A title agent’s diligence in Washington successfully prevented a fraudulent email request for the company to send a wire transfer.
Maureen Pfaff, general manager and chief financial officer for Olympic Peninsula Title Co., recently received a random email requesting the company wire nearly $11,000 to a TD Bank in Florida.
Pfaff said she knew immediately the email was fraudulent because the message came from her father, who wouldn’t make a request like this via email.
“Additionally, the formality of the email and signing it the way they did was a dead giveaway,” Pfaff said.
Realizing it was a scam, Pfaff strung the criminal along, eventually sending something encrypted so she could get an IP address to include in the complaint filed with the FBI. Pfaff created a fake wire transfer notification in an encrypted email, which generated a report when opened.
Pfaff said this was the third fraud attempt the company has experienced in the past six months.
“They’ve all been different strategies,” she added.
Title professionals who receive these types of emails should report the incident to the FBI’s Internet Crime Complaint Center, which is used to track trends in criminal activity.
Below are some of the emails between Pfaff and the fraudster (click to enlarge the image):
Criminals use various tricks to obtain information and money. Here are several other schemes title professionals should be aware of that are being used by criminals:
Identity theft victims can now go online and get a free, personalized identity theft recovery plan as a result of significant enhancements to the Federal Trade Commission’s IdentityTheft.gov website.
The new website is integrated with the FTC’s consumer complaint system, allowing consumers who are victims of identity theft to file a complaint with the FTC and then get a personalized guide to recovery that helps streamline many of the steps involved.
In addition to IdentityTheft.gov and the new personal recovery plan features, the FTC also provides educational materials for businesses with information on how to prevent identity theft and remain vigilant for other scams.
In 2015, the FTC received over 490,000 consumer complaints about identity theft, representing a 47 percent increase over the prior year, and the Department of Justice estimates that 17.6 million Americans were victims of identity theft in 2014.
What can businesses do to help?
The third pillar of ALTA’s Title Insurance and Settlement Company Best Practices addresses policies and procedures for an appropriate information security program.
To learn more, register for ALTA’s Feb. 11 compliance webinar “Protecting Sensitive Customer Information: The Basics of Gramm-Leach-Bliley,” The Gramm-Leach-Bliley Act provides the basic legal framework governing title and settlement companies’ duty to protect their customers’ non-public personal information (NPI).
Several executives from Stewart Information Services including Matt Morris, chief executive officer, rang the opening bell on Jan. 29 for the New York Stock Exchange.
“We are honored to have had the opportunity to ring the iconic opening bell,” Morris said. “It was a great occasion for us to kick off 2016. This will be a year of continued momentum and growth, as well as a year of transformation with our recent governance changes. We will center our business on our customers and real estate partners to drive trusted real estate services delivered by our amazing associates who make it possible.”
Joining Morris on the podium were Thomas Apel, Stewart’s chairman of the board; Allen Berryman, chief financial officer; John Killea, chief legal officer; Ted C. Jones, chief economist; Nat Otis, director of investor relations; and Jennie Craig, vice president marketing programs and media relations.
Morris opened trading with the ringing of the bell at the 4:25 mark of the following video:
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The Financial Crimes Enforcement Network (FinCEN) has issued Geographic Targeting Orders requiring several title insurance underwriters to identify the names of individuals involved in shell companies and other legal entities that make all-cash purchases for high-end residential real estate in Manhattan, N.Y., and Miami-Dade County, Fla.
FinCEN is concerned that all-cash transactions in these areas are being used by individuals to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. To help mitigate this potential money-laundering vulnerability, FinCEN will require certain underwriters to identify and report the true “beneficial owner” behind a legal entity involved in certain high-end deals in these two areas. The reporting requirement also pertains to the underwriters’ subsidiaries and agents.
NPR interviewed ALTA CEO Michelle Korsmo about the order. Below is audio of NPR's article, which includes a portion of the interview with Korsmo. She can be heard at the 2:17 mark.
Transaction Requirements to File Report with FinCEN
Any underwriters that received the order must file a currency transaction report with FinCEN if these things occur:
The report must include:
If the purchase involved in the covered transaction is a limited liability company, the underwriter must provide the name, address and taxpayer identification number of all its members.
