august 4, 2019 new york, new york · 2021. 4. 28. · bragg & staffin, p.c. v. bank of america...

2019 Summer National Meeting

© 2019 National Association of Insurance Commissioners

Title Insurance (C) Task Force

August 4, 2019 New York, New York

© 2019 National Association of Insurance Commissioners 1

Date: 7/29/19

2019 Summer National Meeting New York, New York

TITLE INSURANCE (C) TASK FORCE

Sunday, August 4, 2019 2:00 – 3:00 p.m.

New York Hilton Midtown—Mercury Ballroom—3rd Level

ROLL CALL James J. Donelon, Chair Louisiana Barbara D. Richardson Nevada David Altmaier, Vice Chair Florida Marlene Caride New Jersey Lori K. Wing-Heier Alaska John G. Franchini New Mexico Peter Fuimaono American Samoa Mike Causey North Carolina Michael Conway Colorado Jillian Froment Ohio John F. King Georgia Glen Mulready Oklahoma Colin M. Hayashida Hawaii Jessica Altman Pennsylvania Dean L. Cameron Idaho Raymond G. Farmer South Carolina Vicki Schmidt Kansas Larry Deiter South Dakota Al Redmer Jr. Maryland Todd E. Kiser Utah Steve Kelley Minnesota Michael S. Pieciak Vermont Chlora Lindley-Myers Missouri Scott A. White Virginia Bruce R. Ramge Nebraska NAIC Support Staff: Jennifer Gardner/Aaron Brandenburg

AGENDA 1. Consider Adoption of its Spring National Meeting Minutes—Warren Byrd (LA) Attachment One 2. Expose its 2020 Proposed Charges—Warren Byrd (LA) Attachment Two 3. Hear a Presentation from CertifID on Wire Transfer Fraudulent Events Attachment Three

—Tom Cronkright (CertifID)

4. Hear a Presentation from American Land Title Association (ALTA) on its Homebuyer Attachment Four Outreach Program—Elizabeth Berg (Agents National Title Insurance Company)

5. Hear a Presentation from First American Title Insurance Company and Old Republic National Title Insurance Company on Blockchain Innovation in Title Insurance —Justin Earley (First American Title Insurance Company) and Ron Blitenthal (Old Republic National Title Insurance Company)

6. Discuss Any Other Matters Brought Before the Task Force—Warren Byrd (LA) 7. Adjournment W:\National Meetings\2019\Summer\Agenda\TitleTF.dotx


