Posts Tagged ‘fraud’

magnifying glass looking at an aerial view of a neighborhood

Legal Descriptions: Wait! I Can’t Locate My Real Property 

In the automotive world, each vehicle is uniquely identified by a vehicle identification number (VIN), a distinct code used by the car industry. This identifier is used in various ways, such as for insurance and department of motor vehicles records, ensuring each vehicle is clearly and accurately tracked.

There is a similar concept that applies in the area of real property, and it’s not the parcel identification number shown on a county appraisal district or a property appraiser or assessor’s website. The true identifier for real property is the property’s “legal description.” However, errors with a property’s legal description can lead to complex issues affecting transactions. Let’s discuss some common issues and strategies to prevent and address these problems.

Legal descriptions come in various types, such as metes and bounds, or plats, just to name two. The legal description is created by a professional surveyor and is used to locate and identify the real property it describes. This information is located on deeds, deeds of trust, mortgages, and other instruments pertaining to real property. Without a legal description, it is nearly impossible to determine where a property is located and the boundaries of the property on the ground. Absent a legal description, it is also extremely difficult to determine who holds title to the property, who can convey title, what property is being pledged as collateral to secure a loan, and much more.   

At Alliant National, the claims team regularly sees cases involving legal descriptions. Here are just a few of the more common issues:

  • the legal description is not included with the recorded deed, mortgage, or deed of trust;
  • the legal description is incomplete;
  • the legal description has typographical errors;
  • the legal description references an incorrect subdivision or references an erroneous plat book or page; or
  • ownership of property is being challenged due to a gap in the property or an overlap of the property’s legal description with that of a neighboring property owner.

When a legal description is missing or not correctly identified in an instrument, it may result in a title claim involving intervening conveyances or liens on the real property. In some cases, a person may not be able to convey title to property they believe they own, or they may face challenges from others who believe they have better title.

Legal description issues can be timely or difficult to cure. In some states, there are statutes that permit certain legal description errors to be corrected through the use of a correction affidavit. However, states that have such corrective statutes generally limit their use and have certain requirements that must be met before a correction affidavit may be utilized. If the situation is not covered or the requirements are not met under the statute, then a correction affidavit is not available. In those cases, it may require a corrective instrument be obtained from a party or costly litigation. Even though it is not an exhaustive list, the Resources section below includes links to a few states’ corrective statutes.

Familiarizing yourself with your state’s laws is crucial to understand if there are corrective statutes relevant to legal descriptions, along with their specific limitations and requirements.

Happily, experience teaches that attention to detail can significantly reduce the occurrence of legal description issues. Here are a few tips for avoiding legal description headaches:

  • Purchase Contract and Addendums. If parties make changes to the purchase contract’s legal description, make sure to have those changes incorporated into your real estate closing platform to ensure, when it is time to print documents, that the documents properly reflect the accurate legal description.
    • For example, the parties may have originally contracted for Lots 1, 2 and 3, Main Plat. Subsequently, through an addendum, the contract now only dealing with Lots 1 and 3, Main Plat. Make sure the documents reflect only Lots 1 and 3, Main Plat.  
  • Who else should know of changes? Let your team and any third-party vendor know of any changes made to the legal description since the last time products were obtained and request that the products be revised, and new products issued to reflect the change. Then, distribute the revised products to the proper parties.
    • Remember to let the lender know of any changes to the legal description as soon as you know. Lenders may use this information to obtain an appraisal of the property to determine its value and may have to adjust the lender’s underwriting review.
    • In some cases, if the lender prepares the deed of trust or mortgage, it may pre-print the legal description on the instrument.  Review the instrument prior to closing for accuracy of the legal description. If the legal description is inaccurately reflected, contact the lender immediately to discuss.
  • Review and ask questions. If a survey was purchased or a prior survey is being reviewed showing the property’s legal description, review the survey for any differences shown in the seller’s vesting deed (and those in the chain) against what is being prepared to be conveyed. If there are differences, ask questions and review with the surveyor and the parties to clear up any discrepancies and document your file indicating how the parties addressed and resolved the situation. 
  • The parties. Review all documents prior to the closing to ensure they accurately reflect the legal description the seller intends to convey and the buyer intends to purchase. Don’t forgot to review and compare any legal description changes that the parties agreed to in the contract or purchase contract addendum.
  • Recording. When sending the instrument to the county recorder’s office, remember to include the correct legal description with the instrument.
  • Policies. When a final title policy is issued, review to make sure the correct legal description is included in Schedule A before sending it to the recipient.

