Mitigating Fraud For Florida Title Company

Considering that Florida leads the nation in overall fraud and South Florida is number one in the country for mortgage fraud, learning how to mitigate fraud for your Florida title company is a smart idea. The major hurdle here is that despite the increase in digital records available from courthouses and other institutions, title companies operate in a largely decentralized industry. The nature of searches performed by your average Florida title company often calls for dealing with unlicensed individuals to gain access to specific documents. Additionally, the large transactions of escrow accounts — both in number and amount — creates opportunities for unsavory characters to commit title insurance fraud. hands working on tablet

Until the industry as a whole becomes more centralized and well-regulated, it’s a good idea to learn how to mitigate fraud and implement healthy practices that result in title fraud protection for your Florida title company. Performing an annual security checkup can be just what the doctor ordered.

3-Step Checkup for Title Fraud Protection

One of the most comprehensive documents on title fraud protection is Title Escrow Theft and Title Insurance Fraud from the National Association of Insurance Commissioners (NAIC). Overall, the NAIC reminds title companies that it is the responsibility of everyone involved in title and escrow procedures to minimize the threat of fraud and theft — from coworkers catching minor irregularities to underwriters performing agencywide audits.

Perform enhanced initial audits and investigations during licensing. Florida doesn’t possess many of the more stringent requirements for title insurance licensing that other states have. In fact, the state’s requirements are relatively lax. This leaves it up to Florida title companies to enact due diligence investigations that are more apt to turn up any past legal, regulatory or trustworthiness issues during a prospective agent’s licensing period. For inspiration, you may look toward the requirements enacted by other states with more strict licensing regulations such as requiring licensing with departments of insurance and financial institutions or requiring a separation of title insurance premiums from escrow settlement funds as separate fiduciary trust accounts.

Require escrow funds to be held in banks offering Positive Pay. Positive Pay is a fraud prevention system that is less time-consuming and expensive than hiring independent CPA audits for each of your escrow accounts (which is required by some states). Still, it achieves an equivalent level of fraud protection. Limit your bank interactions and licensees’ escrow funds to institutions that provide Positive Pay systems to help prevent home title fraud through forged, counterfeit and altered checks. Further, homebuyers are routinely encouraged to use Florida title companies that enact Positive Pay.

Under a Positive Pay system, your title insurance agent submits to the bank a daily list of checks your company has issued. When an attempt is made to cash the checks, the bank first matches each check’s dollar amount, check number and account number to the list of checks previously issued and authorized by your title company. Unless all three identifiers match, the check is not cleared and your company is notified. You can then investigate further or give authorization for the check to be cleared in the event a minor clerical error was made.

Educate your clients and customers about the process from start to finish. Although you have a good amount of control over the people you hire and the standards you practice, title company fraud can also stem from outside mistakes. Consider first-time homebuyers who have never even heard of a title company and are confused or overwhelmed by the entire process. They may be thinking of buying furniture or dreaming of starting a family when an official-looking email comes from what seems to be their realtor’s email address. Phishing, spoofed portals and social engineering aren’t always easy to detect when you’re a professional, let alone an underinformed consumer who is already overwhelmed with the buying process and relying on a number of strangers recommending them to even more strangers (e.g., builders to designers to lenders to title companies). By educating your clients, you can help reduce your risk of payoff fraud and wire fraud.

Print or obtain consumer educational brochures and provide links to department of insurance websites that provide consumer-friendly information about title insurance practices so they can understand what to expect. When discussing deadlines and instructions for important document filings, be specific and detailed. Help them understand who is responsible for protecting their funds when closings fall under the jurisdiction of entities that have different regulations to keep your company safe from title fraud.

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Keep Your Florida Title Company Protected

Of course, as the NAIC points out, there are many other concerns that don’t quite rise to the level of fraud but are of concern nonetheless. These can include mixing personal funds with escrow funds, investing escrow funds in non-guaranteed accounts, failure to meet duties during closing and insufficient steps to prevent fraud from occurring. Performing routine audits of your title company to ensure compliance will help reduce the risk of incidences such as these, but constant vigilance, following guidelines and good hiring practices will provide a daily defense against title fraud and institutional corruption. Additionally, you should keep up with Florida’s prescribed differences from NAIC statutory accounting principles and not be afraid to reach out to your financial institutions for guidance on how they can help with wire or title fraud protection.

Topics: Protect Your Assets