Does E-Closing Actually Reduce Fraud And Identity Theft?
The federal E-Sign Act (ESA), adopted in 2000, established that electronic signatures are legally valid and enforceable as part of a commercial transaction. The act created a general definition of an electronic signature as, “an electronic sound, symbol, or process attached to or logically associated with a contract or other record, and executed or adopted by a person with the intent to sign the record.”
A later act, known as the Uniform Real Property Electronic Recording Act (URPERA), was created in 2016 and adopted by 46 states and the District of Columbia. URPERA clarified that county and municipal recorders are authorized (but not required) to accept, record, store, and retrieve documents and e-signatures pertaining to real estate transaction, as if they were wet-ink signatures and physical documents. The act also required that states whose recorders accept e-signatures and digital documents establish oversight for those processes, but left it to individual states to develop and implement that oversight. As a result, the real-world application of URPERA is not very uniform.
- E-Signatures & Electronic Documents In Real Estate – The fact that some states, counties, and municipalities are still using paper-based systems for recording real estate titles, and more are using hybrid paper and electronic systems creates opportunities for fraud. As the entire process moves toward digital implementation, though, there will be greater uniformity and fewer chances for would-be perpetrators of real estate fraud to take advantage of the inefficiency of the paper-based systems. Titles will be recorded more quickly, and transaction documents will be transmitted and stored through secure means, with safeguards in place to make tampered or forged documents immediately identifiable.
- Shut The Door On Fraud – Common fraud schemes take advantage of the fact that paper-based systems operate in isolation, and that they move slowly, so a well-organized criminal can strike multiple times before the record-keeping catches up and reveals that there’s a problem. In some cases, these fraudsters even work the law to their own advantage. For example, in some states, recorder’s offices are limited in their ability to verify signatures and documents they are presented as part of an instrument. Forged quitclaim or trust deeds are another common entry point for real estate fraud in a paper-based system, and those means would be easily foiled by end-to-end implementation of digital documentation, because tampering with digital documents in a secure system leave a trail to the perpetrator.
- Reduce Human Error – Some cases of identity theft and fraud in real estate transactions stem from deliberate acts. More often, though, human error leaves an opening for identity theft. Unsecure email, mailing or faxing physical documents, and storage of paper documents all leave your clients’ identity and financial information vulnerable. Conducting transactions within a secure electronic shell prevents hackers and phishing attempts, ensuring that only verified users and devices are able to see any of the information involved in your transactions. Entering transactions into a digital system also helps weed out human errors by using a relational database for single-entry simplicity. Any form you choose in relation to a given transaction is automatically populated, so you know you’re getting complete and correct forms and calculations every time.
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