Taking a moment to thoroughly address a property’s legal description can greatly reduce potential errors that could lead to claims. If you have questions, please feel free to reach out to me or any member of the Alliant National claims team. We’re eager to help!

Resources:

Colorado Revised Statutes Title 38, Sec. 38-51-111 – https://leg.colorado.gov/colorado-revised-statutes

Florida Statutes, Title XL, Sec. 689.041 – http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0689/Sections/0689.041.html

Texas Property Code, Title 2 – Conveyances, Chapter 5 – Conveyances, Sec. 5.027-5.031 https://statutes.capitol.texas.gov/Docs/PR/htm/PR.5.htm

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.

man peering over a desk with the words "who you gonna call?"

Data Breach Prep: Texas

When a data breach occurs, it’s an intense, frightening moment. Who you ‘gonna call? Ghostbusters aren’t the ones for this job, so the best way to make the specter of a breach less scary is to have an incident response plan in place; to know what your legal and regulatory requirements are; and to have the contact information that you need close at hand.

While this new series of blogs is not intended to provide legal advice, it is intended to provide you with recommendations for resources that may be useful; to increase awareness regarding notification and reporting requirements; and to provide helpful notification contact information, unique to each state. In each issue, we will present you with contact information regarding a different state in which Alliant National is licensed, and in which you may be its appointed agent. It is up to you to make sure that you know when to use these contacts – either because you are legally required to do so, or because you have optionally decided to provide notification. Lastly, for our legal disclaimers, we’ve made our best efforts to acquire the correct and current contact information, but we can make no guarantees as to its accuracy or that the information will not change over time.

Understanding State Reporting Responsibilities

There are two kinds of laws that impact your reporting responsibilities: (1) state data breach notification laws that generally apply to all entities who “own” data, and (2) insurance data security laws that apply to those who are regulated for doing the business of insurance. A great summary of the state data breach notification laws is published quarterly by the law firm of Foley & Lardner. Another useful resource for tracking both the state data breach notification laws and the insurance data security laws is a tool published by the law firm of Lewis & Brisbois

Now that we’ve discussed both the general and insurance data breach notification laws, please be aware that sometimes notification requirements derive from other sources, including statutes which are not labeled as Insurance Data Security Laws (or which don’t even fall under the category of such laws), and bulletins issued by insurance regulators.

State data breach notification laws vary from state to state and may have some exemptions which apply to you, but often include the following common components:

  • Notification to affected state residents without unreasonable delay.
  • Notification to certain agencies, including state attorneys general and/or consumer reporting agencies under certain circumstances.

The variances are quite considerable and include (but are not limited to) how (e.g. by what method) to give notice, permitted delays when a law enforcement agency investigation is pending, timing of the notice, what particular information is required information to be provided, and record retention.

Consumer Reporting Agency Notification

For your convenience, when these laws do require notification to Consumer Reporting Agencies, the following information may be helpful to you:

Common Notification Requirements

Insurance Data Security Laws also vary from state to state and may have some exemptions that apply to you (typically based upon the size of the licensee, its year-end total assets, and its gross annual revenue), so, again, be sure to check your state’s specific requirements. However, these laws generally include the following common notification components:

  • Notification to the insurance commissioner of the cybersecurity event (usually within three days in most states).
  • Notification to affected state residents without unreasonable delay.
    • But if you’ve had a breach and determined that notice is not required (according to the state law or other authority), then typically that determination is required to be documented in writing and retained for at least five (5) years.
  • Notification (usually within 10 days) to a covered third-party (such as your *title insurance underwriter) when you have determined or believe that a breach occurred.
    *(for Alliant National Title, you can contact Elyce Schweitzer, Regulatory Compliance Officer, at eschweitzer@alliantnational.com)

