MortgagePoint July 2023

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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 42 July 2023 F E A T U R E RON & FRAUD: THERE'S MORE TO THE STORY While a small fraction of RON transactions may involve fraudulent activity, we have advanced tools at our disposal to stay ahead of bad actors. B y B R O O K E A DA M S R emote online notarization (RON) has been a game-changer in the real estate industry, bring- ing convenience, efficiency, and security to the closing process. Despite a few incidents of attempted fraud highlighted in the media, RON continues to gain popular- ity and recognition for its many benefits and added security protections. While it is important to shed light on attempted fraud, it is equally important to keep things in perspective. Isolated incidents of fraud represent only a tiny fraction of the many successful real estate transactions conducted using RON each year. RON closings provide many addi- tional identity verification safeguards than conventional in-person notary transactions, especially when using the right platform and when best practices are followed. Putting RON Fraud Into Context I nstances of fraud related to Remote On- line Notarization technology may typically involve criminals utilizing a public database to identify unoccupied or unencumbered properties, obtaining the owner's identity from public records, and impersonating the owner while working with an unsuspecting real estate agent. In such scenarios, the fraudulent seller often fabricates an urgent need to sell the property and may accept below-market value offers, particularly if paid in cash. The criminal often insists on a remote closing and may have arranged their own remote notary outside of a conventional platform. However, the issue with focusing on these isolated incidents is that they are often pre- sented without the necessary context. While addressing these incidents is important, it's also crucial to understand that they don't necessarily reflect a system's overall safety and success. The same holds true for real estate trans- actions. The real estate market is known for its high transaction volumes, with millions of deals conducted each year. While a small fraction of these transactions may involve fraudulent activity, we have advanced tools at our disposal to stay ahead of bad actors. Enhanced Safety Measures in Remote Closings R ON provides a plethora of identity verifi- cation safeguards that go beyond what is typically available in conventional in-person notary transactions. Although concerns have been raised about their safety, we can be as- sured that it is, in fact, the safest option when closing, especially when (and if, as it keeps being introduced) federal legislation passes that establishes clear rules and regulations. However, since we are currently work- ing in a patchwork landscape, the laws vary by state, which can create confusion and uncertainty. Despite this, RON should still be regarded as the safest option available due to the advanced security verification tools and safeguards that closing platforms incorpo- rate. These measures far exceed the security provided by a notary checking someone's ID during an in-person notarization. During an in-person signing, the notary only verifies the seller's identity by checking their ID and making a notation. However, with RON, the notary verifies the seller's ID by asking them to present it to the camera for credential verification and answer a dynamic "Knowledge-Based Assessment" quiz of five questions based on the identity of the purported signer. This dynamic Knowledge-Based As- sessment will generate a set of five random questions that only the target individual will know the answers to, as they are based on public data, credit reports, and other records databases specific to the individual. RON platforms require every signer to complete this test in under two minutes and pass with a score of at least 80%. If an individual fails, then they may retake it one more time, but then if they fail, they are locked out for 24 hours, meaning the notary cannot use this method to verify the identity for the notariza- tion. The credential verification assesses the ID card for authenticity against independent data sources and looks for signs of tamper- ing and illegitimate documents. In this scan of the ID, the closing platform captures the front and back of the ID, and the data is veri- fied against the issuing state or authority's template, and advanced forensics detect signs of tampering or other fraudulent activity. The B R O O K E A D A M S is the General Counsel, Chief Compliance Officer, and Corporate Secretary of Stavvy.

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