ALTA is pleased to announce new and associate members, as well as real estate attorneys, who have recently joined ALTA. Over the past month, ALTA gained 59 new members, including 41 title agencies and six real estate attorneys. ALTA has 6,052 member companies so far in 2023.
Ask any title professional what you do, and you’ll hear a consistent theme: ensure a great closing experience for our clients. But the factors leading up to a great closing have changed significantly in the last several years.
Title agencies play a critical role in the commercial and residential property markets as they serve as the trusted party that ensures the transfer of clear and marketable title from seller to buyer. They also serve to protect mortgage lenders that require the assurances of first lien positions after new mortgage loans are funded. This process involves special skills, an understanding of the public records system and meticulous attention to detail. Now, title agencies are leveraging their transactional knowledge and expertise to manage a new threat to the great closing experience they are committed to providing: protecting their customers from fraud.
The recent rise in seller impersonation fraud is the latest example of this. Seller impersonation fraud occurs when scammers pretend to be the rightful property owner and hire a real estate agent to sell the property, diverting funds to fraudulent accounts after the closing. This trend began as a simple scam a few years ago. Bad actors were looking for the quick sale of vacant lots priced in the tens of thousands range. That was just the beginning, or the low hanging fruit as they say.
Fast forward to today, seller impersonation has now been perfected by scammers working together on what appears to be a nationally coordinated effort. The potential to harvest large sums of money has attracted the resources of organized crime syndicates. They’re increasingly emboldened and they are targeting higher value properties. In the case of a property owner in Connecticut, the fraud was only discovered months later when a $1.5M home was being built on their land.
What lessons should we be taking from the seller impersonation scams that are spreading across the country?
Fraud Isn’t Going Away Any Time Soon
Let’s face it. Real estate transactions are perfect targets for cybercriminals. They combine large sums of money, are easy to identify due to the open public records databases and have limited consumer awareness. The result? More stolen funds every year, to the tune of $446 million in 2022 according to a recent advisory by the FBI.
The entire system of property changing hands in the U.S. involves so many parties. That means not only complexity for the consumer, but also the potential for obfuscation of red flags; lack of responsibility for preventative measures; and lack of liability when things go wrong. That is evident from the recent case of a property owner in Arizona whose land was sold to an imposter.
Fraud Isn’t Simple
Be prepared for any and every tactic to be circumvented. For example:
Requiring an ID card is a great step. Guess what? Fake IDs cards aren’t that difficult to obtain. In fact it’s as simple as visiting a supermarket kiosk in some states, where scammers can generate state-issued drivers licenses or change the addresses on licenses with just a few pieces of information on the victim.
Requiring a video conference call to match an ID holder with the document is also useful. But, we have seen examples of bold fraudsters show up and get validated with the fake ID.
Requesting a property tax record is a great idea. Be aware that the address can sometimes be changed in the public record without knowledge by the owner.
Overnighting checks prevent you from wiring money to a fraudulent account. But how do know you are even dealing with the rightful seller in the first place?
The key is to incorporate multiple layers of protection into your strategy. This resource from ALTA does a great job of outlining the key steps you should consider in the case of preventing seller impersonation.
Fraud Can’t Be Fought Alone
It will be a persistent, maybe even forever, threat that requires multiple layers of protection. Today it’s seller impersonation. Tomorrow it’s payoff fraud involving lender impersonation. The next day it could be buyer fraud or other new scams.
The only way to stop fraudsters is to become too difficult or expensive for them to attack. That means addressing the key choke points: verifying identity and other key details before any money changes hands. Invest in fraud prevention across your people, process, and technology so that when the fraud attempts come at you—and they will continue to come—they have less chance of finding an entry point.
These developments are part of the new normal of the title industry. Criminals are using the latest technology to improve the sophistication of their impersonation and scale of their attacks. You’ll need to find technology of your own to meet that challenge.
ALTA recently recognized this in the updated Best Practices Pillar II. According to Diane Tomb, CEO of ALTA, "We’ve made huge strides in awareness on wire fraud. Now, in addition to providing resources and education, we’ve codified the use of wire verification services as an industry best practice.”
