Software solutions to combat identity fraud

Valuation Insights & Perspectives, Summer, 2007 by Wayne R. Pugh

In this issue's lead feature story (page 14), Valuation examines the ever-evolving topic of identity and signature theft, including the possible implications and preventive measures. Several software companies are in the process of addressing the issue with systems designed to increase security of a digital signature. The following is an overview of four of them currently on the market or soon to be available.

Pincert[TM] from ACI

Pincert provides appraisers, appraisal companies and lenders with a solution that promotes compliance and combats appraisal fraud from numerous angles. Pincert is compatible with standard PDF files, MISMO and other industry-standard XML formats. Designed to work with any forms-processing software, Pincert is a three-tiered system used to sign appraisal data, seal PDF files and deliver the final report package to the client.

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Pincert requires a comprehensive identity verification process that involves several steps:

* Validation of the appraiser on the Appraisal Subcommittee National Appraiser Registry.

* Two-level identity verification by Equifax including personal information confirmation and an out-of-wallet interview (such as the amount of the appraiser's monthly mortgage payment or mother's maiden name).

* Phone interview by ACI administration personnel.

The successful completion of this process results in a Pincert level of "Verified," the first level of verification. The highest level is "Certified" and involves an in-person identity confirmation by ACI or one of its authorized agents. Once approved, the appraiser is added to the secure Pincert Registry, which maintains appraiser information such as license expiration dates, certification levels, coverage areas and appraiser capabilities.

The Pincert signature is then created and is activated by the appraiser where it remains under the appraiser's complete control. The PIN number for the Pincert signature is stored online and can be changed by the appraiser on-demand, thereby preventing unauthorized use. When the appraiser applies the Pincert signature, the signing "ceremony" verifies the user with one of three levels of authentication (see sidebar) based on the appraiser's profile.

Each Pincert signing event creates a unique single-use signature "sandwich" (see Figure 1). The signature sandwich contains an image of the appraiser's signature, an optional photograph and data unique to the assignment, such as the property address, value opinion and effective date. The signature image also contains a tamper-evident background to protect against alteration.

During the signing process, a one-way hash of the entire report is created using an algorithm and then stored by Pincert. Since the hashed data cannot be used to recreate the data fields, it cannot be used by a third party for any purpose other than verification.

When the lender attempts to verify the report, the hash is recreated and compared against the original. If the two hashes differ in any way, it is a sign that the original report data may have been tampered with and that fraud may have been attempted. If a discrepancy is found, the anomaly is immediately reported to both the appraiser and the lender.

Additionally, by using a dual-platform system wherein the "signing ceremony" requires access to the server to authenticate the signature and transmit the hash, while the development of the report and much of the other activity takes place at the desktop level, Pincert speeds up the process by not requiring the appraiser to use up bandwith during the entire report-writing process.

For more information on Pincert, visit www.aciweb.com.

Appraisal Sentry

Another online server for validating and authenticating an appraiser's identity and for ensuring the authenticity of an appraisal report is Appraisal Sentry, from Appraisal World, a subsidiary of Bradford Technologies. The service was being beta-tested at press time to offer the following features.

Similar to other systems, Appraisal Sentry validates the identity of the appraiser via a third-party verification service that ties into hundreds of national databases as well as interviews to generate both in- and out-of-wallet information. It also checks the validity of the appraiser's license with the ASC registry. This information is encrypted into an identity authentication file, which requires a personal identification number for the information to be validated, similar to the process when using an ATM card.

In addition to authenticating the appraiser, Appraisal Sentry uses data matrix technology from Appraisal Matrix LLC to connect that identity with the appraisal report. A data matrix is a 2-D bar code--either digital- or paper-based--that can store data in a redundant form so that even if up to 40 percent of the matrix is destroyed or altered, the original data can still be retrieved. The U.S. Postal Service uses such technology in metered mail to prevent postage fraud. In Figure 2, the square with all the little dots is the data matrix, which stores all the information about the postage for this letter: the ZIP code it was mailed from, date, amount of postage, meter machine identification, etc. If you tried to commit postage fraud by changing the postage amount, you would also have to change the data matrix, which is next to impossible. This is why data matrixes are called "secure, portable databases"--they contain all the pertinent information about a document in a secure, tamper-proof fashion right on the document.