Additionally, covered title companies must retain all records relating to compliance with the order for five years, store the records so they are accessible with a reasonable period of time and make the data available to FinCEN or other law enforcement or regulatory agency, upon request.
The term of this order expires in 180 days, but FinCEN may indefinitely renew the order for another six months and for additional areas.
FinCEN said title insurance companies play a central role in real estate transactions and can provide valuable information about potential illegal activities.
“FinCEN appreciates the assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors,” FinCEN said in a release.
ALTA is actively assisting our members to comply with these reporting requirements. Korsmo said "ALTA looks forward to continuing its work with FinCEN as members implement the order to help prevent money laundering schemes and the illegal purchase of real estate in the United States. As the independent third-party at the closing table, ALTA members work to safeguard the real estate transaction for millions of Americans every year. Our work with FinCEN underscores ALTA members’ commitment to providing a compliant real estate settlement experience.”
ALTA has already submitted a letter to FinCEN’s director asking for several clarifications to promote consistency in reporting and help the industry better understand which transactions are covered by the order.
ALTA Seeks Clarification of Orders from FinCEN
ALTA proposes FinCEN adopt RESPA’s definition for “residential.” Industry familiarity with definitions and regulatory scheme provided by RESPA will help title companies identify transactions covered by the order.
ALTA recommends that the definition of “Legal Entity” exclude trusts. The order defines the term “Legal Entity” as a corporation, limited liability company, partnership or other similar business entity.” According to the letter, ALTA said that unlike a corporation, a trust is not considered a separate legal entity under the common law of various states. Adopting this recommendation will provide a definition consistent with those used by the industry for purposes of determining how to effectively transfer title.
ALTA also suggests that the definition of “agents” refer only to people or entities with a contractual relationship with the covered title company. State insurance laws require insurers to appoint agents via a specific written contract or authorization. This will help the insurers consistently determine which business partners they must educate and supervise to comply with the order.
“We urge FinCEN to use a reasonable and good-faith test for determining insurers’ compliance with this order,” ALTA wrote in its letter. “We believe the clarifications requested and joint education with the insurer and FinCEN, should ensure that all covered transactions that the insurer is aware of will be reported; however, even with the best efforts of title insurers, there may be transactions of which the insurer is not made aware.”
To aid compliance, title professionals are encouraged to have a better understanding of the types of customers they do business with. Real estate agents and attorneys should be resources to help gather information about corporate entities purchasing real estate.
The Federal Trade Commission (FTC) recently issued a consent order against Henry Schein Practice Solutions, Inc. (Schein), a software provider for dental practices, for allegedly marketing its software using deceptive assertions. The FTC fined Schein $250,000 for alleged false marketing advertisements related to the level of encryption the company provided to protect patient health data.
Schein advertised that its software provided industry-standard encryption methods to protect sensitive patient information as required by the Health Insurance Portability and Accountability Act (HIPPA). However, the FTC alleged that Schein was aware that its software did not comport to the Advanced Encryption Standard, which the National Institute of Standards and Technology (NIST) recognizes as the industry standard that meets the regulatory data encryption obligations under HIPPA. By failing to meet the encryption standards identified by the NIST, Schein was found to have misled patients about the level of protection its software provided.
The significant fine the FTC assessed for Schein’s deceptive marketing correlates with the type of data Schein was encrypting. “Strong encryption is critical for companies dealing with sensitive health information,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “If a company promises strong encryption, it should deliver it.”
The primary lesson that title insurance and settlement companies should take from this consent order is the importance of clearly and accurately identifying encryption methods. When marketing software qualifications or security, it is better to be specific about what the software is capable of doing instead of using puffery or broad statements. Implying that the services meet certain regulatory standards may be seen as deceptive, as Schein’s advertising was found by the FTC in this case.
Question: How do we address issues that come up during a walkthrough? For example, if the water heater is leaking and the parties want to escrow $1,000 for it to be repaired. Does the Closing Disclosure have to be revised and does the lender need to redisclose?