It’s a lonely road for a title professional who is expected to be the last line of defense without the right help and support. Leverage the Best Practices provided by ALTA and lean on resources like CertifID in your fight against fraud.
Tom Cronkright is co-founder and CEO of CertifID. He can be reached at [email protected].
Sylvia Smith Turk, division president for Stewart Title Co., provided a presentation on Non-Title Recorded Agreements for Personal Services (NTRAPS) during the National Association of Insurance Commissioner’s Summer National Meeting on Aug. 14 in Seattle.
Turk, a former member of ALTA's Board of Governors, provided the NAIC’s Title Insurance Task Force background information about NTRAPS, and explained their impact on consumers and title companies. She also shared the model legislative bill ALTA helped develop and legislative activity at the state level.
“The presentation went very well. Eric Dunning (chair of the Title Insurance Task Force) was very gracious and many of the regulators seemed surprised we would take on something like this,” Turk said. “I informed the regulators that we value protecting consumers, and all the curative work title professionals perform helps reduce risk to homeowners.”
States that have passed versions of bills that address NTRAPS include Alabama, Colorado, Florida, Georgia, Idaho, Illinois, Iowa, Maine, Maryland, Nevada, North Dakota, Ohio, Tennessee, Utah and Washington.
ALTA member company TitlePlus! will handle transactions of low-income homebuyers purchasing single-family homes from a non-profit corporation established by the City of Bloomington, Ind.
Morrie Erickson, owner and president of TitlePlus!, said the project consists of about 50 lots. The homes will be prefabricated at a manufacturing facility and assembled on the lots, making the cost and delivery time predictable.
Eligibility will be based on a formula that considers the appraised value and a buyer’s income. The city will own each lot and lease them to buyers, who will own the improvements—including the residence—on the lot, according to Erickson.
The buyer will be required to maintain the property to a certain standard or the city or its nonprofit may intervene.
“If the buyer wishes to sell, the city will have a right-of-first-refusal or option to purchase so it can convey the residence to a qualified buyer on a waiting list who will receive an assignment of the leasehold and a deed to the improvements,” Erickson said.
Share Your Story
We love to hear examples like this and want to highlight other efforts as well. Even if it’s a closing fee discount to first-time homebuyers, we want to know! Share your initiatives at [email protected].
Recently Daily Mortgage News’ Chrisman Commentary amplified inaccurate assertions about title insurance. Below are the facts that undercut the false claims.
Myth: Title insurance is “seriously overpriced.”
Fact: While other forms of insurance have seen rate increases in recent years, the cost of title insurance coverage actually decreased 7.8% nationally since 2004 and roughly 5% from 2019 to 2021, based on recent industry financial statements. For title insurance, a homebuyer only needs to pay a one-time fee at closing, which is about .5% of the purchase price of a home.
It is critical to understand the difference between an owner’s policy of title insurance and a lender’s policy. A lender’s policy protects against claims that may affect the lender’s loan and does not protect the owner’s property rights, which is why title professionals recommend that consumers purchase an owner’s policy to protect one of life’s greatest investments.
Without title insurance, homeowners are not protected from a devastating financial loss – sometimes in the tens of thousands of dollars – that may result from a title defect, a tax lien, an undisclosed easement, fraud, or forgery. Importantly, title insurance also covers legal fees and court costs to defend a consumer’s property rights if a legal dispute arises. This means that title companies will fight for homeowners to stay in their homes for no additional cost.
In approximately half of the states, the seller helps pay for title insurance in some form – whether the seller splits costs with the homebuyer or pays for the owner’s policy fully, with just a nominal cost to the homebuyer for lender title policy coverage. Title insurance companies also offer numerous methods to reduce the cost of title insurance – including a discount when the owner’s and lender’s policies are issued simultaneously.
When a homeowner refinances, they are also required to purchase a lender’s policy of title insurance on a new loan. In the time period between the purchase of a house and refinancing, problems could have arisen that the lender must know about before approving a new loan, such as a lien from a contractor or a judgment on the house due to unpaid taxes. A new lender’s policy is necessary when refinancing to protect the lender, but most title insurance companies offer discounted refinance rates to reduce the cost.