Attachment One Spring National Meeting Minutes

Draft Pending Adoption


Draft: 4/11/19

Title Insurance (C) Task Force Orlando, Florida

April 7, 2019

The Title Insurance (C) Task Force met in Orlando, FL, April 7, 2019. The following Task Force members participated: James J. Donelon, Chair, represented by Warren Byrd (LA); David Altmaier, Vice Chair, represented by Anoush Brangaccio (FL); Lori K. Wing-Heier represented by Michael Ricker (AK); Michael Conway represented by Damion Hughes (CO); Ralph T. Hudgens represented by Margaret Witten (GA); Colin M. Hayashida represented by Kathleen Nakasone (HI); Dean L. Cameron represented by Pamela Murray (ID); Vicki Schmidt represented by Heather Droge (KS); Al Redmer Jr. represented by Erica Bailey (MD);); Steve Kelley represented by Martin Fleischhacker (MN); Chlora Lindley-Myers represented by Carrie Couch (MO); Mike Causey represented by Fred Fuller (NC); Bruce R. Ramge represented by Matt Holman (NE); Marlene Caride represented by Mark McGill (NJ); Barbara D. Richardson represented by Stephanie McGee (NV); Jillian Froment represented by Michelle Brugh Rafeld (OH); Jessica Altman represented by Michael McKenney (PA); Raymond G. Farmer represented by Joe Cregan (SC); Larry Deiter represented by Dan Nelson (SD); Todd E. Kiser represented by Reed Stringham and Tracy L. Klausmeier (UT); Scott A. White represented by Mike Beavers (VA); and Michael S. Pieciak represented by Karen Ducharme and Kevin Gaffney (VT). Also participating were: Susan Stapp (CA); Michele Riddering (MI); Stephen Doody (NY); and Tashia Sizemore (OR). 1. Adopted its 2018 Fall National Meeting Minutes Ms. Rafeld made a motion, seconded by Mr. Nelson, to adopt the Task Force’s Nov. 16, 2018 minutes (see NAIC Proceedings – Fall 2018, Title Insurance (C) Task Force). The motion passed unanimously. Mr. Byrd reported that the Task Force met Dec. 12, 2018, in regulator-to-regulator session, pursuant to paragraph 3 (specific companies, entities or individuals) of the NAIC Policy Statement on Open Meetings, to discuss the pending merger of two title insurers. 2. Received an Update Regarding the Survey of State Insurance Laws Regarding Title Data and Title Matters Jennifer Gardner (NAIC) said the Survey of State Insurance Laws Regarding Title Data and Title Matters (Survey) was sent to the states in August 2018. The Survey is a rewrite of prior surveys conducted in 2008 and 2015. New questions were added to identify: 1) the department or division with regulatory authority over the title insurance industry in each state; 2) filing requirements for policy forms; 3) title and closing activities allowed to be performed outside of the state; 4) department staffing with direct duties tied to title insurance; and 5) recent market conduct activity. Forty-three states and territories responded. Additional states will be added if received. The Survey is posted on the Task Force’s web page. 3. Heard a Presentation from CertifID Regarding Wire Transfer Fraud Tom Cronkright (CertifID), co-founder and chief executive officer (CEO) of CertifID, said CertifID was developed as a result of a fraudulent event that took place at Mr. Cronkright’s title agency, Sun Title Agency, LLC. CertifID was created to confirm the identity of a wire transfer recipient and securely deliver funds via wire transfer. Mr. Cronkright explained CertifID’s core title services as: 1) searching and examining records; 2) preparing and issuing title commitments; 3) underwriting; 4) issuing title policies; and 5) closing and settlements (if in accordance with local customs). However, he said escrow and closing includes: 1) coordinating transactions; 2) closing and notarizing documents; 3) preparing disclosure and closing statements; 4) collecting incoming funds for closing; 5) closing; 6) disbursing to parties and lien holders; 7) post-closing activities such as recordings and lien releases; and 8) confirming requirements to issue title insurance policies. He said roughly $2 trillion moves in and out of title and escrow accounts annually. Mr. Cronkright said real estate wire transfers are, on average, approximately $200,000 per transaction, making it a lucrative and attractive target for fraudsters. Additionally, the transactions involve multiple parties all communicating electronically. Finally, information regarding real estate transactions is often readily available online making it an easy target for cyber-crime. Wire fraud is the fastest growing cyber-crime in the U.S., with more than $90 billion in attempted losses reported to the Federal Bureau of Investigation (FBI) from June 2016 to December 2018. In 2018 alone, the FBI reported that $1.5 billion was lost through email compromise.

