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Why Closing Protection Coverage is Important
We have discussed in past newsletters what Closing Protection Coverage is and we frequently receive questions on why someone should purchase it during a real estate closing. We recently had an incident that proved why this protection is beneficial.
NorthStar was recently handling a residential sale where the seller had instructed us that the proceeds of the sale be overnighted by check to a specific address. Our office then received an e-mail that appeared to be from the seller instructing us to have the proceeds wired to a bank account so they could have faster access to their funds. The account information that the seller gave us had a corporation name on it. We e-mailed them that we could only wire money to an account in the name of the sellers and not to the corporation.
Our escrow officer felt that this was unusual so he called the seller to verify the new instructions. The seller told us that they had not sent any e-mails relative to a wire transfer. At that point, we noticed the e-mails were not coming from the seller's e-mail account Mary.Smith@gmail.com, but from a Marry.Smith@mail.com account. In addition, our investigation found that the street address for the bank listed on the wire instructions was not a bank, but a Walgreens. The perpetrator responded to our prior e-mail with another set of wire instructions, with the account being in the name of the seller. Both banks listed were contacted and the accounts were put on hold.
We are sure that NorthStar was not hacked. Our IT experts have set-up firewalls and virus protection to eliminate our e-mails from being hacked. It is their opinion that either the listing agent's e-mail account or the seller's e-mail account were hacked and the perpetrator was able to see incoming and outgoing e-mails that detailed the transaction. Both the REALTORŪ and the seller were using Gmail as their e-mail provider. The takeaways provided by this incident are: 1.) Do you use a free e-mail account for work? If you don't, does anyone in the e-mail list on a pending transaction utilize a free e-mail account (as opposed to a company-issued e-mail)? Beware: these free e-mail may have security vulnerabilities that substantially increase the risk of fraud and theft in real estate transactions. While free e-mail accounts offer both convenience and portability, many lack the firewalls, virus protection, and other security apparatuses of company-issued e-mail accounts
2.) If this attempt at fraud was not caught and the funds were wired to a fraudulent bank account, the title company and the seller would not have known for a couple of days (when the overnight package failed to arrive) and the proceeds of the sale would have been long gone. If the seller had purchased closing protection coverage they would have been able to make a claim under that coverage and would have quickly recovered their funds.
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NorthStar Title Services, LLC
1406 West 6th Street
Suite 400
Cleveland, OH 44113
Phone: 216.623.3655
Fax: 800.953.4026
www.nstitle.com
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Wells Fargo announced that it will exit all its marketing services agreements (MSA) with real estate professionals and builders, beginning Aug. 1, over a period of 90 days. The lender cited uncertainty surrounding regulatory oversight of MSAs as a prime reason behind the decision. Industry reaction seemed to support that thought. "All the enforcement has shown, no matter what, they're not compliant. I think it's the beginning of the end for MSAs," one said. Read on for all the details, and stay tuned to The Title Report for more expected announcements on this subject, as well as new expected guidance on TRID compliance and more.
NorthStar Website
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