As the country’s leading independent title insurance underwriter for the independent title agent, Alliant National has a responsibility to help confront the growing threat of fraud in our industry. One way we do this is through our Crime Watch program, which incentivizes agencies to report instances of fraud that they encounter. As part of the program, firms that prevent a fraudulent transaction that was to be insured by Alliant National may be eligible to receive a reward of $1,000.
Coffelt Title – An Active Partner In Fraud Detection
Coffelt Land Title, Inc., a title insurance agency that does business throughout Missouri and Kansas, recently detected three instances of fraud, and submitted them to Alliant National for award consideration.
Jessica Wackerman, who works at Coffelt as a title searcher and examiner, noticed a potentially fraudulent transaction while examining a series of files on three properties involving one buyer. “Looking at all of them together, I noticed some issues with the deeds as far as the same formatting, the spelling of grantor and grantee names, as well as notary names,” she said. “I then did some digging and found lots of issues – such as finding death information on one individual.” After noticing this and collecting the requisite information, she quickly notified her contact at Alliant National and sent in copies of the deeds and commitments.
Taken together, these various properties represented a potential fraud amount of nearly $20,000, pointing to the importance of vigilance when it comes to detecting and reporting fraud. As Jessica explains: “Alliant National’s Crime Watch program is a great thing for the agents and underwriter. It protects everyone, but it also ensures that the agents are looking into anything that might seem a little suspicious. The incentive is a nice reward for doing the research to produce all the information.”
Of course, no single program can entirely prevent or mitigate a problem as endemic as real estate fraud, which is why agencies must take other steps to protect themselves and the customers they serve. Coffelt Title itself has taken that idea to heart, investing in staff training and education to help employees catch fraud before it is too late.
Alliant National Is Making A Difference In Fraud Prevention
“I think all title companies need to be more aware of the fraud that is happening in their markets. They should not act under the assumption that it won’t happen to them or their customers,” said Jessica when asked about fraud in the title industry.
We couldn’t agree more, which is why Alliant National launched the Crime Watch program in the first place. Over the past year, we have seen the program pay off in spades. In 2022, Alliant National agents, through this program, collectively reported to us 12 instances of attempted fraud, totaling a potential liability amount of $1.8 million. In recognition of these agent sleuths, we have issued $12,000 in awards. We’re proud of our agents’ efforts to combat this systemic problem in the industry and, as this year draws to a close, would like to thank the following Crime Watch award recipients for making title insurance a safer and more sustainable field:
Siesta Title Escrow and Services LLC | FL | Amanda Pertuch
Title Professionals of Florida (TPF) | FL | David D. Lanaux
Alliance Nationwide Title Agency, LLC | MO | Daniel Onwiler
Alliance Nationwide Title Agency, LLC | KS | Ben Chapman
Siesta Title Escrow and Services LLC | FL | Claire Hooper
Coastal Title Services | FL | Brianna Steel
Legacy Title & Escrow, LLC | FL | Kathy Morgan
Caldwell County Abstract and Title Company, LLC | MO | Megan Eitel and Amanda McGinley
The relationship between an independent title agency and its title insurer is a unique one; we rely on each other for our mutual success. So when a claim occurs, it’s no fun for anyone. Claims are a fact of life for any insurer, but thankfully, some of the costliest claims are entirely preventable if time is taken to appropriately review and analyze information that is part of the transaction.
What are these costly and preventable claims? Based on our experience at Alliant National, the top five categories for claim files over the last three years have been in the following areas:
Missing or erroneous legal descriptions,
Lack of capacity or authority to convey title or release a lien,
Unreleased mortgages or deed of trust,
All other unreleased liens and judgments, and
Unpaid taxes and assessments.
To take this a step further, when we compared all of our closed claim files against closed claim files classified as “agent error,” we found that claims involving “agent error” tend to be more costly, particularly when it comes to the top five claims categories.
You ask, what can I do to reduce these preventable claims and thereby reduce the costs and other impacts of claims? Based on our experience, here are a few items to consider in every transaction:
Carefully read documents. Real estate transactions involve a lot of detail, and all those details are important. Take time to carefully read what the prepared instruments and documents say. This includes those that may have been delivered to you by a party to the transaction, a third-party or within a lender’s package. Do not assume anything. Here’s one example. Let’s say the lender does not include a spouse or a co-titleholder’s name on the mortgage or deed of trust. In several states, if the borrower is married, the spouse must join on the mortgage or deed of trust. Just because their name was not originally included, the lender may fall back on what the closing instructions required. In this case, it would be important to take a minute to contact the lender and make the necessary adjustments.