Myth: Title insurance companies have “fat profits” because they pay out so few claims.
Fact: Title insurance is fundamentally different than other insurance products. Unlike other insurance products where most of the upfront cost is marketing, for title insurance, significant upfront expenses are related to conducting public records searches, examination, and rectifying problems found. The work of title insurance professionals is to not only prevent claims from being made, but also to provide coverage if a defect arises. Claim prevention is paramount because a claim on someone’s property can be devastating and costly, and it would not be resolved by simply receiving a check. Low claims rates means that the title professionals did their jobs properly at the outset.
Importantly, title insurance also protects against “unknown” risks that are not found in a public records search – such as federal tax liens, HOA liens, and fraud or forgery of title documents. That is why much of the cost/expense goes toward paying expert title professionals to review title and correct any issues before issuing a title insurance policy.
It is the title insurance company’s willingness to stand behind this work – even if the defect originated in faulty public records or was unknown – that provides lenders with confidence that they have a first lien mortgage, and homeowners with peace of mind that their property is truly theirs.
Myth: In Iowa, title insurance “costs $175 for home purchases up to $750,000” compared to “$1,400 to $2,700 for the median home” in the rest of the country.
Fact: The current government-operated system in Iowa is often cited as an alternative to traditional title insurance. However, while the cost for title insurance in Iowa can be lower than rates in some other states, comparing title insurance in Iowa and title insurance in other states is comparing apples to oranges.
In Iowa, title insurance costs do not reflect all the necessary costs that are normally included to produce a title insurance policy. The total cost that consumers pay for title searches, examinations, and clearing of any title problems in Iowa do not differ substantially from other states. In 2021, Iowa’s total closing costs were higher than 12 other states.
For years, there has been a deeply held misconception that claims leaders and managers are opposites, often painting managerial roles in a bad light. A Forbes article proposes doing away with this leader vs. manager comparison, as managers must also possess crucial leadership skills to work effectively with employees and positively influence how they feel, behave, and perform in the workplace.
This applies to every organization, including title agencies, where managers must lead employees to deliver optimal service to clients and contribute to overall business growth. But just like any manager in any industry, title agency managers face key leadership challenges that ultimately affect employee engagement and business decisions. Here’s how to address some of them.
Undergo Coaching and Training
Having to lead employees through constant change — such as shifting policies for processing titles and documents or new clients and realtors — can quickly take its toll on the well-being of title agency managers. When this happens, managers can benefit from undergoing training and coaching themselves.
In this light, a Human Resource Executive article explains how in-house human resources professionals can step in and provide updated resources that not only touch on workflow and productivity concerns but also allow managers to acquire soft skills like change management and trust building. Managers who are resilient and equipped to take on uncertainties are less likely to experience burnout while also inspiring employees to adapt successfully to organizational changes.
Learn Project Management to Improve Productivity
Another common leadership challenge in the title business is achieving and maintaining productivity, considering this is a fast-paced industry with lengthy closing cycles and uncertain mortgage market conditions. In such cases, title agency managers can adapt skills from project management to plan effectively, meet deadlines, and deliver stellar results.
To illustrate, the essential skills of project managers include the ability to delegate tasks, create synergy, and communicate priorities among team members. Since project managers also utilize each member's strengths and keep them motivated throughout the project cycle, title agency managers can apply this to their own leadership style through project-based approaches like resource management for allocating labor and resources and critical path planning for adhering to a set timeline.
Consider Sponsorship for Talent Development
A crucial part of being a manager is helping employees with their potential for growth and career advancement. In the title business, this means guiding agents in updating their skills, competencies, and certifications for more outstanding qualifications and performance.
While mentorship can provide employees with the support and motivation they need, an opinion article from Housing Wire sets forth the idea of sponsorship for boosting career opportunities like scholarships and participation in conferences. Sponsorship also takes on a more pivotal role by driving broader progress in diversity, equity, and inclusion — mainly by giving deserving people visibility and credibility regardless of age, gender, culture, and work style.
