Historically, identity verification in a real estate transaction was not particularly challenging. Most transactions were centered within the local community with real estate agents, lenders and title companies knowing their clients and the houses they were buying.
Hard to get away with fraud when everyone remembers you played football for Central High, or you are married to your real estate agent’s niece. It was a small circle of trust.
Those days are long gone and with transactions moving with increasing frequency to online platforms, identity verification has become a title agent’s number one headache.
According to recent research released by LexisNexis in its LexisNexis True Cost of Fraud Study for Real Estate report, more than 90% of title agents ranked identity verification for online customers as their number one challenge.
The New Trend
One of the newest trends making identity verification even more problematic is synthetic identity theft. A synthetic identity is a fake identity created based on both real and made-up information. For instance, a fictional name attached to a real social security number, combined with a made-up birth date and a real mailing address. The idea from the fraudster’s perspective is to make enough of the information verifiable so that cursory checks are satisfied it is a real person, even though the combination of those things is fictional.
According to a recently released Experian White Paper, “Synthetic identities: getting real with customers,” the rise of synthetic identity theft is largely due to data breaches, with personally identifiable information records now being sold on the dark web. It gives the fraudsters access to names, addresses, SSNs, phone numbers, email addresses and credit card numbers, a veritable garden of ingredients to choose from to cook up an effective identity.
While much of the synthetic identity theft is conducted by sophisticated fraudsters, sometimes it is just a canny individual trying to slightly alter personal information to create a new identity for the purpose of creating a “clean” credit report so they can buy a house.
This is where a title agent can truly excel at ferreting out a synthetic identity issue. Title agents are by nature suspicious. Agents can identify altered deeds, falsified documents, forged signatures, and fake employment details. They are highly trained to discover customers who have multiple aliases, such as multiple spellings, nicknames, and former married names, to track possible nefarious intentions in the transaction process. Their intuitive sense that “things aren’t adding up” is honed to the nth degree.
Online transactions have made this harder, of course. Title agents may find themselves in situations where they are accepting more orders at arm’s length – that is issuing title policies or conducting closings with far less personal contact.
In these situations, title agents need to double down on their vigilance, including:
- Work with trustworthy companies who you know are vetting their buyers and borrowers
- Employ technology that can quickly red-flag dubious data
- Make sure all your employees are trained to identify questionable situations
- Have a defined pathway for employees to report issues
- Train managers and give them the authority to respond quickly and decisively
Certainly, most of the responsibility for ferreting out synthetic identity fraud is going to fall on the shoulders of the lenders. But title agents are often the last stopgap for a fraudulent real estate deal and can be a huge force in preventing these deals from ever being consummated.
At Premier One, we are dedicated to keeping your agency secure. Contact us to learn how our expertise in the title insurance industry can help you manage all your cybersecurity issues.