Identity protection real estate

identity protection
Be proactive with identity protection (infographic from nsa.gov)

Even with precautions and laws to protect your sensitive data while conducting financial transactions, there can still be a weak link in the chain that can put your personal data at risk.  You may not have heard about the latest data breach, but it involved the potential leaking of over 24 million mortgage documents. Identity Protection during the real estate process takes awareness and vigilance. However, what do you do after the transaction is over?

The data breach to which I refer was discovered and reported by Bob Diachenko, Cyber Threat Intelligence Director of Security Discovery with the assistance of Zack Whitaker of Techcrunch.  This data breach was discovered by Diachenko just by searching public search engines.  According to Diachenko’s report (securitydiscovery.com/document-management-company-leaks-data-online), the unprotected database contained about 51 GB of credit and mortgages information.  The database potentially exposed more than 24 Million files.

Essentially, the over 24 million unprotected records (24,349,524 according to Diachenko) that existed on the database were likely scanned (OCR) from original documents.  Diachenko stated, “These documents contained highly sensitive data, such as social security numbers, names, phones, addresses, credit history, and other details which are usually part of a mortgage or credit report. This information would be a gold mine for cyber criminals who would have everything they need to steal identities, file false tax returns, get loans or credit cards.” 

Diachenko and Whitaker tracked down the owner of the database and found that the exposed database belonged to a third party.  After the database was secured, however, Diachenko found a second vulnerable server that contained original documents.

How is consumer iinformation handled through through institutional real estate transactions?

According to Whitaker, the documents date as far back to 2008, possibly further.  The documents concerned “correspondence from several major financial and lending institutions” including government entities such as HUD.  Whitaker stated that not all data was “sensitive,” however the database included: names, addresses, birth dates, Social Security numbers, bank and checking account numbers.  They also found some documents that contained other “sensitive financial information,” such as bankruptcy and tax documents, including W-2 forms. 

To understand the broader implications of identity protection in a real estate transaction, read Diachenko and Whitaker’s first (techcrunch.com/2019/01/23/financial-files) and second (techcrunch.com/2019/01/24/mortgage-loan-leak-gets-worse) report. The reporting of Diachenko and Whitaker is significant because it exposes how your identity and sensitive information can be mishandled in the broader financial transactional process that occurs between entities.  Even though direct correspondence with you may be encrypted and secure, security lapses can occur during the institutional transaction process (such selling and/or transferring a mortgage)

The moral of the story is that once your information is out of your hands, you cannot assume it’s 100 percent secure.  Even blockchain technology, which has been touted as a safe means of digital data management, has weaknesses.  And as governments and financial institutions are looking to blockchain as the “answer” to data security, there are reports of “attacks” of increasing sophistication according to James Risberg (Yes, the Blockchain Can Be Hacked; coincentral.com; May 7, 2018). 

Take your identity protection seriously when buying and selling a home

Be vigilant and proactive to protect your identity and sensitive information.  Be wary of unsolicited requests for information, even if it appears to be from someone with whom you are conducting business. Always make a call to confirm the request. Consider a credit freeze to prevent fraudsters from opening credit accounts in your name.  Check your credit report regularly and dispute errors.  If you’ve been a victim of identity theft, the FTC’s IdentityTheft.gov site can help you report it and create a recovery plan.  You can learn more about protecting yourself from identity theft from the FTC (consumer.ftc.gov) and the Federal Reserve (federalreserveconsumerhelp.gov).

Original published at https://dankrell.com/blog/identity-protection-real-estate

By Dan Krell. Copyright © 2019.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Title fraud protection

title fraud
Title fraud and house stealing (infographic from fbi.gov)

In the wake of the largest consumer data breach in history, ads for credit monitoring and other related services are flooding the airwaves.  One of these associated services is home title monitoring.  These commercials claim that they will protect you from home stealing and title fraud.  But what is home title monitoring and is it worthwhile?