Draft Pending Adoption


Mr. Cronkright described the common playbook for fraudsters to commit wire transfer fraud. The first step is to identify a transaction. This can easily be done by finding a listing marked as pending on a real estate web app or web page such as https://www.zillow.com, https://www.trulia.com or https://realtor.com. Typically, real estate closings take approximately 42 days to close from the initial contract to the closing date. The fraudster identifies the parties of the transaction, often via public records; hacks into one of the party’s email accounts; and obtains transaction details. With adequate details, the fraudster can impersonate someone in the transaction and manipulate the parties into wiring funds into the fraudster’s account. In response, Mr. Cronkright said underwriters are pivoting away from liability through revisions to the closing protection letter (CPL), specifically to exclude underwriter liability for losses due to wire fraud. Mr. Cronkright said the courts in Bain v. Platinum Realty, LLC et al, held an agent and broker liable for 85% of wire fraud losses when a buyer wired funds to a fraudulent account. The agent and broker had a contract and fiduciary relationship with the seller. The buyer was unrepresented; however, the agent and broker representing the seller were held liable. In O’Neill, Bragg & Staffin, P.C. v. Bank of America Corp., the bank was not held liable for failing to stop a $580,000 wire transfer to a fraudster. The law firm was held liable based on the terms of its contractual agreement with the bank. Title agencies, attorneys and closing settlement agents need to be privy to the schemes that exist and have measures in place to thwart fraud, because they are being held liable in the courts. Mr. Cronkright said his title agency, Sun Title Agency, LLC, experienced a fraudulent event in spring 2015. The agency wired $180,000 from a forged cashier’s check into the hands of a money mule operating on behalf of a fraud ring with origins in Nigeria. Mr. Cronkright described many of the people involved in the money laundering operation and explained how his agency was able to recover $140,000 of the stolen funds. He also described how his work and testimony assisted the FBI in prosecuting members of the fraud syndicate. Finally, Mr. Cronkright stressed the importance of consumer information. He encouraged the states to alert consumers to common methods of fraud schemes so that wire transfers are verified with the appropriate parties before any funds are moved. He stressed the importance of guidance like the Insurance Data Security Model Law (#668) to assist agencies in forming standards for data security. 4. Discussed Other Matters Mr. Byrd said the Title Insurance Financial Reporting (C) Working Group has not met in more than a year, so the Task Force should consider disbanding the group. The Working Group’s charge to “consider the effectiveness of recent changes in financial reporting by title insurance companies and to identify further improvements and clarifications to blanks, instructions, Statement of Statutory Accounting Principles (SSAPs), solvency tools and other matters” would not be eliminated but, rather, moved under the Task Force. Mr. Byrd said an email would be distributed to request recommendations for the Working Group. If no requests for work are received, the chair will call for an e-vote to consider disbanding the Working Group. Mr. Byrd said an email was received from Birny Birnbaum (Center for Economic Justice—CEJ) notifying the chair of a recent court case in the Superior Court of California. Mr. Birnbaum requested that the Task Force be alerted to the case, as it relates to the pending merger between Stewart Title and Fidelity National Financial. Mr. Byrd said the case and its exhibits would be distributed to the Task Force for review. Having no further business, the Title Insurance (C) Task Force adjourned. W:\National Meetings\2019\Spring\TF\Title\_Final Minutes\TitleTF4-7min.docx


Attachment Two 2020 Proposed Charges

Draft: 7/29/19 Adopted by the Executive (EX) Committee and Plenary, ____ __, 2019 Adopted by the Property and Casualty Insurance (C) Committee, ____ __, 2019 Adopted by the Title Insurance (C) Task Force, ____ __, 2019

2020 PROPOSED CHARGES Title Insurance (C) Task Force

The mission of the Title Insurance (C) Task Force is to study issues related to title insurers and

title insurance producers.

Ongoing Support of NAIC Programs, Products or Services

1. The Title Insurance (C) Task Force will: A. Monitor issues and developments occurring in the title insurance industry, and

provide support and expertise to other NAIC committees, task forces and/or working groups, or outside entities, as appropriate.

B. Review and assist various regulatory bodies in combating fraudulent and/or unfair real estate settlement activities. Such efforts could include working with the Antifraud (D) Task Force and other NAIC committees, task forces and/or working groups to combat mortgage fraud and mitigating title agent defalcations through the promotion of closing protection letters and other remedies. Report results at each national meeting.

C. Consult with the Consumer Financial Protection Bureau (CFPB) and other agencies responsible for information, education and disclosure for mortgage lending, closing and settlement services about the role of title insurance in the real estate transaction process.

