Be mindful of the potential hazards with an increasingly online-only landscape
As news continues to break, it becomes more and more apparent that the COVID-19 pandemic will have a lasting effect on our industry. While it’s critical that we learn to adapt amidst the crisis, it’s also imperative that we be mindful of the potential hazards that can come with shifting into an increasingly online-only landscape. Here are some of the things to watch out for as we navigate through this difficult time.
Increase in Wire Fraud and Phishing
There is no way to avoid electronic communications throughout this pandemic. Be vigilant against phishing emails, incorrect email addresses, slightly off signature blocks and dated lingo, and emails coming in at odd hours (implying the fraudster may be abroad). Always call a verified telephone number to confirm changes to wire instructions. Click on this link for more information on what to watch out for.
TIP: Have a plan in place – meet with your IT department, and talk to your insurance agent to see how you can protect yourself against these scams.
Fraud & Forgery
Unfortunately, tumultuous times often only embolden fraudsters further. That’s why it’s important now, more than ever, to treat remote closings with the same care and caution as mail-away closings. Here are some red flags common to fraud and forgery claims: (1) the property is a part of a “flip” transaction; (2) the property is vacant land; (3) the deed to the seller is a recently recorded quit claim deed. Click on this link for more red flags.
Powers of Attorney
Powers of Attorney (POA) are ripe for fraud. Carefully examine the powers that are granted in any POA, and confirm that the POA was given freely and purposefully for the intent for which it will be used. Require a fresh POA if the POA presented is more than six months old. If you have reason to question the capacity of the principal, or have questions about the validity of the POA, contact your local Alliant National underwriter for approval before proceeding.
TIP: If your state allows the use of remote online notarization (RON) technology and the county recorder will accept electronically signed instruments for recording, recommend using RON so the principal can sign the required documents instead of appointing an attorney-in-fact.
Undue Influence and Duress on the Elderly
With COVID-19 threatening the elderly more than any other demographic, we have a responsibility to ensure we’re mindful of any potential undue influence or duress from unscrupulous heirs or caregivers. If the person holding title is elderly or is sick, be sure to dig in further before agreeing to conduct the closing.
Hard Money Lenders
Hard money lenders aren’t regulated by state or federal law. Generally, hard money lenders do not collect loan applications or otherwise vet their borrowers. This practice creates a higher potential for fraud by third parties posing as legitimate borrowers. If something feels off, it probably is. For more information on what to look for with these transactions, click on this link.
Note: Seller-financed purchased money loans are not considered hard money lenders.
Crime Watch Program We take the safety of our clientele very seriously. Because of that, Alliant National offers a $1000 reward to any agent who helps identify and prevent a forgery or scam. Be sure to contact the hotline to report anything that may feel like fraudulent activity. To submit a claim for a reward, click here: https://alliantnational.com/title-claims/crime-watch-program/.
Being mindful, being aware and noting odd happenings in our digital lives can help stop these fraudulent maneuvers.
Every day, as consumers and as business people, we are confronted with obvious and often not-so-obvious attempts to steal our information, our identity and our money. Scammers have been particularly busy in recent weeks as businesses and individuals shift their activities online in response to the COVID-19 outbreak.
We are not powerless against these criminals. Being mindful, being aware and noting odd happenings in our digital lives can help stop these fraudulent maneuvers.
Here are six tips for staying safe.
1) Online purchases should be made with PayPal or with a credit card. The reason is that debit cards take the money immediately. If fraud is in progress, the delay of a credit card transaction affords the card holder a better opportunity to catch the fraud and get it corrected.
2) If it looks odd, it likely is. Sometimes, something doesn’t look or feel right. While many shoppers stick to large, legitimate shopping sites like Amazon or Barnes & Noble, shoppers also seek deals. Unfamiliar web sites or mom-and-pop sites have become adept at mimicking their supersized competitors.