Do not be afraid to communicate. We’re all in a hurry, but it’s important to take the time to ask questions and be willing to ask for clarification when something is not clear. Then, of course, we need to listen to what is being said. In some cases, there may be disclosures of matters – not known until that moment – which can alter the transaction. Also, it’s helpful to consider whether everyone is using the same terminology to describe the same thing. We use a lot of jargon in this industry, so be careful not to think that “everyone uses this term” or that they understand things the same way you do.
Avoid being solely persuaded by the seller or borrower not to collect funds required at the closing. We oftentimes hear that the seller or borrower told the closer that the delinquent taxes, mortgage, or homeowner assessment was already paid outside of closing and to just disregard any payoff or estoppel letter that was previously collected. Experience tells us that you should not just take the person’s word but instead contact the creditor, lienor, or lender that is owed the funds, at a properly verified number, and confirm whether a payment has resolved or made current an amount owed. If appropriate, it may be good practice to hold back those collected funds until a certain time has passed, and it is confirmed that the account is current and/or the lien has been satisfied or released.
Spend time in understanding the subject of the closing. This includes the parties in the transaction and the property. Understanding the intricacies can help you spot types of fraud involving the conveyance of title or unpaid liens and taxes. With a critical eye, review the person’s ID and other documents that are presented since a number of fraudsters and imposters are impersonating others in transactions.
Promptly discuss concerns and matters with the underwriting and claim teams. We at Alliant National are always ready to review and discuss issues and matters of concern with our agents. Please don’t hesitate to call us. Waiting until the last minute or after closing to discuss a known issue may cause problems. In some cases, it may be too late to deal with an issue brought to the title underwriting team after the closing, as a claim may now exist.
Everyone is excited when a closing occurs and funds are disbursed, but this enthusiasm can quickly change to concern when a title matter is submitted involving that transaction. Thankfully, taking time to review, understand and analyze transaction information can reduce the possibility of errors and help avoid those top-five pesky and preventable title claims.
If you have questions, please contact the Alliant National claims team.
The Federal Bureau of Investigation (FBI) has labeled business email compromise (BEC)/email account compromise (EAC) as “one of the most financially damaging online crimes” as it is “the top cyber threat.” BEC/EAC is a scam in which fraudsters trick an unsuspecting party, typically by using a variety of social engineering and phishing tactics, into making payments to fraudulent accounts.
Since 2016, over $43 billion has been lost through BEC/EAC attacks. In 2021, U.S. losses attributed to BEC/EAC cybercrimes were reported to be almost $2.4 Billion. This is more than one-third of the total cost of all cybercrimes reported to the IC3 in 2021. In a recent article from Security Magazine, the author noted that email cyberattacks have increased by 48% in just the first half of 2022. It is no surprise that the title insurance industry has been the target of fraud schemes for many years, especially with wire transfers being utilized more often.
Some common schemes we continue to see include:
Seller Spoof – fraudsters impersonate the seller (using an email address that may only be slightly different from the original, or using the actual seller’s email), and provide alternate bank account information for the seller proceeds.
Lender Spoof – in a transaction involving the payoff of a prior lender, fraudsters impersonate the prior lender. They often modify the original payoff provided by the prior lender (or create one) with wiring instructions for a fraudulent account.
Buyer Beware – fraudsters pose as the settlement or real estate agent using a similar email address, and instruct the buyer to wire their down payment funds to a fraudulent bank account.
There are many ways to protect a person or a business from becoming a victim of these costly schemes. A few tips include:
Meticulously examine the email address, URL, and spelling used in any correspondence. Fraudsters use only slight differences hoping you do not critically analyze the spelling.
Be suspicious about opening any email attachments from someone you don’t know and be wary of email attachments forwarded to you as they may include malware or other malicious software.
View all changes to wire instruction with extreme caution.
Always independently verify with the company any payments or wires being sent to a third-party by contacting them at a legitimate number, and be leery of any last-minute changes to account numbers or payment procedures.
Confirm with the intended recipient that the wire was received.
Be extremely suspicious if the requestor is pressuring you to act quickly.
If you do become a victim, do not wait to take the next steps since time is critical in this process. Have a plan in place and be prepared to:
Notify your office management.
Notify your financial institution and the recipient’s financial institution.
Contact local law enforcement.
Contact your local FBI field office.
Contact your cyber-insurance, escrow security bond, and error and omissions provider.
File a complaint with Internet Crime Complaint Center (IC3).
Contact your title underwriter.
With our increased dependency on technology and the pace of our industry, we cannot let down our guard – we must stay vigilant! Heed the warning that fraudsters are not slowing down or giving up on these fraudulent schemes. If you are presented with any of these situations, the key is to be able to recognize the scam and then shut it down before it can infiltrate your transaction and create a web of issues.