D. As necessary, consider the effectiveness of changes in financial reporting by title insurance companies and identify further improvements and clarifications to blanks, instructions, Statement of Statutory Accounting Principles (SSAPs), solvency tools and other matters. Coordinate efforts with the Statutory Accounting Principles (E) Working Group.

2. The Title Insurance Financial Reporting (C) Working Group will:

A. Consider the effectiveness of recent changes in financial reporting by title

insurance companies and identify further improvements and clarifications to blanks, instructions, Statement of Statutory Accounting Principles (SSAPs), solvency tools and other matters. Coordinate efforts with the Statutory Accounting Principles (E) Working Group.

NAIC Support Staff: Jennifer Gardner/Aaron Brandenburg

W:\National Meetings\2019\Summer\TF\Title


Attachment Three Presentation from CertifID on Wire

Transfer Fraudulent Events

2019

Wire Fraud Trends in Real Estate TransactionsNAIC– August 4, 2019

2

Tom Cronkright

• Co-Founder and CEO, CertifID

• Licensed Attorney

• Large Title Agency Owner in Michigan (Sun Title)

• Wire Fraud Victim

• National Speaker on Wire Fraud and Cyber Security

[email protected]

3

Today’s Topics

Wire Fraud in Real Estate

• Why real estate transactions?

• How big is the problem?

• What’s trending?

• What can be done?

4

Today’s Topics


Why real estate transactions?




5

1.They are incredibly lucrative(avg $200,000)


6

2.Transactions involve multiple parties all communicating electronically


7

3. All the information to start a fraud is easily found online


8

$3.8 Bil – Funds transferred

Daily Home Sales Volume(2018 existing and new home sales)

1,822 / hr.30 / min..5 / sec.

2X the daily Department of Defense budget of $1.88 Bil

16,400 closings

$235,000 median sales price

$422Mil / hr.$7Mil / min.$117K / sec.

In a 9 hour working day that’s:

9

Top Industry Targets for Business Email Compromise (BEC):

Source: FinCEN – Updated Advisory to Financial Institutions on E-Mail Compromise Fraud Schemes– July 16, 2019

(https://www.fincen.gov/sites/default/files/advisory/2019-07-16/Updated%20BEC%20Advisory%20FINAL%20508.pdf)

10

Today’s Topics






11

Wire Fraud(via Business Email Compromise)

Fastest growing cyber crime

$90 Bil in attempts (June ‘16 to December ‘18)

+$301 Mil per month in attempts in 2018

~$1.5 Bil in losses in 2018

Title agents are sustaining crippling losses

Banks and insurance providers pivot to avoid liability

12

(

+120% +174% $301Mil

BEC Losses Spike2016-2018 Trends

(https://www.fincen.gov/news/news-releases/fincen-exchange-forum-counters-business-email-compromise-scams)

Monthly reported incidents Value of attempted threats Monthly average of attempts in 2018

Source: U.S. Treasury – FinCEN SAR Report Source: U.S. Treasury – FinCEN SAR Report Source: U.S. Treasury – FinCEN SAR Report

13

Today’s Topics






14

Wire Fraud Playbook

Phish

Profile

Monitor

ObtainAccess

Impersonate

Manipulate

Transfer

15

Phishing Business Email Compromise

Social Engineering

Cyber Attacks: Title Companies as Targets

Fraudsters use phishing attacks to gain access to realtor’s email account.

Fraudsters then utilize the compromised email to gain transaction-level information.

Using knowledge gained from monitoring emails, the fraudster impersonates the realtor or title company to provide fraudulent information.

Phish Access Monitor Obtain Impersonate Manipulate

16

Wire Fraud Playbook

Phish

Profile

Monitor

ObtainAccess

Impersonate

Manipulate

Transfer

17

PhishingThe process of obtaining personal information from someone —

such as credit card numbers, social security details, or login credentials to a protected system — via fraudulent emails meant to look authentic.

