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.
At a time when our industry is under threat from ID fraud, First International Title’s swift and decisive action in uncovering and halting two vacant property scams is an important example of care and diligence.
Sharon Garrison and Jenny Rodgers, both of whom work in the Florida-based company’s Port St. Lucie office, were recently recognized and rewarded through Alliant National’s “crime watch” program. The program offers $1,000 to an agency employee who prevents a fraudulent transaction that would have been written on Alliant National.
Clear warning signs
Like many transactions involving ID fraud, the malicious activities encountered and thwarted by Garrison and Rodgers had clear warning signs.
The properties in question were two vacant lots located in Port St. Lucie, Florida. The first was originally set to close back in March of 2023, but according to Garrison, the title processor at First International in charge of this transaction, red flags quickly emerged when she compared the name on the property deed with that on the seller’s driver’s license and found that the first name was misspelled.
There were similar warning signs with the second property, which was being processed by Rodgers. She was immediately on her guard when her property’s listing agent informed her that the seller needed to close ASAP due to her son needing surgery. It was also highly suspect that the seller’s passport and driver’s license had the same photo.
Due diligence in action
After noticing these discrepancies, both processors began delving deeper into their respective transactions. Garrison attempted to call the seller and listing agent, but she received no answer even after leaving multiple voicemails.
Rodgers also conducted her due diligence. She first reached out to the title company who worked on the property previously, only to be informed they couldn’t close the file because they had suspected fraud.
Having taken these steps, each processor then sent out Property Owner Notification letters, which are intended to trigger a response from owners. Phone number and IP verifications were also performed, which cast further suspicion. Garrison’s seller, for example, showed an IP address located in Miami, despite having claimed to live in New Milford, New Jersey. Rodgers’ IP verification revealed a similar discrepancy, with an IP address for Miami turning up when the seller claimed to be in New York.
Other actions included a rigorous comparison of handwriting via mortgage signatures and other forms of identification, assessing passport photos and conducting passport number searches. Rodgers also called the fraudster directly. She asked them to provide their date of birth so she could compare it to her records. Unsurprisingly, the fraudster provided incorrect data, and when Rodgers asked them to repeat it, they hung up.
A responsibility not taken lightly
The experiences of Garrison and Rodgers illustrate several things about the title insurance and real estates fields, specifically the importance of fraud prevention efforts.
Stopping fraud, according to Rodgers, is key to obtaining “cost savings for all parties.” But like any worthwhile goal, their respective odysseys show that beating back fraudsters requires a great deal of time and effort, not to mention passion and acute attention to detail. What’s more, it necessitates title offices having strong anti-fraud processes in place, which allows agents to objectively verify important information and stop scam transactions from going forward.
“First International Title,” said Rodgers, “has implemented Property Owners Notification letters, which we mail or FedEx to the owner based on the address on the property tax bill. This letter is a fraud prevention tool. It indicates that we have received a real estate transaction request on the property and asks the owner to call us immediately to verify this transaction is correct and if we should proceed with the sale.”
Of course, availing yourself of these resources and putting in the necessary effort becomes much easier when there is an emotional payoff at the end of the journey. As Garrison explained, while she “felt bad for the other party that was really excited about the purchase,” it was gratifying to help them not “lose the property and money.” Rodgers echoed these sentiments: “I felt a great sense of satisfaction knowing that I was able to help the person going through this awful event. She was very grateful we were able to stop these crooks.”
Alliant National’s essential role
As a title underwriter, Alliant National seeks opportunities to support and incentivize its agents’ anti-fraud efforts. Garrison said working with Alliant National teaches those in the industry “what to look for and saves all involved from experiencing loss in terms of money and property.”
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.
Foreclosure rescue scams were rampant during the Great Recession as homeowners found themselves underwater with their mortgages facing foreclosure. As economic conditions slow and home prices decline in some regions, now is the time to watch for properties being sold under the guise of a foreclosure rescue. Here is a quick overview of different types of foreclosure rescue scams and a few tips on what to do if you suspect your transaction may involve a foreclosure rescue.
Foreclosure rescue scams
Foreclosure rescue scams can be as simple as taking money from a distressed homeowner promising to negotiate an agreement with the servicer or lender and then failing to provide any meaningful assistance. Some schemes require the homeowner to make mortgage payments to the scammer, who promises to manage the payments on their behalf, but instead, takes the money and disappears.
The scams that title agents must watch out for are those that result in a transfer of title to a foreclosure rescue company or investor. Insuring the title in a foreclosure rescue scam transaction may result in a claim when the new owner attempts to evict the tenant – the original owner of the property – and gets sued by the tenant. Becoming a party to a lawsuit could lead to reputational damage for your agency and other potential harm.
Here are a few such scenarios.
Bait and switch: The homeowner is asked to sign documents purportedly to bring the mortgage current, but the owner unknowingly signs a deed transferring the ownership to the fraudster. The homeowner is told they can remain in the property while the details are being worked out with the mortgage company. When the ownership transfers, the property is sold to someone else by the fraudster, and the unsuspecting former owner is evicted by the new owner.
Rent-to-own: The homeowner signs a deed transferring ownership to the scammer under a rent-to-own agreement believing they will be able to buy the home back. The scammer promises the homeowner they will not record the deed, but the deed is recorded. As with the scenario above, the home is then sold to someone else without the knowledge of the original owner.
Equity skimming: The owner signs a deed to the scammer who promises to share a portion of the profit from the home sale. Instead, the scammer rents out the home, pockets the proceeds, fails to make mortgage payments, and may record a deed back to the original owner. When the home foreclosure is finalized, the owner is on the hook for the debt and has lost ownership of the home.
Some rescue services are legitimate, but even in those cases, the owner may not understand that they have lost ownership of their home.
Foreclosure scam Red Flags
Transactions involving foreclosure rescue scams often have similar details. Here are some Red Flags to keep in mind:
A recently recorded deed from the owner to the investor
An investor who brings an already executed deed to the title agent and asks the agent to record the deed
An existing mortgage by the prior owner is in foreclosure
The prior owner is still living in a property being sold by an investor or foreclosure rescue company (Scammers may call them “tenants” and ask that you do not disturb them as a condition of the sale).
Thankfully, if you spot one of more of these Red Flags, there are steps you can take to help determine whether the transaction is legitimate.
Trust but verify
A title search will show if there is a notice of foreclosure against the property. If this is the case, and the prior owner still resides at the property, a good first step may be to call or write that person to determine:
Why they are still residing at the property
If they understand they have transferred ownership of their home to the investor
Whether they are aware that their home is now being sold to someone else.
Be wary of an investor attempting to steer you away from contacting the previous owner of the property or the lending company. It is best that you communicate directly with all parties, the prior owner and the lenders, letting them know about the impending transaction.
Open communication is also critical in the case of a simultaneous flip. The original owner may not be aware of the second sale for an increased amount. The new lender may include a requirement in the closing instructions that property flips be disclosed or that they are prohibited. Disclosures should be in writing. It is also best to communicate directly with the lender, and not just a mortgage broker.
Here are a few more things to keep in mind in the fight against foreclosure rescue fraudsters:
Trust your instincts if you are feeling uneasy over a pending transaction or uncover unusual circumstances.
Watch out for odd or unusual requests from the buyer, seller, or investor.
As the neutral third party, it’s best to communicate openly with all parties to the transaction. Do not shy away from asking questions.
Be wary of any party to the transaction requesting secrecy.
Final note
At Alliant National, we invite agents to share their stories and thoughts on how we can all help prevent fraudulent transactions. Please email us 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. Learn more at: https://alliantnational.com/title-claims/crime-watch-program/