Texas Notification Requirements And Contact Information  

Contact Information Pursuant to State Data Breach Notification LawsContact Information Pursuant to Insurance Data Security Laws (or Pursuant to Other Authority Requiring Notice to Regulator)
Tex. Bus. & Com. Code §§ 521.002, 521.053, 521.151-152 (these are all sections of the Identity Theft Enforcement and Protection Act but note that Tex. Bus. & Com. Code § 521.053 is the statute pertaining to actual notification / reporting requirements).   When breach affects ≥ 250 residents, notify: * TX Attorney General whose informational webpage for data breach reporting is  https://texasattorneygeneral.gov/consumer-protection/data-breach-reporting; from there, access online data breach reporting form at https://oag.my.site.com/datasecuritybreachreport/s/   When breach affects > 10,000 residents, notify: *Consumer Reporting Agencies (see contact information provided above)No Insurance Data Security Law.  However, Commissioner’s Bulletin #B-0009-23 requires data breach reporting to the Texas Department of Insurance (TDI):   *For all other regulated entities and individuals (besides domestic insurance companies and HMOs), send breach notices to CyberReporting@tdi.texas.gov.
dark photo of a disheveled man in a business suit standing next to washing machines that are laundering money

Beyond GTOs: FinCEN Proposes Expansion Of Industry Reporting Requirements

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) on Feb. 7 to expand its efforts on a permanent basis to combat and deter money laundering through the residential real estate sector.

According to the FinCEN announcement, the proposed rule would require professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities and trusts.

“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” said FinCEN Director Andrea Gacki. “Today marks an important step toward not only curbing abuse of the U.S. residential real estate sector but safeguarding our economic and national security.”

Expansion of GTO efforts

Since 2016, FinCEN has issued multiple Geographic Targeting Orders (GTOs) requiring title insurance companies to file reports on all-cash purchases having specific dollar thresholds in designated geographic areas. These GTOs last for six months at a time. The most recent GTO was issued in October 2023 and expanded the list of affected venues.

According to FinCEN’s proposed rule, expanded reporting requirements would apply on a permanent basis across the entire country, without limit to specific geographic locations or a dollar threshold. The agency will accept comments on the new proposed rule for a 60-day period following its publication in the Federal Register, scheduled for Feb. 16. According to the American Land Title Association’s (ALTA) blog of Feb. 8, FinCEN has proposed that the final rule become effective one year after it is issued.

“We are still reviewing the proposed rule and will work to ensure that FinCEN considers the information they are collecting under the new Beneficial Ownership rule, among other things, so as not to be unnecessarily duplicative and also provide clarity regarding the obligations of all real estate parties under the rule,” said Diane Tomb, ALTA’s chief executive officer. “We also appreciate, and intend to continue, the ongoing dialogue with FinCEN to craft a tailored approach limiting the transactions that must be reported to those of the greatest concern and providing avenues to help reduce the compliance burden on title and settlement companies.”

Proposed reporting structure

The proposed rule would require reporting on transfers of single-family houses, townhouses, condominiums, and cooperatives, as well as buildings designed for occupancy by one to four families. Going a step beyond the GTOs, it would also require reporting on transfers of vacant or unimproved land that is zoned, or for which a permit has been issued, for occupancy by one to four families.  Furthermore, both purchasing entities and transferee trusts are reportable unless a specific exception is applicable.

ALTA’s Feb. 8 blog summarizes reportable information under the proposed rule to include (but is not limited to) the following:

  • Name, address and taxpayer identification number (TIN) for the transferee and transferor.
  • Beneficial owner information for the transferee and anyone signing the transfer documents. (names, date of birth, addresses and TINs for those individuals).
  • Name, DOB, address and TIN for all transferors on title or the beneficial owners if the seller is an entity.
  • Address and legal description of the property.
  • information about the payments made by or on behalf of the transferee.
  • Information about any hard money or other lender not subject to anti-money laundering rules. That participated in the deal.
  • Individuals representing the transferee entity or transferee trust.
  • The business filing the report.