18

Our “Digital Distance” Exposes Us

19

91% of cybercrime starts with phishing

20

Masquerading As Brands We Trust

Agari Research

21

How Phishing Began

22

Email from the IT Department

Target: Company

Objective: Obtain Credentials

Sophistication: Medium

Red Flags:

• Your IT department should never ask for your participation in maintenance

• “Help Desk Team” – this should come from an individual

• Scaring users with access restrictions

23

Fake Invoices

Target: Company

Objective: Distribute Malware

Sophistication: Medium

Red Flags:

• Make sure the email is coming from a company you are actually doingbusiness with

• Double check the email address

• Fake invoice emails will usually involve some kind of urgency

24

Email Monitoring

25

Email Monitoring

26

Wire Fraud Playbook

Monitor

ObtainAccess

Impersonate

Manipulate

Phish

Profile

Transfer

27

Trend 1:

Buyers are Targeted Week One

28

Trend 1:


29

Trend 1:


On Thursday, July 25, 2019, Jennifer L. Drossman, Esq. <jdrossman.nylegalcenter@aol. com> wrote:Hi Richard,

Yes the list of the repairs/credits has been sent to the seller's lawyer which as been approved by the seller's, and the credit requested will be deducted from the closing cost.

Let me know as soon as the wire has been done tomorrow.

Thanks.

30

Trend 1:


From: Jennifer L. Drossman, Esq. <[email protected]>Date: Tuesday, July 30, 2019Subject: 3038 Xavier Pl Oceanside, NY 11572To: [email protected]

Hi Richard,We received the $84k,but still waiting to confirm the first payment ($30k). as of

yesterday it hadn't come into our account. please confirm from your end if the fund is still in your bank account or being processed

Have also got in touch with the seller's lawyer and will like to know if 7th August is good for you to do the signing.

Thanks!

31

Trend 2:

Diverting Seller Proceeds in Real-Time

32

Trend 2:


33

Trend 2:


34

Trend 3:

Diverting Mortgage Payoffs

35

Trend 3:

Diverting Mortgage Payoffs

36

Today’s Topics






37

A multi-faceted transaction verification process, as well as training and awareness-building to identify and avoid spear phishing schemes, can help financial institutions guard against BEC and EAC fraud.

FinCEN – Updated Advisory to Financial Institutions on E-Mail Compromise Fraud Schemes– July 16, 2019

(https://www.fincen.gov/sites/default/files/advisory/2019-07-16/Updated%20BEC%20Advisory%20FINAL%20508.pdf)

U.S. Department of Treasury – Financial Crimes Enforcement Network (FinCEN)

Risk Management Considerations

38

[C]ybercriminals are using their infiltration ability to focus on new, more lucrative attacks…Staying up-to-date on the latest security safeguards and best practices is crucial to preventing attacks in the future."

Internet Society's Online Trust Alliance (OTA) Cyber Incident and Breach Trends Report – July 10, 2019

Staying Current on Trends and Best Practices

39

Ideal Target to Ideal StateA Layered Security Approach

Risk

Time

40

Risk

Time

Hardware• Router• Firewall• Intrusion Detection


41

Risk

Time


Software• Email monitoring• Software updates• Virus detection


42

Risk

Time

People• Phishing tests• Continual training• “Culture of Curiosity"




43

Risk

Time


Process• Limit account access• Dual wire controls• Verify identities• Incident response




44

Risk

Time



Partners• Continuing education• Buy-in• Educate customers




45

Risk

Time



Partners• Continuing education• Buy-in• Educate customers




1410 PLAINFIELD AVE. NE, GRAND RAPIDS, MI 49505

WWW.CERTIFID.COM | (616) 855-0855 | [email protected]

How Can I Help?

