The real estate industry has the second highest rate of median loss due to frauds, according to the 2016 ACFE – Association of Certified Fraud Examiners Report on Occupational Fraud and Abuse. The report indicates that fraud costs around 5% of revenues every year to the average organizations, while 58% of victims are not capable enough to recover the loss.
Earlier title insurance agents and title insurance underwriters assumed that cybersecurity was mainly of concern to big banks and other financial institutions. However, with fraud becoming commonplace in the virtual and day to day world, it can be said that real estate providers and settlement services industry is as prone to fraud and cyber-attacks now. Post the Ransomware attack recently – an attack that locked up computer systems essential to execute time-sensitive mortgage transactions – the real estate industry, including title agents, have seen their businesses and reputations suffer. This has also resulted in the Federal Trade Commission (FTC) issuing a warning about phishing and other scams directly targeting homebuyers and service providers. The lack of internal controls results in the occurrence of frauds that go unseen and deteriorates the health & reputation of the organization.
Today, mortgage lenders are progressively being audited and pulled up for their vendor management practices and they are looking for assurance from their suppliers, including title agents, on how their data, especially non-public personal information (NPI), is being kept secure.
Therefore, some of the core responsibilities that lie with title agents are to protect client data from cyber threats, comply with financial regulations, abide by the specific policies levied by lenders and provide the right property information. This is important for them – to avoid business risk both for themselves and for their lender customers.
Today most of the title agents work with third-party partners/ vendors and must keep in mind certain guidelines to overcome these business risks:
1. Conduct a thorough due diligence to verify that the service provider understands and is capable of complying with federal consumer financial law
2. Request and review service provider’s policies, procedures, internal controls and training manuals to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or handle non-public data or have compliance responsibilities
3. The contract with the service provider must set clear expectations about compliance, as well as appropriate and enforceable consequences for violating compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices
4. Establish internal controls and ongoing monitoring to determine whether the service provider is complying with federal consumer financial law
5. Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate
By following the above steps, title agents or agencies and their stakeholders would be prepared to evaluate any threats, thus appropriately manage risks. Service providers like SLK Global Solutions that have been in this industry for over a decade now, clearly understand the severity of the situation. Such organizations have obtained certifications that include ISO 27001:2013 (for Information Security Management), ISO 9001:2015 (for Quality Management), SSAE – SOC 1 & 2 (financial controls), ISO 22301:2012 (business continuity) and PCI DSS V3.2 (payments), to avoid such risks and stay compliant with the ever-changing regulations.
Established in 2001, SLK Global Solutions is a business process transformation company providing technology enabled comprehensive products and solutions for the title insurance and mortgage industry. We specialize in property title search reports that can be delivered in 4 hours* with SmartProp and property tax reports backed by 100% financial guarantee with SmartTrak, enabling Title agents to partner with a single vendor for property search and tax reports. We deliver 1 Mn Title searches and 70,000 Tax reports annually, including to 3 of the Top 4 U.S. National Underwriters and 100+ U.S. Title & Tax customers.
Let us know your thoughts on the above and write to us at email@example.com to have a detailed discussion on how we can help you avoid such business risks and stay ahead of the game.