Mortgage fraud continues to be a major problem in the U.S. resulting in significant losses for title companies, lenders, homeowners and sellers. Even a single title insurance provider can experience losses in the millions each year due to fraudulent activity. According to the American Land Title Association (ALTA), mortgage fraud “is one of the biggest threats in the title industry.”*
The unfortunate reality is that criminals seek out vulnerabilities to exploit, and as market conditions change, they are able to adapt by coming up with new schemes or resorting to their old tricks. Sadly, the COVID-19 crisis has increased the opportunities for real estate fraud, and criminals can – and will – take advantage of the situation.
Concerns for Title Companies
Mortgage fraud has been around for decades, and the schemes criminals deploy run the gamut. Some of the more common activities include wire fraud, foreclosure rescue schemes, illegal property flipping and “equity skimming,” where false documents are used to establish a mortgage loan in a straw buyer’s name.
Another fraudulent scheme, and one which is of particular concern to the title insurance industry, is when a dishonest borrower applies for several loans concurrently on a single residential property, leading to multiple open title orders. If the loans close, and funds are transferred before this activity is detected, losses to title companies could be in the hundreds of thousands of dollars per incident.
Often referred to in the industry as order stacking, this particular scheme takes advantage of the gap in time between the closing date, and when the deed and mortgage are recorded with the county recorder’s office. During that gap, there is a “blind spot,” where title examiners have no visibility into whether or not a property has acquired other liens against it.
Mortgage and Deed Recordings Delays
Due to the COVID-19 pandemic and the need for social distancing, many county recorders are working with limited capacity. As a result, recording offices across the U.S. are likely experiencing delays in finalizing property records.
While it’s impossible to accurately say how many completed real estate transactions have not been recorded, the number is likely significant. And, unfortunately, this creates a sizeable opportunity for those seeking to commit fraud.
Uncovering Information Blind Spots
Clearly, it’s more critical than ever for title companies to have visibility into open orders on a property. The good news is that technology is currently available to help detect this type of activity. In fact, Black Knight’s TitlePoint® and iOnTitle® suite of solutions continuously monitors the chain of title on a property from the beginning of a title search until the transfer has been officially recorded at the county recorder’s office, reducing the risk of blind closings.
iOnTitle automatically sends notifications by email, as well as presents the notification in TitlePoint, Black Knight’s title production software, whenever another open order is identified prior to recording, so clients can take the appropriate action to reduce fraud. This allows real estate transactions to proceed with confidence, while county offices catch up with their recording backlog.
iOnTitle can also detect when a new recording creates a significant impact to the chain of title, such as Voluntary or Involuntary Liens, Conveyances and will continue to monitor the property until the re-conveyances are recorded.
A “Watchdog” to Help Guard Against Risk
iOnTitle is a proven solution used by many Black Knight clients across the U.S. not only to detect multiple open orders, but also to identify other situations that can result in claims and losses for a title company.
For example, iOnTitle automatically performs an initial screening for a suspicious legal description, vacant property or free-and-clear title, to provide visibility into properties that pose greater risk.
After the initial screening, iOnTitle monitors for fictitious deed or claims filings, multiple filings by parties to the transaction, new filings that were not disclosed, mechanics liens that suggest a change in property condition, last-minute tax liens, and more. The solution serves as a “watchdog” for title companies to help them continually mitigate risk and reduce claims.
Experience an Additional Level of Security
In an industry where a single real estate transaction has so many moving parts and includes exceptionally large sums of money, it’s no wonder fraud has been rampant over the years. iOnTitle is an important tool for title companies to help them prevent fraud at any time, but today’s circumstances make the insight this solution delivers more critical than ever.
With conditions today ripe for fraudulent real estate activity, title agents and those they serve must be armed to defend against such activity. When “blind” closings are an ever-increasing possibility, it’s crucial that title agents are not left in the dark. Black Knight’s iOnTitle can provide a clearer view into potential fraud schemes before, at and beyond closing.