[email protected]

LinkedIn: Thomas Cronkright

(616) 855-7180


Attachment Four

Presentation from American Land Title Association on its Homebuyer Outreach

Program

homeclosing101.com

1

ALTA CONSUMER RESEARCHHomebuyers want more information about the real estate process. It’s critical for ALTA members to take

control of the message and explain how an owner’s title insurance policy helps protect their property rights and

their largest investment.

homeclosing101.com

2

IT’S OUR RESPONSIBILITY TOEDUCATE ALL STAKEHOLDERS

homeclosing101.com

3

ALTA’s Quest to Understand the Issue Through Research

homeclosing101.com

44

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44444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444

PROTECTYOURPROPERTYRIGHTS

homeclosing101.com

5

homehomeclosclosing1ing101 c01.comom

55

homeclosing101.com

6

PERSONALITY

TRUSTWORTHY PRACTICAL RESPONSIBLES O C C S O S

homeclosing101.com

7

TONE

CONFIDENT OPTIMISTIC CLEAR

homeclosing101.com

888

homeclosing101.com

9

- NAR Home Buyer and Seller Generational Trends Report 2017 & 2016 Profile of Home Buyers and Sellers

homeclosing101.com

101

homeclosing101.comhomeclosclocl g1ing101.ccc0 omomom

homeclosing101.com

12

Templates

HOMEBUYER GUIDE

Blogs Educational One-Pagers

PowerPointPresentations

RackCards

homeclosing101.com

1313

TemplatesLetterhead

PowerPoint PresentationDocument Cover PageSocial Media Graphics

homeclosing101.com

1414

PowerPoint Presentations

A New Chapter for the Title Insurance Industry

The Homebuyer Checklist: 10 Steps to Buy Your Home

with ConfidenceWhy Every Homebuyer

Needs Owner’s Title Insurance

homeclosing101.com

1515

Rack CardsThe FAQs of Title Insurance for Homebuyers10 Steps to Buy Your Home with ConfidenceYou Sweat the Small Stuff

homeclosing101.com

homeclosing101.com

1717

Educational One-Pagers7 Reasons Every Homebuyer

Needs Owner’s Title InsuranceA Guide for Homebuyers

The FAQs of Title Insurance for Homebuyers

Tips for Talking Title with Homebuyers

What Every Realtor®

Should Know About Owner’s Title Insurance

homeclosing101.com

18

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homeclosing101.com

20

Over 100 items available to ALTA MembersOption to Download or use ALTAPrintsFrom August 2017-May 2019

3211 Downloads296 Orders to Print Shop100,160 Ordered Prints

homeclosing101.com

homeclosing101.com

22

66,821 views since July 2017www.alta.org/wirefraud

homeclosing101.com

23

homeclosing101.com

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Research Conducted by the American Land Title Association - Reported September 2014

Despite familiarity with title search, respondents let someone else select their title company

Entity from whom respondent primarily learned about title search

Q19. From whom did you primarily learn about the title search process?

A majority indicated they were familiar with the title search process before buying their home

Point at which respondent learned about title search

Q18. At what point in the home buying process did you learn about the title search process?

How respondent selected title company

Q20. Which of the following best describes how you selected the title company that was used in your home purchase?

Research Conducted by the American Land Title Association - Reported September 2014

Among those who didn’t but would have liked to have received information about the option to obtain an owner’s title policy, most said they would like it

from their real estate agent or lenderEntity from whom respondent would have liked to have received information about option to obtain

owner’s title insurance

Q31. From whom would you have liked to have received information about the option to obtain an owner’s title insurance policy? (select all that apply)

Less than half said they received information about the option to obtain an owner’s title insurance policy

Receipt of information about the option to obtain an owner’s policy has a quantifiable positive impact on opinions of title insurance, awareness of two policies and opinions of title companies

Q27. When you were in the process of buying your home, did anyone give you information about the option to obtain an owner’s title insurance policy?

august 4, 2019 new york, new york · 2021. 4. 28. · bragg & staffin, p.c. v. bank of america...

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