See an odd “o” in Amazon that looks like a zero? Don’t buy from it. Does the eBay purchase you’re about to make have a legitimate looking url? Double check it. Make sure it’s not a fake or altered web site; pop around online and be sure the purchase comes from the authentic retailer.
3) Go slowly when responding to or clicking through eNewsletters. A sophisticated and effective way scammers can get buyers’ money is by building authentic looking eNewsletters that provide click-thrus for purchasing or for personal information confirmation. One real-life scenario involved a well-known university credit union that sends out eNewsletters regularly.
One day, the eNewsletter showed up in members’ inboxes. The eNewsletter asked the recipient to confirm their name, social security number, address and phone. When the recipient complied and clicked, “done,” all that information went to a database controlled by scammers. The bogus eNews was so well designed, it was virtually impossible to know it was fake.
4) Create new passwords and do it often. Create different passwords for different web sites and make a habit of changing them regularly. Make the passwords sophisticated. If eight or more characters are required for the password, you might consider taking the extra time to make a 16-character password that makes use of supported combinations and special characters (i.e, #,S,<, numbers and letters). There are apps that help keep passwords organized and stored. Use one.
5) Enable fraud protection. The good news is that when fraud is detected, reputable companies help make it right. The credit union fraud caused the card owner to incur over $500 in unauthorized charges. The card holder had all the money put back into her account. Enable fraud protection on all credit cards. Most banks that hold credit cards will work with the cardholder to identify the fraud and reimburse the charges. Fraud protection makes the correction easier to catch and quicker to remedy.
6) Beware of phone scams. Fraudsters are becoming more sophisticated every day in order to get you to hand over your personal information over the phone. This is true not only with voice calls, but with text messages, and smartphone apps as well.
Generally speaking, if you get a request for personal information via your phone and you did not initiate the request, chances are the request is fraudulent.
This is especially true for scam calls purportedly coming from the IRS. The IRS will always notify you by mail first if there are any issues. Then and only then will they communicate using other means to resolve the issue in question, and that is usually only when you initiate the communication with them in response to a letter you may have received.
Amy Gregory has a passion to protect, and when a customer at
Paramount Title was defrauded of $130,000, Amy pulled out all the stops to
track down the funds and then went above and beyond to ensure no customer of
hers would ever fall victim to wire fraud again.
Our story begins with an innocuous email delivered to our
homebyer on June 18, which appeared to come from the lender’s office. The email
informed our buyer that a representative from Paramount Title would call her to
confirm receipt of the funds to close.
Someone called the buyer, but it wasn’t us. A fraudster
named “Jimmy” on the other end of the line confirmed wire instructions for a
specific bank account, with the account name referencing Paramount Title, and
instructed our buyer to send funds in the amount of $130,000.
Our buyer wired the funds.
The following day our buyer checked her account and saw the
wire had been returned to her account. She replied to the email thread with the
fraudster from the previous day asking if she knew what happened and why the
funds were returned.
The fraudster told her the company’s escrow account was
under its annual tax audit and that is why her funds were returned. Then he
gave our buyer new wiring instructions for another bank account. Our buyer
called “Jimmy,” who confirmed the new writing instructions were correct.
Our buyer wired the funds again.
On June 20, our buyer received another email from the
fraudster stating there was an issue with the wire. The fraudster asked our
buyer to call her bank and request a hold be lifted off the wire. Tragically,
our buyer called her bank and obtained the federal reference number for the
The next day a representative from the receiving bank called
to say they flagged her wire transfer and they were not going to release the
funds yet because it looked suspicious.
That’s when our buyer decided to look up the title company. She then called us, the real Paramount Title, and shared her story. Our office confirmed we don’t employ anybody by the name of “Jimmy” – and this was most definitely a case of wire fraud.
This is where Amy swoops into the picture.
