The title insurance industry is on the front lines in a never-ending war with the fraudsters. As the industry has gotten better at combatting wire fraud and even the more recent seller impersonation fraud, criminals looking for larger paydays have turned to mortgage payoffs.
“The numbers are going up,” Sejal Lakhani-Bhatt, the CEO of Techwerxe, told National Settlement Services Summit (NS3) attendees Wednesday afternoon. “Businesses are hit less often than consumers, but they are getting almost three time the amount of money from business than they are from individual consumers, so it is not a matter of if you will get hit, but a matter of when.”
According to data from wire fraud prevention firm CertifID, in May alone their customers caught 18 fraud attempts totally $4 million. Title professionals and other members of the real estate industry need to take their security seriously, experts said.
“Can you afford to lose a million dollars? Can you afford to lose you reputation?” Lakhani-Bhatt asked.
And while all fraud is worrisome, Carol Bullion-Mincy, the business development specialist at Liberty Title Agency, said that mortgage payoff fraud is the scariest.
“Mortgage payoffs are especially scary because you don’t know that they have taken anything something until one or two months later and you’ve got the seller who still have a mortgage open on the property they sold and they haven’t been paying the mortgage for months because they don’t own it anymore and now their credit is dropping hundreds of points,” Bullion-Mincy said.
In order to prevent this, and other types of frauds, experts told attendees to train their employees on proper email security, make sure they are verifying requests and to stay on top of their cyber security by employee things like multi-factor authentication, using secure internet servers and properly secured devices for all business communications.
While the real estate industry is optimistic about integrating new technologies, including artificial intelligence, into home sale transaction workflows, Bullion-Mincy and Lakhani-Bhatt warned that new technology also brings new opportunities for fraudsters.
“This is my 40th year in the title industry,” Bullion-Mincy said. “When I first got into the business we were still doing closing statements with that running tabulators and calculators and throughout the years technology has improved so many things but with that technology come threats. The first group of threats we saw were over fraudulent cashier’s checks, so then we ushered in good funds and wire transfers and now we have wire fraud.”
For many in the title industry, the concern over the impact new payment rails could have on fraud is currently top of mind, thanks to the proliferation of real time payments (RTP) and the upcoming launch of the Federal Reserve’s new instant payment rail FedNow in July.
While wire transfers can only occur during specific business hours and they can sometimes take days to appear in an account, RTP and FedNow are not restricted to a certain timeframe and they are more or less instant. Although this is great news for those who want to close on a weekend or after business hours, many are concerned that the speed of the transfers will result in more fraud, or at the very least make it harder to recall funds that were sent to a fraudulent account.
However, Richard Booth, the senior product manager and vice president of KeyBank, which sends RTP, sees things differently.
“When a request for money to be disbursed gets to your bank, the bank does an OFAC fraud check, a balance limit check and account validation,” Booth told NS3 attendees. “If anyone of those is triggered, that payment is not going out the door and the sender will be asked to review it.”
Booth also highlighted RTP’s “request for payment” feature, which allows one party in the transaction, such as the title company, to send the buyer a request for payment for something like their cash to close, as another way RTP could help thwart fraud.
“It eliminates the chance for fraudulent wiring instructions to be sent and it is a process consumers are more comfortable with,” Booth said.
Industry professionals, however, still have their concerns, including what happens if a bad actor infiltrates the transaction, sets up a fraudulent account that looks close enough to the title company’s account and scams a home buyer with a fraudulent request for payment. According to Booth, if this happens the bank that sent the fraudulent request would be liable for the lost funds.
“Banks have to go through the process to make sure they are an actual company, but if they get duped and a fake got past them, then sending bank would be liable,” Booth said.
While this new technology has increased concerns and the need for cyber security is not going away, Bullion-Mincy and Lakhani-Bhatt told attendees that the best defense against fraud are the industry professionals themselves.
“Everybody here multitasks, but when we multitask, what we don’t do is pay attention to the details and if you are on the phone, trying to send a text and then all of a sudden you open an email that says you won a free TV and they are in your computer,” Lakhani-Bhatt said. “Verify things and pay attention to the details. Put your mouse over the email and see if the address matches where it said it is coming from.”
