During The Property Records Industry Association’s Annual Conference in Cleveland, a panel of speakers from across the recording industry spoke about how they are working to combat deed theft.
Red flags to look out for
Paul Clifford, founder of HopDox, addressed some of the schemes and red flags that are out there. He noted that ownership of Graceland was disputed earlier this year because a fraudster recorded a deed of trust on the property and then sought to foreclose on the deed.
“We’re also seeing a rise of people getting tricked with recording assignments,” he said. “How do you know when an interest goes from one lender to another? How do you verify it? How do you validate it?”
Clifford said another scheme that is increasing is a fraudster going to the secretary of state, filing a statement of information to change the officers of a corporation, get a certificate of good standing, then assume and try to sell the property.
John Dyer, President of Nova Title Agency, talks to Realtor groups about seller impersonation fraud, informing them of red flags, such as if someone wants to control the notarization of their transaction, or only use text or email to communicate with the Realtor.
He gave an example where a woman said she inherited property as the sole heir. When they googled the deceased, they learned the deceased had a daughter and a son. The son was in jail and the woman was lying on the form.
In another example, Dyer said an investor was taking title from an individual and the situation seemed odd. When they looked up the person transferring the title to the investor, that person was deceased. When they looked up the notary on the secretary of state website, the notary didn’t exist.
“That’s a real weed-out because a lot of these fraudulent items, it’s just a fake notary, somebody with a rubber stamp,” he said. “I’ve notarized thousands and thousands of documents, as most title agents have. The vigilance just has to be across the board and it’s a collaboration and we in the title industry appreciate the difficult job [the recorders] have.”
As general counsel of Erie Title, Monica Russel remembers a claim she litigated where an abandoned car dealership was titled to an LLC and somebody went to the Ohio Secretary of State, reinstated the LLC, made up corporate documents and sold the property to an adjacent owner, who was the insured. A couple weeks later, the buyers received a letter from the prior owner’s family informing them the property was not theirs.
Russel noted her company has added tools to combat fraud as the years have gone on. Now when they open a file, they verify the identification of their parties using Closinglock, though there are other providers. Closinglock verifies the ID provided by the parties is legitimate and uses information like their date of birth and Social Security number to further confirm their identity.
“We do that at the outset of the transaction to make sure we’re dealing with the correct people,” Russel said. “Then, of course, at closing, we use our own notaries. We make sure we maintain control over the notary process and our notaries are physically checking those identifications at closing when they’re signing their documents. We have multiple steps we take to make sure we have the proper parties.”
Vendors adapt to threats
During the presentation, Jerry Lewallen, Chief Strategy Officer of eRecording Partners Network, reflected how things have changed since the days of the pandemic, when eRecording vendors were getting calls asking to open up access to their eRecording platforms. Now, they are being asked to be more selective.
Jana Miyasaki, Operations Manager of CSC, agreed.
“Gone are the days where sales would send a contract over and we’d all say, ‘Yay, sign them up, set up an account, let them start eRecording,” she said. “I think each one of the eRecording vendors now has a pretty standard and strict vetting process.”
Miyasaki said if a customer doesn’t pass that initial verification checklist, they do another check. If they don’t pass that, CSC doesn’t allow them to eRecord. If they pass initial vetting, “Then they have to demonstrate they have a need to eRecord,” she stated.
“What types of documents have they recorded? We really are trying to put some good measures around access to eRecording, and make sure they’re fully vetted before we open them up to [recorders] to be able to record their documents,” Miyasaki added.
Bryan Young, Director of Product Management at ICE Mortgage Technology, said Simplifile starts out with automated checks, asking a verification company to return an identity confidence score. Scores below a certain threshold trigger another level of verification.
“Also from an eRecording vendor standpoint, each submitter has a contractual relationship with the vendor that they are using, meaning they had to sign a contract,” Lewallen said. “Part of the review of that contract is the vetting process. We also have an electronic record of who submitted that document and when and where from and we have that information stored. That information doesn’t exist for someone who walked into your counter or for someone who submitted a package via FedEx or UPS.”
Clifford reflected that when Hopdox started 25 years ago, they knew everybody that submitted because they were in their office.
“You vetted them because you are on the spot in their office, seeing what they do and nobody really slipped through for the first 10 or 15 years,” he said. “Then eRecording started to really catch on and it became nationwide. Lots and lots of people began calling, going to the website, trying to sign up remotely. Then all of a sudden, you get COVID hitting and this onslaught happens. So, I can understand where there’d be some gaps in security, but there’s always been that vetting process. I think it’s gotten better, way better, to the point where if we can’t verify you, you are not going to record. It doesn’t mean it’s going to be perfect, but you can see how this has evolved over time.”
New tools
Ryan Marshall, CEO of Equity Protect, shared about how his product seeks to help prevent fraudulent deeds from being recorded.
“What we designed was something that is brand new to the industry called a notice to restrict voluntary conveyance,” he said. “What the document does is put the current property owner in a creditor position in their own asset and any subsequent transaction from that point forward requires them to either subordinate or terminate that document.”
He said the technology was very similar to the Mortgage Electronic Recording Systems Inc. (MERS) technology.
“Anytime somebody comes in and out of our ecosystem, there’s a real time mechanism, with biometric authentication, where we can effectively transfer these liens to and from certain parties with the direct approval from the lawful homeowner at the time that they want to make that transaction,” Marshall stated.
“Our first pitch was to stop the financial crime from occurring because we didn’t want to prevent somebody from reporting a quitclaim deed or changing something into a trust,” he continued. “Some of the people that we’ve talked to in the past have, you know you have somebody that’s trying to take a move on an elderly parent or something like that, which we see frequently, which is elder abuse. What we’ve done is we’ve actually developed a brand new specialty insurance line that actually covers off the duty to defend, plus the cost to restore title quickly, by a title action in addition to if somebody did modify the property, then we would actually restore the property to its current condition. We also guard off a settler or trespasser.”
ePN is part of the Old Republic Title Tech family of companies. This article has been reposted with permission from The Legal Description. You can read the original article here.