Amy was quick to discuss all options for our buyer to report
the crime, including offering to report the issue on her behalf. Amy contacted our
US Secret Service agent (YES, we actually have a US Secret Service agent in our
rolodex to help us in these “special” circumstances), finally reaching him at
10 o’clock at night to discuss the details of the file.
Amy wanted to see if the agent could provide any assistance
on what our buyer could do to get her money back. She conferenced in our buyer,
so she could speak directly with the agent. The agent then offered to call the
“fraudsters” bank and see how they could help.
On June 22, thanks to Amy’s tireless efforts driven by a
passion to protect, the full amount of the wire was returned to our buyer. Our
buyer closed on her home two weeks later.
“I spoke with the client shortly after the ordeal was over,
and she expressed to me how good it felt that someone had her back through the
process,” said Andrea Somers, Compliance Officer for the Florida Agency
Network. “Amy truly goes above and beyond in everything that she does.”
But our story doesn’t end there, because Amy went above and
beyond to ensure no customer of hers would ever fall victim to wire fraud
First, she implemented the website “www.inquirebeforeyouwire.com,”
a message we now we blast everywhere we can. When we receive a new contract, our
customer is informed of this very real threat. When a customer receives an
email from us, they see the Inquire Before You Wire image. It doesn’t matter
how small, or big, the transaction is.
She also implemented additional processes where phone calls
are made to the contacts on each file, to discuss wire fraud, the current fraud
trends being seen in our industry and to lay out exactly how the client will
receive wire instructions.
What’s more, Amy decided to go one step further by achieving
the Certified Anti-Money Laundering Specialist (CAMS) certification. This
achievement demonstrates Amy’s commitment and leadership in protecting our
clients and our industry. Amy feels we have a duty to protect and serve the
Amy’s passion to protect pushes our team to uphold the same
standard of care, to protect and try to prevent tragic situations involving
wire fraud from occurring on our watch again.
It may seem like “Title Insurance 101” – but small mistakes can be signs of fraud or misuse of funds or outright intentional undoing of a clear road to closing on a real estate deal.
It may seem like
“Title Insurance 101” – but small mistakes can be signs of fraud or
misuse of funds or outright intentional undoing of a clear road to closing on a
real estate deal.
Not everyone knows everything
all of the time; a thousand items have to fall into place and “add
up” in order to make the process smooth and completely unencumbered.
Our Fraud Detection Guide for Agents
A power of attorney
showing up in the middle of a transaction (or at the end) should be
scrutinized. So should cashier’s checks drawn from geographical areas that
don’t coincide with the seller’s, buyer’s or property’s locale.
Take a look at the
potential red flags below; being aware is half the battle.
Red flags” involving the preliminary title report and title search may include:
by, prepared for, or mailed to a party other than the lender.
seller is not in title (possible purchase disguised as a refinance or improper
owned property for a short time with a cash-out on the sale.
of default is recorded (possible cash-out purchase with a straw buyer or
indicates delinquent property taxes.
indicates modification agreement on existing loan(s).
documents show the borrower or Seller on a purchase is not the owner of record.
- For a purchase transaction, the seller
should be the owner of record.
- For a refinance transaction, the
borrower on the loan application should match the owner of record on the title
“Red flags” involving escrow
and closing instructions may include:
in the blank” or generic escrow instructions.
of sales prices to “fit” the appraisal.
amounts paid as a deposit/down payment.
or unusual buyer credits or fees.
amendments to the original transaction.
on Closing Disclosure different than seller on preliminary title report.
of “white-outs” or alterations without initials.
to third parties whose lien was not listed on the preliminary title report.
to another escrow.
payment is paid into escrow upon opening.
is paid outside of escrow to property seller.
is “subject to” property seller acquiring title.
acting as the property seller is controlled by, affiliated with, or related to
the applicant or another party to the transaction.
is required to use a specific broker/lender.
of subject property is not subject to inspection.
of attorney used with no explanation.
of attorney is not properly documented/recorded.
Funds to Close
“Red flags” involving funds
to close may include:
- Remitter on cashier’s check or source of the wire is not the borrower.