Practice Giving FeedbackLastly, title agency managers may also struggle with conflict resolution between team members or between themselves and an employee. This can happen when the team is juggling too many clients at once or when the business is pressured to generate new clients in an otherwise competitive market.
As previously discussed in a post about leadership skills for title agency managers, there is value in knowing how to give constructive feedback without discouraging employees and hurting overall team morale. The BIG model, in particular, teaches managers how to balance motivation and discipline by commending employees on their performance first, then pointing out what can be improved and how to move forward from the conflict.
Overall, title agency managers encounter numerous leadership challenges while carrying out their roles. These challenges may range from internal pressures to external conflicts, but what matters is they take on the challenge to adjust, communicate well, and constantly strive for improvement.
Grace Collins is a business and financial blogger. She provided this content exclusively to ALTA. Send feedback to [email protected].
Oregon joined 12 other states to pass a comprehensive data privacy law. Gov. Tina Kotek signed the Oregon Consumer Privacy Act (OCPA) into law on July 18. It goes into effect July 1, 2024.
Oregon’s legislation is modeled on the Virginia Consumer Data Protection Act (VCDPA).
The act contains an exemption for personal data subject to the Gramm-Leach-Bliley Act (GLBA), along with an exemption for publicly available information. ALTA has held that any comprehensive data privacy legislation should include an exemption for entities subject to the GLBA. Since 1999, this federal law has strictly limited financial institutions’ use and sharing of customers’ personal information. Additionally, financial institutions are required to assure the security of this information and provide comprehensive disclosures to consumers. Click here to view ALTA’s principles for data privacy laws.
OCPA applies to businesses that conduct business in Oregon or provide products and services to residents of Oregon. It also applies to business that control or process the personal data of either of the following:
Consumers and/or devices linked to consumers numbering 100,000 or more, other than personal data controlled or processed solely for the purpose of completing payment transactions.
Consumers numbering 25,000 or more, while deriving 25% or more of the business’s annual gross revenues from selling personal data.
There is no revenue threshold or small business carveout. Like Virginia, the OCPA does not include B2B or employee data.
ALTA is pleased to announce new and associate members, as well as real estate attorneys, who have recently joined ALTA. Over the past month, ALTA gained 48 new members, including 23 title agencies and 10 real estate attorneys. ALTA already has 5,879 member companies so far in 2023. Not a member? Click here to join today. You can check out member benefits here.
It's been one of the hottest topics of 2023 so far. Its potential is staggering. Every day seems to bring to light another, previously undiscovered nuance to its capabilities. Its emergence is likely one of the rare occurrences where “game changing” isn’t just advertising language. Of course, we’re talking about ChatGPT and its cousins, such as Google Bard. Their arrival represents a new level for a technology we’ve been speculating about and anticipating since the 1984 movie The Terminator.
Artificial Intelligence (AI), that is.
While it’s highly likely AI will not be seeking world domination or even terminating existing jobs for the foreseeable future (more on that later), it has actually been helping the title industry for a few years now. And it is, indeed, changing the game for an industry that has long relied on manual processes to address simple tasks.
Just for fun, I asked ChatGPT itself what it is and how it believes it will impact the title industry. If you do the same, it will tell you (depending upon the way you ask the question) something like this:
“ChatGPT is a large language model developed by OpenAI that uses machine learning algorithms to generate human-like responses to a wide range of prompts. It can understand the nuances of human language and respond to queries in a natural, conversational tone. As a result, ChatGPT has the potential to revolutionize the way title insurance companies operate.”
ChatGPT also shared that it has the potential to automate many previously manual processes. That would include underwriting, risk assessment and management and, naturally, communications and customer service. In fact, multiple AI-powered technologies have already come online, so to speak, for title agents. That’s been the case for two or three years, in fact.
So have those applications learned enough yet to open their own title agencies? Well, no. And they probably never will. But they are facilitating faster, more effective service; more efficient workflows and, best of all, a workforce emancipated to focus on much more important things than keying data from faxes, emails, texts and voice mails into production systems.