Answer: Prior to the consummation or closing, the Closing Disclosure should be updated with the best information reasonably available to the lender. If any issues arise from a walkthrough that require a monetary adjustment, the Closing Disclosure should be updated to reflect this adjustment prior to closing.
Although the walkthrough may necessitate a revised copy of the Closing Disclosure, the changes may not necessitate an additional three-day waiting period between delivery of the Closing Disclosure and closing. There are only three circumstances (§ 1026.19(f)(ii)) that trigger a new three-day waiting period:
This is why it is important to work with real estate partners to ensure those adjustments are sent to the lender and settlement agent as soon as possible after they come to light. While the change may not trigger a new three-day period, lenders may require a few hours to approve the change, determine its impact on the APR and update the disclosures.
ALTA created the Homebuyer Guide to help members easily communicate the benefit of owner’s title insurance. The Homebuyer Guide includes more than 60 marketing resources available for direct-to-consumer communication. These materials are available to members.
In this post, we focus on how you can use the various rack cards that are available. What is a rack card? These documents are used for advertising, frequently in convenience stores, hotels, restaurants, rest areas and other locations that get significant foot traffic. Rack cards typically have an appealing graphic design and are 4-by-9 inches in size.
ALTA has created three rack cards available to members to provide to consumers and real estate partners. Click here to view all the material available in the Homebuyer Guide.
How to Use: This rack card can be displayed in the closing office or real estate office, or be hand delivered when meeting with homebuyers. Below is the top of the front of this card:
How to Use: Real estate agents can use “The Homebuyer Checklist: 10 Steps to Buy Your Home with Confidence” PowerPoint in conjunction with this rack card. It can also be displayed in the real estate office. An example of the to half of the back of this rack card is below:
How to Use: Pin this to the company fridge, share it with a fellow title professional or use it as a guide for remembering the top three things you give homebuyers. Below is what the top of this marketing piece looks like:
The implementation of the CFPB’s Know Before You Owe regulation has brought up a number of questions regarding who is permitted to receive copies of closing documents, including the Closing Disclosure and alternate settlement statements, such as the ALTA Settlement Statements. It is important to note that the Know Before You Owe regulation did not implement any changes on data privacy; however, ALTA encourages title insurance and settlement companies to take this opportunity to review your company’s privacy policies to ensure they match your data-sharing practices.
Refresher on Governing Law
The Gramm-Leach-Bliley Act (GLBA) was passed in 1999 and remains the predominant authority on how to protect data. GLBA requires financial institutions, including title insurance companies and agents, to disclose their data-sharing practices to their customers and to safeguard private and sensitive customer information. To meet these new requirements, GLBA imposed three basic obligations:
The GLBA tasked the Federal Trade Commission (FTC) and other government agencies that regulate financial institutions to implement regulations to carry out the Act's financial privacy provisions. The CFPB is not included in the list of government agencies that regulate data privacy, and thus the implementation of the Know Before You Owe regulation did not affect the longstanding data-security requirements that title insurance companies and agents have been subject to.
With the implementation of GLBA, the FTC released guidance regarding the type of information companies should be safeguarding. The FTC is responsible for enforcing its Privacy of Consumer Financial Information Rule, which protects a consumer's "nonpublic personal information" (NPI). NPI is any "personally identifiable financial information" that a financial institution collects about an individual in connection with providing a financial product or service, unless that information is otherwise "publicly available. The Privacy Rule applies to ALTA members that provide real estate settlement services.
ALTA members should note that the FTC considers NPI to be any information obtained about an individual from a transaction involving a company’s services. This could include a person’s name, address, income, Social Security number or other information on an application. This also includes any information from court records or from a consumer report. The FTC said NPI does not include information that is believed to be lawfully made "publicly available." In other words, information is not NPI when steps have been taken to determine: (1) that the information is generally made lawfully available to the public; and (2) that the individual can direct that it not be made public and has not done so.
Applying Standards to Today’s Real Estate Transactions
The implementation of the CFPB’s Know Before You Owe regulation has required lenders, real estate settlement agents, and title insurance professionals to radically change the way they conduct business. The new regulation’s disclosure requirements have also generated a greater need to use additional settlement statements, such as ALTA’s model Settlement Statements, to ensure that settlement agents can continue to meet their state disclosure requirements. With the use of these new forms comes the question, “Who is allowed to receive a copy of the Closing Disclosure and settlement statement?”
