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68 associated with the closing are accurately inputted by the lenders prior to drafting the final CD form. Title Agents must also be careful about lenders inserting indemnification language in their closing instructions concerning the CD forms. e CFPB clearly delineated that the burden of accuracy falls on the lender, not the title agency. Nevertheless, this has not stopped some lenders from attempting to transfer liability to the title agent. e underwriters have clearly instructed all agents "not to sign or approve closing instructions with indemnification language." No matter what industry you are in, the risk of fraud is always present. Fraud is one of the greatest ongoing challenges to title agencies and underwriters. Developments in technology help manage the problem, but also afford new opportunities for fraudulent activity. Our title agency represents two of the national title insurance underwriters. Underwriter-issued "Fraud Alerts" have become more frequent and more alarming. According to Fidelity National Title Group, Wire Fraud is rampant nationally and an epidemic. e result is large losses to some unfortunate and unsuspecting title agencies. As a result, we took steps to ensure we had appropriate fire walls and quality control in place to prevent cyber threats and wire fraud. is included programs which provide a defense against malware and other cyber threats, such as phishing emails with embedded links and other such nefarious activity. It should also be mentioned that standard errors and omissions coverage, including cyber policies, do not protect against such theft. Be sure to talk to your business insurance agent to obtain the necessary recovery protections and/or endorsements to coverage. rough this process we learned where fraud prevention and the ATLA Best Practices intersect. Title agents must be proactive in utilizing the appropriate escrow procedures set forth in Pillar 2 of the Best Practices. Email, Fax and telephone instructions are not an entirely secure way of communication. Best Practices require that wire and disbursement instructions received via email must be confirmed by telephone at a known or individually confirmed telephone number and not only the telephone number at the bottom of the email. Be on guard for new, revised or altered bank wire instructions. Wire instructions seldom change. Also, be sure to block all outgoing international wires from the escrow account at your bank, if possible, or at the very least implement a system to flag them. First American recently reported an example of attempted wire fraud in Texas. e buyer was to bring in over $1.5 million in cash to close. Shortly before closing the buyer received an email which appeared to be from the escrow officer. is email listed the file number and property address in the caption. Unlike many fraudulent messages, it was well worded, informing the buyer that because of our "tax policy" involving wires over a million dollars, the buyer would be receiving new wire instructions, informing him it was company policy in such cases to use an "international account," and if there are any questions to respond to the escrow officer via a Gmail account. Fortunately, this buyer was accustomed to dealing with First American on a regular basis, called the escrow officer directly and the fraud was defeated. Positive Pay is an automated fraud detection tool offered by the Cash Management Department of most banks. Simply stated Positive Pay matches the account number, check number and dollar amount of each check presented for payment against a list of checks presented, authorized and issued by the title company. It is a tool which can be utilized to block payments of forged checks. Positive Pay must be monitored daily to insure only authorized checks can be drawn against your escrow account. Our title agency has successfully used Positive Pay to defeat a forgery scheme preventing forged checks from draining our accounts. e above examples are but a few of the proactive measures which may be taken to prevent fraud, forgery and theft of escrow funds. We work closely with our underwriters to implement and enhance fraud prevention. e procedures and policies must not only be documented in your Best Practices, but must also be implemented in the daily operations of your Agency. Never have the risks been greater than they are today. e good news is that law firms and REO title agencies are better trained, more prepared and ready to take on bigger challenges. THREE IMPORTANT PRACTICE POINTERS TO PROTECT YOUR BUSINESS: Implement preventive measures as part of your best practices. Wire and Check Fraud is prevalent, far reaching, creative, evolving and manifesting a real and present danger to title agencies. A failure to follow your protocol every wire could be problematic. Verify each wire, beware of last minute changes in wire instructions, and follow your instinct. Read your closing instructions carefully! Title agencies must work in tandem with lenders and realtors to be sure the Closing Disclosure forms are correct and compliant with CFPB regulations. However, that does not mean that the title agent should assume the liability if a CD form is found wanting by the CFPB or a subsequent investor purchasing from the originator. Work with your underwriter and utilize all of the resources at hand to draft comprehensive Best Practices. Best Practices cover more than just solid escrow procedures and fraud prevention. The Seven Pillars of Best Practices is not a document that can be quickly drafted overnight. Many parts of the seven pillars are already in place, but need to be documented and then updated on a routine basis. If affiliated with a default law firm, you already have compliance and audit expertise. Leverage that knowledge into your seven pillars. You may also choose to take the extra step to obtain a Third Party certification of compliance for Best Practices. While this option came at a modest cost for our title agency it proved to be an important validation for our lender and realtor partners that our title insurance agency has matured and prepared for these challenging times. 1 2 3

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