The Merriam-Webster dictionary defines fraud as the “intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right,” and from identity theft to sweepstakes and investment scams, it can take countless forms at a high cost to consumers. The Federal Trade Commission (FTC) reported that American consumers lost $10 billion to fraud in 2023, a 14% increase from the prior year.
In the real estate sector, there has been an increase in bad actors driving fraudulent activities. The title insurance industry is vigorously battling these challenges as it protects Americans’ largest asset, their homes. In fact, a new study notes that nearly all title companies surveyed currently provide or plan to provide education and resources to train employees on fraud. The title industry is committed to combating all types of financial crimes, including seller impersonation fraud, wire fraud, elder fraud, and money laundering.
Seller impersonation fraud occurs when fraudsters impersonate property owners to sell property they don’t own. Because they usually target non-owner-occupied properties, significant time can pass by before the true owner discovers the fraud. In 2023, 28% of title insurance companies experienced at least one seller impersonation fraud attempt and in April of this year alone, two in ten title companies experienced such attempts.
Thankfully, title insurance companies have deployed tools and resources in place to catch seller impersonation fraud before the real estate closing is completed, and title insurance policies can provide protection for those buyers who do fall victim to seller impersonation fraud.
Another area of growing concern is real estate wire fraud. During this scheme, hackers impersonate real estate professionals and trick homebuyers into wiring their closing cash to them. In 2022, there were $446 million in losses across 2,284 victims.
The title insurance industry has continually strengthened its digital safety and security procedures, but with fraudsters continuing to target prospective homebuyers, ongoing education is critical to prevent wire fraud. The title industry provides professionals with resources and tools they can utilize to educate their customers about how they can protect their money, whether purchasing a new home or refinancing a mortgage.
Elder real estate fraud and financial exploitation, such as forged or coerced signatures on legal or financial documents and inappropriate utilization of authority under a Power of Attorney, is also rising at an alarming rate. The FBI’s Internet Crime Complaint Center (IC3) reported that almost 1,500 Americans ages 60 and older lost $65 million in real estate scams in 2023. Overall, there was a 14% increase in complaints filed by elderly victims with the IC3 since 2022.
Our industry has urged a collective effort between the private sector and policymakers, and along with others, have outlined ways state can protect elderly Americans from the fraud and financial exploitation that could jeopardize their financial wellbeing, including barring unfair and deceptive long-term real estate agreements, and enacting and enforcing the Uniform Law Commission’s (ULC) Uniform Power of Attorney Act.
Finally, the title industry is also working with the federal government to reduce money laundering. The title industry has been an important component of the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) efforts over the last eight years as it investigates money laundering in real estate. Through its Geographic Targeting Orders (GTOs), our members have filed beneficial ownership information to help identify bad actors behind shell corporations used in all-cash purchases of residential real estate.
For our industry, protecting property rights encompasses far more than ensuring a clean ownership title; it’s also about preventing fraud and thwarting fraud—a role we are proud to play as we safeguard the American Dream.
Diane Tomb is the CEO of American Land Title Association.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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