- Cashier’s check issued from a bank that is inconsistent with the depository information on application.
- Cashier’s check issued from a bank branch that is out of the buyer’s geographic area.
- Dollar amount is incorrectly encoded on check.
- Sources of funds are questionable
Closing Disclosure/Settlement Statement
“Red flags” involving the
closing disclosure or settlement statement may include:
and addresses of property seller and buyer vary from other loan documentation.
mailing address is the same as another party to the transaction.
real estate agent commissions paid.
estate commission paid, but no realtors listed on the purchase contract.
price differs from sales contract.
is made to undisclosed secondary financing or double escrow.
prorated on owner-occupied transactions.
amount due to/from buyer.
Disclosure or escrow instructions contain unusual credits, disbursements,
related parties, delinquent loans paid off, or multiple mortgages paid off.
for items not consistent with liens listed on title commitment.
seller paid marketing, administrative, assignment or trust fees.
to unknown parties.
of the closed mortgage differ from the terms approved by the underwriter.
of settlement is delayed without explanation.
Our Fraud Detection Guide for Agents
one wants to learn that fraud or misuse of funds or fraudulent transfers
happened once a closing is complete, yet those events can be part of real
estate closing worlds.
can also prove to be undependable, as parties involved can have
Download Our Fraud
Detection Guide for Agents
wants to learn of a crooked contract – that’s already been signed, notarized
one. Below, we take a look at what agents can do regarding all of the above and
how to avoid pitfalls before they happen.
What Agents Should Do If Wire Fraud is Suspected
After the Exchange of Funds (regardless of the dollar amount of the loss)
- Contact your
- Speak with someone who has authority to
reverse or “recall” the wire. This contact may be in your bank’s fraud
department. Note: A best practice is
to identify this contact and establish a relationship with him or her before a
wire fraud incident occurs.
- Make sure the bank understands you have been
the victim of a Business Email Compromise (BEC) scheme.
- Request a Wire Recall or SWIFT Recall
- Ask your bank to fully cooperate with law
- Contact your
local FBI office (https://www.fbi.gov/contact-us/field-offices). The FBI has a number of protocols aimed at
freezing and retrieving funds. They will activate appropriate protocols based
upon the circumstances of the loss. The American Land Title Association has more information on the FBI’s protocol for reversing
fraudulent international wires.
- Complete and
submit a Complaint Referral Form to the FBI’s Internet Crime Complaint Center (IC3). Be prepared to
provide all details related to the transaction including date, amount, the name
of your bank and the beneficiary bank, account numbers, contact information,
- Contact the fraud
department at the beneficiary bank to notify them about the wire-recall request
due to the fraud. Provide details and request that the account be frozen.
local law enforcement (https://www.policeone.com/law-enforcement-directory/)
- Contact your
Secret Service field office (https://www.secretservice.gov/contact/field-offices/)
- Contact the
Alliant National Claims Department by first calling the Claims Manager at (303)
682-9800, ext. 425, and then follow up by emailing applicable information to Claims@alliantnational.com.
When the Money Goes Out, Minutes Count
The 48-hour period following a fraudulent
wire transfer is critical; immediately contacting your bank, the local FBI
office and submitting a complaint to IC3 as described above will increase your
chances of recovering the funds.
Special Handling of International Wires
Since international wire
fraud has a very low chance of recovery or reversal of the wire, special
precautions are advisable, such as requiring “in-person authorization” from
only those authorized signers on an out-going international wire, and having
such precautionary requirements agreed upon with your bank.
Appraisals and appraisal reports may contain “red flags” indicating
potential fraud. “Red flags” may include, but are not limited to:
- Owner of
record listed is inconsistent with other information disclosed in the loan
- Occupant is
identified as a tenant on an owner-occupied refinance application.
refinance transaction, but the property is vacant.
- Occupant of
subject property is listed as “unknown.”
