UPDATE, Nov. 30, 9:42 a.m.:
Coriell reports this morning that the local title companies are fully up and running once again.
UPDATE, Nov. 29, 1 p.m.:
Bryn Coriell called the Outpost a few minutes ago to report that a few employees at the two local title companies have had their access to Fidelity National Title’s online systems restored, which he took to mean that the rest of the staff will soon be up and running as well.
Virtually all local real estate transactions have been indefinitely delayed since last Tuesday thanks to a failed cyberattack on Fidelity National Title, a Fortune 500 company that owns the only two title companies left in Humboldt County: Humboldt Land Title and Fidelity National Title Humboldt.
The unexpected shutdown could wreak havoc with pending escrow closures and cause major financial impacts to borrowers, according to Bryn Coriell, president of the Humboldt Association of Realtors and broker-owner of Coldwell Banker Sellers Realty in Arcata (DRE# 01997964).
“At this point, Humboldt County is in total gridlock,” Coriell said. “We can’t close a single escrow or facilitate the signing of settlement statements.”
Speaking only about the incident’s impact in his own office, which employs 20 agents, Coriell said, “We have at least three deals that are supposed to close this week and we had one or two last week that are not going anywhere.”
After being targeted with a ransomware attack last Tuesday, Fidelity National Title responded by shutting down some of its systems, which is impacting mortgage transaction services nationwide, as the company explained in a regulatory filing with the U.S. Securities and Exchange Commission.
In an emailed message to fellow members of the Humboldt Association of Realtors this morning, Coriell explained that as a result of Fidelity’s ongoing internal review, the company is having to reboot each employee’s system access one by one, which is time-consuming. “This process involves authenticating each unique user and ensuring compliance with the SEC,” his message explained.
Nearly a week after the attack, local employees of the two Fidelity-owned title companies still don’t have access to the systems required to complete home loan transactions, he said.
A woman who answered a phone call to Humboldt Land Title told the Outpost that all inquiries must be sent to Fidelity’s national marketing team. We sent an email but aren’t holding our breath for a response since other news outlets have been trying to get answers for more than a week, to no avail.
Meanwhile, the local real estate market has come to a screeching halt. One local lending professional, who asked to remain anonymous so as not to burn any business-related bridges, said the cyberattack is hitting Humboldt County especially hard because there are no alternatives to Fidelity here.
“It’s kind of scary because we used to have multiple companies doing the same thing, and Humboldt Land Title used to be employee-owned,” he said. “Fidelity bought them out. Since then, [Humboldt Land Title and Fidelity National] operate under two different names, but really it’s one company. Each transaction is typically going through them, so if they go down, we all go down.”
The lender explained that interest payments on home loans are paid in arrears. So, for example, a December loan payment covers the necessary principle amount plus November’s accumulated rent.
“When we fund a loan, [the borrowers] start paying interest from the day we fund, which is normally fine and dandy,” he said. “But last week we funded a loan and it hasn’t recorded, so our borrower is paying interest on a loan that hasn’t been recorded because Fidelity/Humboldt Land is unable to trace the funds for the loan and get into their system to verify everything.”
He’s hoping that the title company will cover any excess interest amount that his clients have to pay but he doesn’t know if that will happen.
Another employee of that lending company said borrowers could wind up losing their down payment as a result of their loan following through, costing them $15,000 or more. “I don’t necessarily trust banks to recognize that this is an extenuating circumstance,” he said.
Last week, one worried realtor told Coriell that clients were pulling into Humboldt County in a 40-foot moving truck and had no idea what would happen if their loan didn’t close.
Coriell wanted to make it clear that local employees of the two Fidelity-owned title companies have always been top-notch, and they’ve done their best to help during this incident, reaching out to corporate higher-ups by phone, delivering checks for earnest money deposits and so forth. But for the most part they’ve been locked out of the systems required to do their jobs.
In most cases, the delayed home sale closures aren’t a huge deal, Coriell said, because a delay of a day or two — or even a week — won’t make a big difference in the long run, though of course people might get upset about having to cancel reservations for cleaning companies, moving vans or other services.
“The real trouble,” Coriell said, “is when people who are loan-funded lose their rate lock.” Banks and other mortgage lenders often pre-approve home loans at a guaranteed interest rate, but if the deal fails to close within a set timeframe, that guaranteed rate can be lost.
When the borrower applies again, Coriell said, “the rates might be a lot different. They [the borrowers] might not qualify for that loan and so they can’t buy that house. That’s the real kicker.”
In his message to fellow realtors, Coriell said leadership at Fidelity was hopeful that its systems could be back online as soon as today, though there’s no way to know how long it will actually take.
With people waiting to close what may be the largest financial transactions of their lifetimes, the stakes of this shutdown are getting larger every day.
“We tend to run on pretty strict schedules,” Coriell said. “These are people’s lives.”