According to a FBI report (fbi.gov) “House Stealing, the Latest Scam on the Block,” house stealing is a combination of two popular “rackets:” identity theft and mortgage fraud.  The 2008 report described a couple of versions of how the scam is perpetrated.  One form of this crime is committed by obtaining a cash-out mortgage posing as you to get a check at settlement.  Another form is committed by fraudulently taking title to your home and then selling the home for the proceeds.  Although fraudsters frequently target vacant homes, house stealing can also occur while you’re still occupying your home.  The FBI describes how scammers perpetrate house stealing and title fraud:

Here’s how it generally works:
-The con artists start by picking out a house to steal—say, YOURS.
-Next, they assume your identity—getting a hold of your name and personal information (easy enough to do off the Internet) and using that to create fake IDs, social security cards, etc.
-Then, they go to an office supply store and purchase forms that transfer property.
-After forging your signature and using the fake IDs, they file these deeds with the proper authorities, and lo and behold, your house is now THEIRS* [*Since the paperwork is fraudulent, the house doesn’t legally belong to the con artists.]
There are some variations on this theme…
-Con artists look for a vacant house—say, a vacation home or rental property—and do a little research to find out who owns it. Then, they steal the owner’s identity, go through the same process of transferring the deed, put the empty house on the market, and pocket the profits.
-Or, the fraudsters steal a house a family is still living in…find a buyer (someone, say, who is satisfied with a few online photos)…and sell the house without the family even knowing. In fact, the rightful owners continue right on paying the mortgage for a house they no longer own.

Both forms of house stealing (or title fraud) are typically intertwined with mortgage fraud.  And because of the process, mortgage fraud usually has multiple conspirators carrying out the scam.  An example of this is the 2013-2014 sentencing of at least five co-conspirators (including a title company manager and mortgage broker).  These criminals perpetrated a complex multi-million-dollar mortgage fraud scheme that occurred in Maryland.  One conspirator sold homes that did not belong to her.

According to the FBI report, house stealing is difficult to prevent.  However, vigilance on your part is highly recommended.  Red flags include receiving payment books and/or late notices for loans for which you did not apply.  Additionally, it is recommended to routinely monitor your home’s title in the county’s land records. Any unrecognized paperwork or fraudulent looking signatures may be an indication of title fraud and should be looked into.  Title fraud should be reported to the FBI.

Title fraud protection

You can visit Montgomery County’s land records office and get information on searching your home’s title from the very helpful staff.  You can also search land records online.  However, you should consult a title attorney for a detailed title search.

A problem with searching land records is that it is not always definitive.  Of course, accuracy depends on those who prepare and file the documents with the county.  Common issues that are found in title searches are misspelled names and aliases.  Deeds and other related documents (such as quit claim deeds and mortgage satisfaction letters) are not always filed timely, or sometimes not at all.

After the Equifax breach, millions of consumers’ identifications are available to criminals to perpetrate house stealing/title fraud.  Title monitoring services tout their ability to protect you from such scams.  Before you decide to enroll, be aware of the fees, the limitations, and how it compares or differs from your owner’s title insurance policy (including cost).

Your title insurance policy may already protect you from title fraud.  According to the Maryland Insurance Administration’s A Consumer Guide to Title Insurance (insurance.maryland.gov), “Title insurance protects real estate purchasers and/or lenders from losses that arise after a real estate settlement…A title insurance policy provides coverage for legal defense, as well as the coverage amount listed in the policy, which usually equals the purchase price of the real property.”  Basic coverage typically protects you for fraud that occurred prior to settlement.  However, enhanced coverage may provide protection for fraud that occurs after settlement.

You should consult with a title attorney about your title insurance coverage and how it protects you from title fraud.

By DanKrell
Copyright© 2017

Original published at https://dankrell.com/blog/2017/10/22/title-fraud-protection

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Money laundering through real estate

money laundering
Money laundering through real estate (inforgraphic posted on visual.ly)

In the post financial crisis era, when anti-fraud units from various law enforcement agencies stepped up activity to prosecute real estate related crimes; real estate continues to be a vehicle for scammers and fraudsters.  Although mortgage fraud and identity theft have been the mainstay, money laundering through real estate has not received the same attention.  That is until this year, when a pilot program was initiated to identify money laundering in residential real estate.  The program was ordered through the Financial Crimes Enforcement Network of the US Department of the Treasury (FinCEN), which is tasked with the protection of our financial system by primarily combating money laundering (fincen.gov).