- Appraiser uses
public record, exterior inspections, or property seller/builder as sole data
- Illegal zoning
is checked on first page of the appraisal.
deficiencies or adverse conditions that affect the livability, soundness, or
structural integrity box” is checked “Yes” on the first page of the appraisal.
property has increased in value in a stable or declining market.
- Land value is
atypically high for the area.
adjustments in urban or suburban area where marketing time is under six months.
- Timeframe between
sales does not allow enough time for reported renovations made to property.
- Loan file
contains a note with a predetermined value.
Condition (C5, C6) or Quality (Q6) ratings.
- Blank spaces
on the form (borrower, client, occupant, etc.).
- Missing photos
- Photos do not
match description of property.
- House number
in photo does not match property address.
- Photos do not
match the floor plan sketch (i.e. location of garage, fireplace, etc.).
- Photos of
subject property taken from odd angles or with no depth of field, or have been
cropped or otherwise altered.
- Photos reveal
items not disclosed in appraisal (e.g., commercial property next door, railroad
tracks, another structure on premises, etc.).
conditions in photo of property are not appropriate for the date of the
appraisal (i.e., July photo shows snow on the ground for a property in
- “For rent” or
“for sale” sign in photo of subject property on owner-occupant refinance application.
- Most recent
sale(s) and/or listing information on subject property and/or comparable
properties are missing.
- Use of
unverified comparable sales (i.e., not verified through traditional data
sources such as MLS, sales office, Closing Disclosure, real estate agent,
- Use of
inappropriate comparable properties (e.g., that are not similar to the subject
property when comparable properties are present).
distance between comparable properties and subject property.
- All comparable
properties are from different town(s) than the subject property.
- Lack of
bracketing with comparable sales used (e.g., all sales are significantly larger
in living area than the subject).
- Appraisal is
ordered and/or prepared prior to date of sales contract or loan application.
Appraiser is located
outside of the county in which the property is located.
Sales contract “Red flags” indicating potential fraud may include, but
are not limited to:
- Multiple sales
- Sales contract
is dated after the appraisal date.
- Sales contract
is subject to an existing lease on an owner-occupied transaction.
- Sales contract
includes personal property or prohibited sales concessions.
- Sales price is
significantly above or below market value.
contract addenda adjusts the sales price.
- Applicant is
not shown as purchaser.
- No real estate
- Real estate
agent(s) used, but not paid a fee; or no real estate agent(s) involved at all.
- Seller is a
corporation or LLC and the subject property is not new construction.
- Seller is an
affiliated real estate agent, trust, relative or employer.
- The parties to
the transaction are related by family or commercial enterprise.
- The contract
is not dated.
- Names are
deleted from or added to the purchase contract.
- The contract
is an “option contract.”
- The contract
was assigned or is assignable.
deposit is an unusually high amount, consists of the entire down payment, or is
an odd amount.
- Contract has a
very short inspection period and upon satisfactory inspection, the buyer is to
notify the settlement agent who is then supposed to transfer a large portion or
all of the deposit to the seller (scam is that 10 business days later, it is discovered
that the cashiers’ check is counterfeit after the money has been sent, and the
escrow account suffers a shortage).
- Recommendation is to contact the bank or
entity issuing the cashier’s check to confirm that the cashier’s check number
and amount is valid prior to depositing the item in the account. Most banks
will confirm this by telephone. Due to the increasing occurrences of
counterfeit cashier’s checks, most banks have instituted mandatory holds on
cashier’s checks. It is not uncommon for a hold to last up to 10 days (check
with your bank to confirm their policy).
- Name and
address on earnest-money deposit check is different from that of the buyer.
deposit checks have inconsistent dates, for example:
- Check #111 dated November 1
- Check #113 dated September 1
- Check #114 dated October 1
check is not cashed or is not reflected on the Closing Disclosure.
Download Our Fraud
Detection Guide for Agents