While many companies have safeguards in place, one attorney is concerned about growing fraud risk
Remote closings have become one of the mortgage industry's bigger selling points in the post-pandemic world, promising faster transactions and fewer scheduling headaches.
But just like with many other technological advances in finance, while remote closings can be extremely convenient and secure when safeguards are in place, fraudsters are working to undermine that safety.
One New York real estate attorney reached out to several title company claims departments to discuss some of the challenges with remote closings.
Elise Kessler (pictured top), counsel at Braverman Greenspun in New York City, said those contacts cautioned that fraud was creeping into remote closings.
"Since the pandemic, the trend has been remote closings," Kessler told Mortgage Professional America. "What happens is you have closings where people don't appear, and it becomes more difficult to verify identities. They are absolutely seeing an increase."
Remote Online Notarization, or RON, is now legal in 45 states and the District of Columbia, according to the Mortgage Bankers Association. The technology has grown considerably more sophisticated since its pandemic-era debut. However, Kessler notes that there are parts of the process that even she questions.
"I would never do a remote notary," she said. "Somebody gets on a Zoom call, and I am not going to notarize their signature. There is no way."
What to watch for
New York briefly expanded online notarization before tightening its rules significantly. Kessler said not every state has tightened its rules in the same way, and brokers should be aware.
According to the MBA-ALTA Model Legislation for Remote Online Notarization, well-implemented RON platforms require multi-factor identity verification, encrypted audio-visual sessions, and knowledge-based authentication questions drawn from the signer's credit history. Sessions are recorded end-to-end, creating a paper trail that a traditional closing does not always produce.
Kessler's concern is not with the technology when it is done right. It is with the gap between how the best programs run and how the practice plays out across the industry, and the pressure on everyone to keep deals moving.
"Should I be doing that?" she asked, referring to the habit of accepting a phone photo of a borrower's ID. "Everyone does it now, but I kind of question whether that is enough. But that is what everybody does because we all want to get things closed."
The concern is not limited to video closings. Some lenders send a third-party notary directly to a borrower's home to collect signatures on-site, with no direct connection to the lender, the title company, or the attorney on the file.
"What they do is send a third party to someone's house to get them to sign documents and notarize," Kessler said. "Who knows what they are signing and who knows who they are."
When a signing service notary spends minimal time on identity verification, and the signer is not the legitimate owner of the property, the closing can proceed without anyone catching it.
Problems harder to catch
Even a broker asking all the right questions may have trouble trusting the answers. AI has made document forgery cheap and accessible in ways it simply was not before.
Kessler said digital tools have changed what fraud looks like at the closing table. Using AI, fraudsters can now impersonate a seller, generate fake credentials, and produce documents that are nearly impossible to distinguish from legitimate ones without expert review.
Title industry groups have noted a year-over-year rise in fraud attempts targeting title and settlement companies, with the schemes getting harder to spot. The problem gets worse when a deed has not yet been recorded.
A borrower who claims ownership and wants to move fast before the deed shows up in public records leaves the broker with nothing to independently verify.
"You want to make sure that deed has been recorded," Kessler said.
Title insurance provides some coverage, but Kessler said the real problem is how easily the process can be compromised before a title company is even involved.
She described a scenario that is more common than brokers may realize. A lender makes a loan on a property, sends a third-party notary to the borrower's home to collect signatures, and nobody with a direct stake in the transaction is in the room.
"If that broker is going to make that loan and it's one of these — someone's residence — and they show up at the house and there's some person signing," she said. "I think it could really be potentially dangerous, not being able to verify who they are. You don't have a title company there that's actually looking at the identification. You just hire someone and give them $50 to go to someone's house."
Kessler said one way to combat this type of fraud is similar to other types of mortgage fraud. Sometimes, it takes a little more time to make sure everything is legitimate.
"I think these remote closings … we need to be a little bit more careful and do more due diligence," she said.
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