The number of residential property sales exploded over the past few years, but the hot real estate market may have driven at least one unexpected consequence when it comes to surveys. Amid the highly competitive market, some home buyers may have been told that it would take longer to close a transaction since surveyors were overwhelmed with numerous orders. Thus, some buyers elected to waive surveys. After purchasing the property, however, buyers may have discovered encroachment matters impacting their property or their neighbor’s property, or that a boundary line is in a different location than originally believed.
Every year the claims team receives several notices involving survey matters and boundary disputes. Here are a few scenarios that serve as a reminder about the importance of surveys, and what you can do when a transaction does, or does not, include a survey.
Scenario One: A new buyer does not obtain a survey at closing. She is visited by her neighbor a few days after purchasing the property. The new property owner believes it’s going to be a friendly visit but instead the neighbor says, “your driveway and garage are encroaching on my property, and we want it removed in 30 days or else you will be hearing from our attorney.”
Typically, such an encroachment would have been shown in a survey. Further, the title policy may not offer much relief to the beleaguered buyer in such a case.
A title policy will likely have reflected a standard survey exception in Schedule B which may read, “Any discrepancies, conflicts, or shortage in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements that would be disclosed by an inspection or an accurate and complete land survey of the Land.” Since a survey was not obtained in this scenario, this may result in the matter not being covered under the title policy.
Scenario Two: This next situation involves a seller who owns a large tract of land and decides to split the tract into three smaller lots. The seller only wants to sell and convey one of the smaller, unplatted lots. The legal description in the seller’s deed is for the entire larger tract. How will the parties determine which of the three tracks is to be sold and properly identify the location of the property and its legal description to include in the deed? The purchase agreement most likely is not clear and will require additional questions and written clarification between the agent and the parties as to what is intended to be conveyed in the transaction. Unfortunately, without clarification in such cases, the parties may eventually find themselves in an expensive lawsuit.
In either scenario, if a survey is not requested and purchased at the time of closing, it is a good practice to have the buyer sign a document that the party understands a new survey is being declined, and to keep the document in the closing file. On the other hand, if a survey is obtained ahead of closing the transaction, consider the following:
Review the survey for accuracy of the survey and the survey certification. Are the correct parties identified? Review the legal description. Do you have a signed and dated survey from the surveyor?
Carefully review the survey to locate any items beyond the boundary lines or encroaching onto the buyer’s property.
Add any specific survey matters which are reflected on the survey as exceptions in the title commitment.
Provide a copy of the survey to the buyer (and lender, if appropriate).
As a good practice, have the buyer acknowledge receipt of the survey by having the buyer sign and date either the survey or a separate document confirming receipt, and keep a copy in the closing file.
Also, in certain jurisdictions, Survey Coverage or Survey Endorsement may be available for purchase to add coverage to an Owner’s or Loan Policy. If permitted in your jurisdiction to rely on a prior survey and an affidavit, discuss such a situation and the requirements with the Alliant National underwriting team before the closing occurs.
We understand not every case requires a new survey, but a buyer may find that a survey provides an understanding of what was conveyed and some peace of mind regarding their investment.
If you have questions, please contact the Alliant National claims team.
Fraudsters continue to seek out legitimate businesses they can use as a cover for illegal schemes that attempt to separate people from their money. One of the fraud scams that has reemerged is the check fraud scheme.
The claims team was recently notified of a scenario involving an Alliant National agent. A new purchase agreement and a sizeable earnest money deposit cashier’s check was presented to the agent. The cashier’s check was from a foreign bank and was promptly deposited by the agent into their escrow account. Shortly after depositing the check, the buyer notified the agent that the transaction was cancelled. The buyer demanded the agent promptly return the funds through aggressively worded emails and continuous phone calls. The agent did the right thing by not allowing the purported buyer to usurp the procedures that the agent already had in place. Ultimately, the foreign bank confirmed that the cashier’s check was fraudulent, and the purported buyer ceased any further efforts to communicate with the agent.
A few Red Flags from the transaction included:
A foreign buyer,
For sale by owner transaction,
No real estate agent utilized in the transaction,
Use of non-standard real estate purchase and sale agreement template,
Termination of the purchase and sale agreement was quickly sent to the agent after the check was deposited, and
An aggressive stance is taken by the buyer requesting that the funds be returned.
Appropriately, the agent did not rush the process, notified the purported foreign buyer of their check verification process, independently researched and located contact information for the foreign bank, confirmed the validity (or lack thereof) of the cashier’s check with the bank, and waited for confirmation from the bank on whether or not the funds cleared the account.
For a foreign bank’s check, it is important to remember that it may take several weeks for funds to clear an account. If you act and return funds too quickly, the buyer’s original check may be returned due to insufficient funds. If you attempt to try and recover the funds from the buyer, most likely the buyer will refuse to return the money or the buyer can no longer be located. Then, the agent is left without those funds in their escrow account, which will lead to other issues.
