Pioneering a new industry - Settlement Agent Risk Mitigation

Called the “number one white-collar crime in America” by the FBI, more than $11 billion in real estate lending-related claims were reported in 2017, resulting in $4+ billion dollars in actual losses. In addition to fraud committed by closing agents, the annual 12%+1 rise in fraud activity is exacerbated by cyber criminals’ ever-inventive data breach techniques. In addition, the FBI has reported more than $26 billion in wire fraud losses in the past three years affecting banks and mortgage lenders.

Put simply: Lenders, who deliver more than $3 trillion dollars in mortgage proceeds into the hands of people they do not meet and hardly know, are at the ongoing mercy of digital hacks as well as closing agents who control and supervise lenders’ money through the entire disbursement process, including the execution and delivery of the deed, note, and mortgage instruments.

While the vast majority of closing agents are trustworthy, today’s surge in mortgage fraud can be traced to a few gaping holes in industry standards and vetting processes:

Licensing, in theory a mark of dependability, is not foolproof risk management. There is no license that spans all parties that handle funds and documents at a closing. This includes (depending upon the state or region) lawyers, escrow officers, title agents, mobile notaries, closers, and realtors.

Closing Protection Letters (in some states known as the insured closing letter) issued by title underwriters have long been perceived as an added line of defense for lenders. But while these letters look and smell like insurance products, they are not, in fact, insurance. Furthermore, there is no national standard for issuing Closing Protection Letters, which are typically issued by title agents. Because of business relationships with settlement attorneys and others involved in the transaction, title agents often face a conflict of interest when evaluating closing agents’ credentials.

The little vetting that does occur by title underwriters and some banks is primarily static and one-time, focused on entities and historically involves no data sharing.

All of this adds up to a sobering reality: In the absence of proper monitoring, lenders are vulnerable. They lack the vast resources needed to evaluate the experience, trustworthiness, and reliability of agents who handle funds and documents at a closing.

This began to change in 2012, when, in the wake of the upward trend in mortgage fraud, federal regulation was passed requiring lenders to show evidence of closing agent risk management. These requirements, which were previously mere recommendations, mandate that all attorneys, title agents, escrow agents, notaries, and anyone conducting closing functions or handling consumer personal information must be checked for risk. Furthermore, these individuals must be monitored for any changes in risk.

Overnight, the onus was on third-party services to deliver more airtight and thorough monitoring and reporting than in years past.

Up until this point, monitoring lagged dramatically behind the uptick in fraud. Title underwriters, who were primarily self-insured, had watched claims rise and profits dwindle. Lawsuits by lenders and consumers stacked up at courthouses around the country. In theory, the new legislation would remedy this. However, the subjective nature of monitoring changes in risk detail is worth noting. To this day, many risk management firms not only limit checks to wire fraud; they only conduct said checks once a year. Even more, they rely on lender clients to collect and provide the information necessary for monitoring. In an age where a profile can go bad overnight, both depth and real-time reporting are the marks of sufficient monitoring – yet are largely missing from the industry method and standard that is also strangely labor-intensive for lenders.

Cue Secure Insight.

Secure Insight’s unprecedented take on monitoring pioneered a new industry - Settlement Agent Risk Mitigation. It involves three key steps:

1

Comprehensive risk evaluation

2

Risk rating

3

Ongoing monitoring and live reporting

In less than ten years of abiding by these standards, Secure Insight has cemented itself as the most comprehensive mortgage fraud risk prevention solution in the industry.

70,000

Closing Agents
in our database

150,000

Trust Accounts Verified

We meet all risk management requirements for third-party vetting of vendor relationships as outlined by federal regulators, GSEs, and government watchdogs: CFPB, OCC, HUD, FDIC, Fannie Mae, Freddie Mac, and the National Credit Union Administration. We also help lenders meet their cyber risk requirements as outlined in state laws and regulations such as those recently passed in California and New York.

Whereas industry peers have shelf lives on data, updating information on account anniversaries or annual re-up dates only, Secure Insight’s news crawlers never sleep. They constantly scan closing agents’ public data for everything from insurance to expirations. This not only benefits lenders, but the closing agents registered with us. Secure Insight notifies closing agents when anything in their data or profile is amiss or due, including the need to re-up insurance, annual fees, or handle other critical aspects of their licensure or business.

The Secure Insight database encompasses 70,000 closing agents (growing every day!) in all 50 states, Puerto Rico, and the U.S. Virgin Islands. This vast and constantly updated database allows Secure Insight bank and lending clients to run a full fraud analysis case report within seconds on 93% of their closing agents.2

Secure Insight has verified over 150,000 trust accounts and protected more than nine million residential mortgage transactions to date. Since 2012, Secure Insight’s proprietary solution has been utilized to support lending operations in all 50 states with $0 loan loss claims reported from closing table or wire fraud.

1. ^ 2018 Mortgage Fraud Report published by CoreLogic

2. ^ Information based on an internal client activity audit of monthly closing agent inquiries. Updated April 2020