Distressed assets, AI fraud complicating title insurance risk

"This has been an unusual real estate cycle, as there is not a single, overarching economic challenge or asset class that has been in distress. For example, the office market has been uneven, with Class A office space in New York City setting record rental rates, while Class B and C office space is experiencing some of the worst market conditions."

"Fraud schemes are getting sharper and faster, driven by AI and stolen data. The most effective countermeasures are clear processes, advanced technology tools and the continuous education and awareness of employees, partners and customers. Between stolen data, AI and tech tools, fraudsters are pushing the limits on how convincing their schemes can be. The uncomfortable truth is there's no single answer to threats this varied, so countermeasures must be designed to confront fraud risk with layered defenses."

"At First American, the simple concept of layered validation has had outsized impact. Each layer reinforces the next, and together they help prevent fraud that might slip past any single control. The reality is all parties to the transaction, from the real estate agent to the lender to the buyer and seller, are vulnerable to the rising threats from fraudsters, so it is imperative each party remain hyper-vigilant."

This real estate cycle shows uneven distress across asset classes, with Class A New York offices hitting record rents while Class B and C offices suffer poor conditions. Commercial lenders are ending 'pretend and extend' practices, producing an increase in desperate borrowers and more bad actors in commercial real estate. Fraud schemes including wire fraud, impersonation and fake identity are evolving rapidly, powered by AI and stolen data. Effective countermeasures combine clear processes, advanced technology, continuous education and layered validation. Layered validation, where each control reinforces the next, significantly reduces fraud risk. Every transaction party remains vulnerable and must stay hyper-vigilant.

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