Technology-related enhancements in disaster preparation and stamping out fraud were laid out by Jamie Kosofsky, founding partner at North Carolina-based Brady & Kosofsky, during the Land Title Association of Colorado’s recent annual convention.
The long-time real estate attorney recounted the ordeal of a 2019 fire at his office that occurred in the middle of the night. The blaze did not lead to any injuries but wiped out essentially all data and physical devices on-site.
“I lost every single computer, every single server in my data center because there was a battery right there and that battery exploded and blew everything up,” Kosofsky said. “One of the most screwed up experiences of my life was watching that fire.
“We had just gone to the cloud. We had just revised our business continuity and our disaster recovery and we had required all of our employees to take their laptop home.”
Kosofsky said those moves proved to be invaluable.
“We had required all of our employees to test and make sure they have connectivity before they went home,” he said. “I lost no documents and I opened on time for the business the next day. I couldn't have done it if I had not had a digital practice. I could not have done it if I hadn’t let go of my paper in the way that they told me I needed to.”
According to research, the global insurance cloud computing market is projected to grow by more than 20 percent through 2026 as more companies and business sectors invest in the technology.
Data from McKinsey and Co. projects that cloud computing will add between $70 billion to $110 billion to the insurance industry’s bottom line by 2030.
That value is said to come from two sources: rejuvenation, which focuses on using the cloud to lower costs and risk across IT and core operations, and innovation, harnessing the technology to accelerate or enable development of new revenue streams. That includes faster time to market or new-product development using advanced analytics and automation at scale.
“Having a digital practice is crucial to your survival in this industry because the banks are starting to look at each one of you as a vendor and you’re a tier one, tier two or tier three vendor,” Kosofsky said. “A tier three vendor is someone that has no controls and has no security. They have a high-risk profile and they’re going to get less work. The bank is not going to take that much risk out.
“Tier two, you have the best practices. The best practices are great and they provide a fantastic foundation. So, if you’ve got that, some (banks) will call you a one, some will call you a two. When you’re talking tier one, those are the companies that get the biggest volume of work because the bank knows they’re secure. They also have a disaster recovery plan in place.”
Kosofsky then delved into recent upticks in seller impersonation fraud and how title agencies can use due diligence and technology to stay ahead of the curve.
“This can happen to anyone in this room,” he said. “I don’t care how big your security is. I don't care how careful your people are. This can happen. The only thing we can do is talk about it. We can talk about it and make people aware of what to look for.”
Earlier this year, the U.S. Secret Service warned consumers of this dramatic leap, reporting that 73 percent of real estate firms had seen an increase since January.
“You’ve got to know your driver’s license in your home state,” Kosofsky said. “There are certain things on the Colorado license that make it different. You have a moose with the county names in it. If you put it under a little magnifying box, your signature is raised; you should be able to run your thumb over your signature. Those are the things that allow you to make sure you’re dealing with a legitimate ID.”
Scammers use public records to identify properties free of mortgages or other liens, often vacant lots or rental properties, which has led to some to call the process “vacant lot fraud.”
Perpetrators then use their findings to pose as the property owners and contact a real estate agent to list the property while generally never meeting with the agent in person, communicating instead solely through email, text messages and other avenues.
After listing the property far below market value, the scammer will quickly accept an offer and attempt to have all funds sent directly to them.
“There’s one way to stop (use of fake IDs) and that’s using scanning technology because the bar codes will scan to see whatever you want them to say, but you need to be able to scan the font, the positioning, everything,” he said. “There's a lot of different things you need to scan. We can potentially knock out 80 percent of selling impersonation this way.”
Help from federal and state legislators will also go a long way, Kosofsky added.
“I think we need legislative change,” he said. “I’m talking to Fannie Mae and Freddie Mac right now. I want to see in their buyers guide that they will not insure properties unless the seller’s ID has been verified using one of these platforms that would knock this whole thing on its can right away, where you can’t finance a property unless you validate the IDs.”