FinCEN’s concern is the laundering and/or structuring of money through all cash deals into luxury real estate, primarily through shell companies.  Through the use of LLC’s or other business structures, individuals can hide assets anonymously.  According to FinCEN, “Money laundering” is the disguising of funds derived from illicit activity so that the funds may be used without detection of the illegal activity that produced them.

A 2008 FinCEN report (Money Laundering in the Residential Real Estate Industry: Suspected Money Laundering in the Residential Real Estate Industry; April 2008) found that suspicious activity reports (SAR) remained steady through 2002.  However, began to increase in 2003, and sharply rose through 2005; the increase was significantly more than the rapidly expanding real estate market at that time.  Findings of the report indicated that over 75 percent of those engaging in money laundering activities were unaffiliated with the real estate industry.

The program to identify money laundering in residential real estate seemed to be the next logical step in a series of investigations.  As a result, FinCEN announced Geographic Targeting Orders (GTO) on January 13th of this year.   The GTO was enforced from March 1st, 2016 through August 27th, 2016.  And required title companies to report the individuals behind the companies buying high end real estate without financing (all cash deals), located in Manhattan and Miami-Dade County.

In an April 12th FinCEN news release, former FinCEN director Jennifer Shasky Calvery stated “The analysis and DOJ forfeiture cases continue to show corrupt politicians, drug traffickers, and other criminals using shell companies to purchase luxury real estate with cash. We see wire transfers originating from foreign banks in offshore havens where shell companies have established accounts, but in many cases we also see criminals using U.S. incorporated limited liability companies to launder their illicit funds through the U.S. real estate market.”

On July 27th, FinCEN announced the expansion of the GTO, beginning August 28th and lasting for 180 days.  The geographic areas were expanded to include: New York City; Miami-Dade, Broward and Palm Beach counties; Los Angeles County; San Francisco, San Mateo, and Santa Clara counties; San Diego County; and Bexar County, Texas.

Increased scrutiny of money laundering in residential real estate compelled the National Association of Realtors® to issue Anti-Money Laundering Guidelines for Real Estate Professionals (realtor.org; November 15, 2012).  The voluntary guidelines state that the real estate agent’s exposure is generally “mitigated” because most real estate transactions involve financing and mortgages (which are regulated).   However, when encountering risk factors that fall outside the norm, NAR encourages due diligence and reporting of suspicious activity.

By Dan Krell
Copyright © 2016

Original published at https://dankrell.com/blog/2016/08/05/money-laundering-and-real-estate/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Protect your identity when buying a home

real estate

Last year, hackers targeted a number of retailers to compromise shoppers’ financial and personal information. A recent hack of a health insurer possibly jeopardized policy holder data. And Krebbs Security (krebsonsecurity.com) reported on February 15th about an investigation being conducted by the Defense Contract Management Agency of a possible hacking.

Surely the reports of stolen data by hackers have made you more aware of protecting your credit cards when shopping. But how protective are you about handing over personal information to mortgage lenders, real estate brokers/agents, and title companies? If not managed or disposed of properly, your sensitive personal information could be at risk of being stolen – an identity thief only needs a few pieces of personal information to access bank accounts, credit card accounts, health record/insurance, etc.

When buying a home, your information is “out there;” and you are trusting those who have it to protect it. If you want to obtain a mortgage, you must complete a mortgage application; which requires a social security number, date of birth, address, employment, and other information. Mortgage lenders also collect financial documents (such as w-2’s, tax returns, and bank statements) to verify income and asset information on your application.

Additionally, your real estate agent may ask you to complete a financial information sheet to demonstrate to the seller your ability to purchase the home. And as a means of record keeping, transaction files maintained by brokers and agents may also contain copies of deposit checks, credit card information, and other financial instruments.

Renters may be required to submit personal information too. A rental application is a lot like a mortgage application, asking social security number, date of birth, address, employment, and other information.