The basic answer is that the Know Before You Owe regulation does not address who may or may not receive a copy of closing documents. Many lenders, however, are refusing to share a copy of the Closing Disclosure with real estate agents or other third parties. Additionally, some lenders are including provisions within their closing instructions that prohibit settlement agents from sharing the Closing Disclosure with third parties. These lenders are stating that the consumer may provide a copy of Closing Disclosure to real estate agents if he or she chooses.
A concern remains about how to get necessary information about the transaction to outside parties, including real estate agents, who need certain information to document their involvement in the transaction. One of the primary reasons real estate agents are interested in receiving the Closing Disclosure is because they have to report certain data fields to MLS to close the listing. These requirements vary by state, and there is not a uniform set of data fields that will satisfy MLS. Reporting these data fields is a requirement for participating in the MLS system, so it is crucial that real estate agent receive this information.
Settlement agents and title insurance professionals should contemplate the requirements and limitations of their privacy policies and contemplate whether any of these policies need to be revisited. The GLBA continues to set a strong standard for protecting NPI, despite going into effect 16 years ago. The ALTA Title Insurance and Settlement Company Best Practices reiterate the importance of privacy policies and include guidelines for companies to protect against data theft to help meet GLBA requirements. Pillar 3 of the ALTA Best Practices provides procedures on physical and network security of NPI, how to properly dispose of NPI, developing a disaster management plan, employee training to ensure compliance, and oversight of service providers.
When revisiting your privacy policies, consider the following questions:
After re-examining your privacy policies, you should compare these policies with your company’s data-sharing practices to ensure that you are only sharing information in conformity with your policies.
If your lender prohibits you from sharing the Closing Disclosure with third parties, you may consider using an alternative settlement statement, such as ALTA’s Settlement Statements, to document the transaction. The ALTA Settlement Statements were designed to be model forms based on the settlement statements that have been in use prior to the implementation of Know Before You Owe. These statements may be modified as appropriate to reflect the terms of the transaction and to prevent any disclosure of the buyer’s or seller’s NPI. Four versions of the ALTA Settlement Statement are available: the buyer statement, the seller statement, the combined statement, and a statement for cash transactions.
Lastly, if you plan on sharing a closing document, such as a settlement statement, to a third party, consider whether you are sharing any information that would be considered NPI under the FTC’s guidelines and whether you have met the GLBA’s requirements for sharing such data. Also consider why you feel the need to share this information and how you would anticipate your customer would feel about you sharing that information. By keeping GLBA requirements and ALTA Best Practices in mind as you adapt to the Know Before You Owe regulation, you can ensure that your customer remains protected and that you continue to have compliant real estate closings.
Compliance Webinar: What You Need to Know About Gramm-Leach-Bliley
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Question: We have been told by a couple of lenders that they would prepare a joint buyer and seller Closing Disclosure and deliver the same to both the buyer and seller for “signature.” Can the lender elect to take on the role of the settlement agent with regard to preparation and delivery of the Seller Closing Disclosure?
Answer: To comply with the TILA-RESPA Integrated Disclosures rule, both the buyer and seller must receive Closing Disclosures that provide details of the transaction. In sale transactions, the rule places the responsibility on the settlement agent to provide the seller with a Closing Disclosure relating to the seller’s transaction. See § 1026.19(f)(4). However, the rule also recognizes that in some instances the settlement agent may meet this obligation by either providing the seller with a seller-only Closing Disclosure or a combined buyer/seller Closing Disclosure. This can be done by either the lender or the settlement agent depending on the agreement between those parties. You should collaborate with your lender partners to determine who will prepare this document so you can ensure you meet your obligations under the Know Before You Owe regulation.
Similar to lenders being liable for delivery and accuracy of the buyer’s Closing Disclosure, settlement agents are liable for delivery and accuracy of the seller’s Closing Disclosure. If a lender decides to provide the seller’s Closing Disclosure, the settlement agent must be aware of this process and ensure accuracy.