Right now, multiple AI technologies on the market are helping title-related businesses with everything from simple client communications (e.g. “Don’t forget your closing is at 8 a.m. on Thursday.”) to complex, two-way conversations initiated by a marketing message. AI can be used to open new orders much more efficiently than before. They can also extract data from all forms of communication and quickly input it into production systems or other applications. AI technologies can securely seek and collect data needed to help process a transaction. All of this is done without the requirement of a human being picking up the phone, typing an email or transferring data via a computer keyboard, one key at a time. This, in turn, frees that employee to do something even more productive, like, for example, advanced quality control—or picking up that same phone to call a hot prospect.
AI is already helping title and settlement services firms absorb and resolve, to different levels, common client inquiries (“What do I bring to closing? Is a personal check OK?”). This isn’t just relaying pre-populated reminders. Today, AI technology is helping title agents to answer questions and resolve multi-layered inquiries via conversation.
All without an employee having to step in.
However, AI hasn’t even come close to reaching the apex of its potential yet. For example, while we can train AI applications and even program them to learn on their own, they’re still not quite able to answer questions requiring complex inference or a nuanced understanding of language. You’ve probably experienced this with some of the more complicated inquiries you may have posed to AI prototypes, Alexa or Siri.
Another thing that AI cannot yet do is be innovative or create. This is a major reason why the myth that “AI is coming for our jobs” remains a falsehood. If anything, AI applications empower owners and employers to redeploy all of the employees (and labor hours) wasted staring and comparing or rekeying simple data. This has long been an issue for our industry for any number of reasons, and AI’s arrival should only continue to open up human resources for more complex and innovative purposes.
Finally, like any other technology before it—and likely after it as well—AI will only perform as well as the quality (or potential biases) programmed into it. The old saying “garbage in, garbage out” is particularly relevant here. Any inherent biases programmed into AI technology will eventually lead to some level of incorrect or biased result. AI is a complex tapestry of myriad algorithms, not a robotic brain of some sort. It is only as “smart” as the data it is provided, and the way it is programmed. At least, for now, your AI application will not be able to think outside of the proverbial box.
But it will take the boring, repetitive tasks off of your employees’ desks and give them more time to do just that. All indications are that we are moving towards a world where AI-supports humans in what they do at work, rather than replacing (or terminating) them. If anything, it will take a service-based industry that spends an inordinate amount of time with its head down doing data entry or email and enable it to provide even greater levels of service or ideate creative new business ideas.
Hoyt Mann is co-founder and president of alanna.ai, a conversational AI assistant which elevates the operational efficiencies of title agents while upgrading their customer service. He is a tech evangelist and title industry veteran who has served the industry for over 20 years, including key roles with RamQuest Software and PhaseWare, before helping to found alanna.ai. He can be reached at [email protected].
Delaware joined a growing list of states to pass comprehensive data privacy laws in 2023.
On June 30, the Delaware legislature passed the Personal Data Privacy Act. The bill, which awaits the governor’s signature, goes into effect Jan. 1, 2025. Other states to pass comprehensive privacy legislation include California, Colorado, Connecticut, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah, Virginia and Washington.
Delaware’s bill is similar to the privacy laws passed in Colorado, Connecticut and Oregon in terms of having stronger privacy protections for consumer.
The bill contains a Gramm-Leach Bliley Act (GLBA) data and entity level exemptions, along with exemption for publicly available information. ALTA has held that any comprehensive data privacy legislation should include an exemption for entities subject to the GLBA. Since 1999, this federal law has strictly limited financial institutions’ use and sharing of customers’ personal information. Additionally, financial institutions are required to assure the security of this information and provide comprehensive disclosures to consumers. Click here to view ALTA’s principles for data privacy laws.
The act applies to entities that conduct business in Delaware that controlled or processed the personal data of more than 35,000 consumers or controlled or processed the personal data of more than 10,000 consumers if they make more than 20% of their gross revenue by selling personal data.
The bill requires Delaware Department of Justice to engage in public outreach to educate consumers and the business community about the act beginning at least six months prior to the effective date.