The National Association of Realtors® (nar.realtor) Data Security and Privacy Toolkit states that although there is no federal law specifically applicable to real estate brokers, the Gramm-Leach-Bliley Financial Modernization Act applies to businesses that qualify as financial institutions; which may subject brokers to comply with “Red Flag Rules” (and other rules), and require policies and procedures to protect against identity theft.

States have also implemented laws to protect consumers from identity theft. For example, the Maryland Personal Information Protection Act (MD Code Commercial Law § 14-3501) describes personal information as an individual’s first name or first initial and last name in combination with any one or more of the following: Social Security number; driver’s license number; financial account number (including credit cards); and/or an Individual Taxpayer Identification Number. Additionally, the law requires a business to take reasonable steps to protect against unauthorized access to or use of the personal information when destroying a customer’s records that contain personal information.

When choosing a mortgage lender and real estate agent, you might consider asking about the company policy on protecting personal information. Some questions about personal data might be: what types of information will be collected; what is it used for; who has access; when transmitted, is it encrypted; how long will the information be retained; and how will the information be disposed? Besides the management of your personal data, you should ask about procedures in case there is a suspected data breach.

To learn more about protecting your personal information and protecting yourself from identity theft, visit these consumer websites: FTC (consumer.ftc.gov/features/feature-0014-identity-theft) and the FDIC (fdic.gov/consumers/privacy).

By Dan Krell
© 2015

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Identity Theft can lead to a stolen home

by Dan Krell
Google+

Identity theft and mortgage fraud continue to plague the nation; both crimes are an ongoing concern for law enforcement. Earlier this year, the Federal Bureau of Investigation (FBI.gov) reported that these types of crimes were increasing, as well as a new disturbing trend in real estate related crimes called “house stealing.”

You may have heard of identity theft; but maybe you did not know that once a perpetrator steals your identity, they can defraud others in many ways. The Federal Trade Commission (FTC.gov) states that besides unauthorized use of your credit cards, perpetrators can use your information to get jobs, healthcare services, social services, and open new accounts (including mortgages, utilities and credit cards).

In January, the FBI reported that there were over 1,200 open cases of mortgage fraud. Most of these cases were “fraud for profit,” where a scheme was used to flip homes to get cash and allow the home to go into foreclosure. Other cases involve corporate schemes and possible insider trading.

So what is house stealing? The FBI reported earlier this year that house stealing is a hybrid crime that is a combination of identity theft and mortgage fraud. There are several forms of house stealing, but essentially the perpetrator will fraudulently take title to your home or steal your identity to ultimately sell your home and disappear with the cash. This can even occur while you are occupying your home!

Perpetrators of house stealing will obtain your personal information much like other identity thieves, and use the information to sell your home. Although the end result is to take the cash from selling your home, the crime can occur by the perpetrator fraudulently taking title to your home and then selling it “for sale by owner” (usually providing little or no information to prospects), or the perpetrator can act as if they are you and list your home with a real estate agent (sometimes the agent may be in cahoots with the perpetrator).

The FBI only recently publicized this new trend as they prosecuted a woman in California who pleaded guilty to devising a scheme to defraud over 100 homeowners and $12 million from lenders (www.fbi.gov/page2/march08/housestealing_032508.html).

In their report, the FBI concedes that there is not much you can do to prevent a house stealing crime other than being vigilant; this may be due to the fact that most people do not go to the county court house on a regular basis to check the deed to their home. However, the FBI recommends that you check documents and signatures filed in the court house “from time to time.” Any discrepancies should be looked into (and reported to authorities) immediately.

Fortunately, there is more you can do to protect your identity. The NAR, in conjunction with the Federal Trade Commission (FTC.gov), has published a brochure called, “AvoID Theft: Deter, Detect, Defend.” The FTC attempts to educate consumers about identity theft; it is recommended that that you become aware of how these crimes occur so you can defend yourself from perpetrators, monitor your information regularly to spot any irregularities, and be prepared with a plan if you are a victim of identity theft. More information about protecting yourself from identity theft can be obtained from the FTC and FBI (and their corresponding websites).

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 3, 2008. Copyright © 2008 Dan Krell.