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Home ownership is a treasured part of the American dream that offers millions of Americans stability and security. But increasingly, home ownership is also bringing vulnerability. Mortgage fraud is on the rise and is reaching “epidemic” proportions, as FBI officials testified during Congressional hearings last fall. To detect and deter real estate fraud, county recorders and lenders require deeds and loan documents to bear the certification of a Notary Public who has verified the identity, volition and awareness of the signing property owner. Consumers increasingly rely on credit unions for their mortgage lending transactions and so naturally a greater number of credit unions have at least one full-time employee who serves as their resident Notary Public. But what safeguards do credit unions implement to protect the integrity of these notarial acts? Would-be criminals are sophisticated in their methods of circumventing a notary and perpetrating a crime. As credit unions expand their product offering to include home loans to increase market share, they must match this level of sophistication. A professional, conscientious notary provides peace of mind to both the consumer and the lending institution. The higher the rate of fraud, the greater the financial loss; sound notarial practices can help mitigate losses. Notaries can present a significant obstacle for real property thieves. While state laws dealing with notaries vary, a conscientious notary will follow these six “Best Practices”: * Demand personal appearance of all signers: Laws in every state require grantors to sign or acknowledge conveyance deeds in the presence of a Notary Public. * Verify the signer’s identification: Once a signer is present before the Notary, the Notary carefully verifies the individual’s identity. This act of identification provides assurance that a signer is not an impostor trying to cheat an innocent victim out of valuable property. * Determine basic awareness and absence of duress: While confirming identity, the Notary observes whether the signer appears to be alert and aware of the transaction and under no pressure or duress to sign. * Create a paper trail: Some states do not require a journal, but notaries should maintain a record of each notarization in a journal of notarial acts. The Notary’s journal is a public record that creates an auditable evidence trail for prosecutors in the event of an act or attempt of fraud. * Obtain a journal thumbprint: Only one state, California, requires signers of real property deeds to leave a thumbprint in the journal, though pending legislation in several other states would require this. It is strongly recommended as a “best practice” that notaries ask each signer to leave a thumbprint. If the impostor is not scared off by this request, the thumbprint will constitute evidence that a fraud was committed. * Verify the document is complete: Notaries should scan each document to ensure that they are not notarizing a totally or partially blank instrument – the equivalent of signing a blank check. These best practices present a formidable barrier for a would-be criminal. Indeed, by following the steps outlined above, notaries serve as the guardians of property and personal rights. For this reason, the Federal Bureau of Investigation (FBI) recently approached the National Notary Association (NNA) in order to gain a greater understanding for the evidence a Notary Public collects by following the above procedures. The FBI understands that in order to win the fight against fraud and identity theft, the full arsenal of a Notary must be utilized. Like the FBI, criminals also understand the power of the notary. Real estate swindlers have fine-tuned techniques for “neutralizing” the notary as a fraud-deterrent agent. Lending institutions should be familiar with these techniques and the ways to counter them. From presenting virtually undetectable false IDs, to stealing or forging a notary’s official seal, bullying a Notary into notarizing a document, or even recruiting an unscrupulous Notary to join in the scam, criminals use any means possible to circumvent the Notary. In all sectors of business, including credit unions, steps must be taken to reduce the likelihood that these neutralizing techniques will be successful: * Treat the notary as a professional position: There is an all too prevalent attitude that a notary’s duties are of secondary importance. This attitude is dangerous, and leads to lax rules of conduct that increase the potential for fraud. All employees should be properly educated on the essential role their notary-colleague plays in detecting fraud, and consequently in reducing risk for the consumer and the lending institution. * Protect the notarial procedure: Standards for safekeeping the notary seal, journal, and other equipment necessary to perform notarial acts should be established. Procedures should be in place for a notary to report unusual behavior by a customer and immediate managerial support should be available when situations arise due to the notary’s refusal to notarize a document. * Mandatory notary education: Notaries should be required to take a course of instruction on their critical screening duties and to keep up to date with notarial state laws. The more knowledgeable the notary on issues such as state identification cards – being able to differentiate between a fraudulent and a valid one through training, for instance – the greater chance that notary has of detecting or deterring fraud. Some states have mandatory education laws for notaries; in the states that do not, credit unions should insist on mandatory education as a business practice. * Mandatory journal records: Notaries should be required to keep a record of each official act – including the thumbprint of each document signer – again, regardless of state law. Already for too many Americans, the dream of home ownership is out of reach due to surging costs associated with the increase in fraud. And while these steps will not completely eradicate fraud, we are obligated to exert the same focus and determination in fighting this crime as thieves use to commit them. The well-equipped notary has an irreplaceable role in this fight and mortgage lending institutions would be wise to utilize this weapon as effectively as possible.

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