For a more detailed summary of requirements and exceptions under the proposed rule, please see the  Fact Sheet published by FinCEN. At Alliant National, we are committed to keeping you updated on legislation and regulations that affect your business. Stay tuned for more, as the comment period progresses.

Crime Watch Banner with computer hacker in the background and people celebrating in the foreground

Alliant National’s Crime Watch Program Caps Off Another Successful Year

Alliant National’s Crime Watch Program is a great example of the old saying that the best defense is a good offense. Designed to incentivize Alliant National’s policy-issuing agents to detect and prevent fraud, the program had a banner year during 2023. Working together, Alliant National’s network of agents prevented scores of fraudulent transactions from going forward over the past 12 months. These efforts not only protected against sizable losses but helped promote a safer and more secure industry. Now that the year has wrapped up, let’s dig into the numbers.

A problem of incredible scope

With property information readily available with a click of the mouse, it is easier than ever for bad actors to research and identify potential targets. The result has naturally been a huge uptick in criminal activity over the last few years. In fact, FBI data indicates that “more than 13,000 people were victims of wire fraud in the real estate and rental sector in 2020, with losses of more than $213 million — an increase of 380% since 2017.”[i]

Fighting fraud requires all hands on deck

To help empower independent agents and assist the title industry in combating fraud, Alliant National initiated its Crime Watch Program several years ago. The initiative rewards agents $1,000 each time they prevent a fraudulent transaction – and the results have been impressive. Year after year, Alliant National’s agents have helped stem the tide of criminals targeting the industry, identifying fraudulent behavior and saving consumers from financial loss and unnecessary stress.

During the program’s lifespan, we’ve seen a number of best practices to help prevent fraud:

  • Never accept wire instructions over email.
  • Double-check all contact information. Then, check it again.
  • Always send wire instructions through a secure, encrypted communication channel.
  • Pay particular attention to any last-minute changes with a transaction, especially with wire transfer information.
  • Speak directly to clients to make sure they are who they say they are.
  • Become as familiar as you can with the history of the property you’re working with and watch for any irregularities.
  • Stay current with all continuing education classes to remain apprised of the latest developments in title fraud and cybercrime.
  • Trust your gut when something feels off and work closely with colleagues to have a unified front against fraudsters.
  • Use real world examples of fraudulent activity to educate colleagues or employees on how to spot fraud.
  • Have a response plan in place if a fraudster is able to get around your agency’s defenses.

2023 was a successful year of fraud busting

For Alliant National’s Crime Watch Program in 2023, past successes were prelude to a tremendous year of fraud busting. Collectively, agents identified and prevented over 25 instances of fraud, totaling more than $280 million in proposed liability. The agents involved in stopping these fraudsters came from a variety of states – including Florida, Missouri and Texas – and the specifics of each fraudulent transaction also ran the gamut. Some of the top schemes encountered by agents included:  

  • Business email compromise
  • Seller impersonation
  • Fraudulent contracts
  • Fraudulent documents like passports
  • Fraudulent cashiers’ checks

Let’s stop fraudsters in 2024

Everyone has their own New Years’ resolutions, but for the title insurance industry, one of the most important should be taking all available actions to detect and ultimately prevent fraud. Since the inception of Alliant National’s crime watch program, we have seen how powerful it is when agents proactively address suspicious transactions. While not all fraud can be prevented, the program is a testament to what the industry can do when it unites against criminals.

Want to learn more about Alliant National’s crime watch program and how your agency can get rewarded for stopping fraudsters? Start here.


[i] Wire Fraud (nar.realtor)

Crime watch banner above a picture of Florida's Cherie Breitenbecker and Gina Preston Brick City and Alliant National's Chris Yates.

Fraud Busting with Brick City Title

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.

Learn more about Alliant National’s crime watch program.

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