both the agent and seller having their own misgivings about the buyer’s behavior and demeanor.
The final step taken was to send the transaction materials to Alliant National and to subsequently cancel the transaction – much to the relief of all involved. “The seller wasn’t surprised this buyer was fraudulent,” said Preston when discussing the aftermath, “and was glad that we uncovered what we found and cancelled the transaction so that [they] could move on.”
Lessons learned
As with any fraudulent transaction, the experience of Brick City Title provides important takeaways. It showcases how agents must not only adhere to their companies’ policies and procedures but also follow their gut instincts. In this case, the buyer’s behavior alone was a clear red flag. “I had a couple of conversations with the buyer and the conversations were not pleasant,” Preston explained. “This person had a very demanding and insulting demeanor which put me on guard.” Brick City Title’s experience also highlights how successful anti-fraud efforts are bigger than the actions of a single party. Instead, having a strong working relationship with every transaction stakeholder is the key to safe and secure transactions.
Through interfacing with its partners in the transaction, Brick City Title gained additional information that backed up their original assessment. The transaction was indeed fraudulent, and the way it was prevented is an essential reminder of how stopping fraud requires all hands on-deck.
Brianna Steel is a seasoned escrow officer, having worked for a variety of title companies throughout Florida. Her years of experience served her well recently when a suspicious transaction came across her desk at Coastal Title Insurance. By trusting her instincts, collaborating with her team, and following best practices, she was able to stop a fraudulent deal from going forward. She was recognized by Alliant National through its crime watch program, which incentivizes anti-fraud efforts by offering agents a $1,000 reward.
Numerous red flags
At first, the transaction in question appeared to be a normal purchase order. Initiated by someone claiming to be “a representative” of the property owner, Steel and the rest of the Coastal Title team got started on the file as soon as they received a request from the lender.
Yet according to Steel, it didn’t take long for red flags to emerge:
Red flag 1: The contract was missing a signature. The representative promised both Steel and Coastal Title that it was coming, but excuses kept piling up, such as the seller being unavailable. While this was suspicious, Coastal Title continued working on the file to ensure that there were no delays, while repeatedly asking the representative to complete the paperwork.
Red flag 2: Steel and Coastal Title were asked to “split” the proceeds with non-owners/non-lien holders.
Red flag 3: Document signatures did not match other signatures available in the public records – a huge warning sign.
Red flag 4: All communication was conducted through one person claiming to be “assisting” the parties involved in the order.
Further complicating matters was questionable behavior on the part of the transaction’s so-called “representative.” For one thing, the representative instructed Coastal Title to wire the transaction payment to several different accounts – including one belonging to the representative – which Steel responded that they couldn’t do.
All these suspicions were eventually confirmed when Steel made a call to the supposed seller. The property’s owner informed Coastal Title that the person who had been claiming to be her representative had been terminated and had no authority to speak for her on anything.
A strong team and the right policies
In reflecting on this experience, Steel had several insights. She noted that fraud can only be prevented through productive collaboration.
“At the end of the day, it comes down to talking with everyone in your office and sharing any concerns or even weird feelings about a file,” Steel said. “We are also very strict on following the rules and guidelines for preventing fraud.”
Steel listed some of Coastal Title’s fraud prevention policies:
Never accept wire instructions via email.
Never send unsecured wire instructions. No exceptions. If a client gets upset, explain that the policy exists for their protection.
Call all clients and speak with them directly for introductions. This helps ensure communication with the correct person. Steel noted that a lot of fraud takes place via email and fraudsters try to not answer the phone.
All employees must complete annual Continuing Education classes on fraud, even if they are not licensed.
Inform colleagues when a phishing email is received. This helps all staff members avoid accidentally opening a malicious email.
Show bogus emails to other employees so they can see things in real time. This has advantages over simply looking at fake emails in lender portals.
Another integral part of this collaboration involves Alliant National.
“Sometimes we are on autopilot and overlook the small red flags and warnings,” Steel noted, adding that Alliant National’s Crime Watch program “incentivizes people to take a closer look at their day-to-day tasks.”
Fighting Fraud: Challenging and Rewarding
As we’ve seen, beating fraudsters at their game is not easy, and it is often only possible through strong collaboration. Yet the time, effort and energy are worth it in the end. Thinking back on her experience, Steel noted that fraud isn’t always obvious.
“It’s surreal and infuriating […] but it’s also not as black and white as we would like to think.” Steel said. “Florida has an aging population and a lot of vacation homes. It is not uncommon for someone to be ‘helping’ a seller through the process. But it is also extremely rewarding to stop these transactions and to protect the real seller and future buyers.”
That’s one reason why Steel was eager to participate in this blog. By sharing information on best practices for protecting transactions, she can continue the collaboration far beyond the walls of Coastal Title. When asked if she had any final advice for title professionals involved in anti-fraud efforts, she shared:
Trust your gut and talk with your team.
If you have an intake person or processor complaining they can’t get a seller on the phone, listen to them.
Look at the signatures on the contract and the last recorded document. If it was e-signed, make sure the email address on the verification is the same you are using.
If you have a suspicious file, ask for someone else in your office to look at it and see if they notice the same inconsistencies.
Don’t “call out” the person that you’re concerned about; instead, ask questions and play dumb. See if you can trip them up. If fraud is confirmed, share the information with your whole office and all your underwriters.
At the end of the day, knowledge and awareness are key and will make all the difference.
If you want more information on how Alliant National incentivizes agents to detect and prevent fraud, check out our crime watch program.
