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County Hack Still Creating Problems

Wed, 10/19/2022 - 18:41

It’s been nearly six weeks since a malware infestation crippled Suffolk County’s computer systems, and while the county has adopted numerous workarounds to address the ransomware attack since Sept. 8 — there’s a long way to go before it’s business as usual, especially when it comes to real estate transactions.

The attack was especially damaging to those transactions after the county’s title search function was shut down more than a month ago. That system is up and running again on a limited basis as of two weeks ago.

“The magnitude of this hack is unprecedented and it has impacts across the board,” Suffolk County Comptroller John Kennedy said in a recent interview with The Star.

Mr. Kennedy highlighted title search snafus as being particularly felt in East Hampton, a company town, as the saying goes, where the company is the real estate industry.

While the mass system shutdown has affected real estate transactions across the county, Mr. Kennedy suggested that “the impacts you are seeing out there is that it’s very cruel that anybody — particularly a first-time homebuyer who might have had a favorable mortgage commitment, may have seen that come and gone.”

Mr. Kennedy’s concern was echoed by Chris Nuzzi, executive vice president and regional director for the firm Advantage Title, which has offices in New York City and on Long Island, including one at 2 Newtown Lane in East Hampton.

“We have a busy real estate market here in the eastern end of Long Island,” Mr. Nuzzi said. “Without a doubt, the ransomware attack on the county systems provided a challenge across the industry and we’ve been working, as have many others, over the past month now to close files despite those challenges.”

Mr. Nuzzi credited Suffolk County Executive Steve Bellone and the county clerk’s office for recognizing and addressing the large-scale economic impacts throughout Suffolk County “for not being able to facilitate real estate closings, whether it was a large-scale residence on the East End, a refinancing, a first-time homebuyer,” said Mr. Nuzzi. “The inability in the county to create title reports became more of an obstacle day by day.”

The county clerk’s office says it is now open for in-person title searches to allow real estate transactions to proceed.

The next phase in restoring real estate services provided by the county, said Mr. Nuzzi, is for it to get caught up on transactions that have taken place during the shutdown, via the Suffolk County Real Property office, which maintains the county property tax map. Documents associated with real estate transactions have to be verified against the tax map before a transaction can proceed, said Mr. Nuzzi. 

“This is a very important next step in moving beyond this closure that dates back to Sept. 8,” Mr. Nuzzi said, and is basically getting the county map aligned up with properties that have closed during the malware period, “so that we know the latest deeds, we know of judgements and liens.”

Mr. Nuzzi also emphasized how the malware crisis may have engendered a negative drag on first-time homebuyers.

“That’s a tangible result,” he said, “where people are losing out on buying a property. The idea that someone has a rate locked in that expires if they can’t get a title report, if they can’t get to closing. Those rates are resetting — and we’re watching now as the Fed increases interest rates. If you were relying on the locked-in rate to be able to afford that home, it’s a real issue to people and of great concern to us. We’re doing what we can to try and facilitate these closings but when the government agencies that are responsible for maintaining the information integral to that process are closed or are unavailable — as each day goes on, it makes it more difficult.”

In a broad-ranging interview in which he detailed numerous service areas where the malware attack could be playing out in East Hampton, Mr. Kennedy said he couldn’t predict when all county systems might be back up and running.

The slowdown in real estate transactions stands out, Mr. Kennedy said, and also because of programs such as the regional community preservation fund that utilizes a 2-percent transfer tax on real estate transactions to fund land-preservation initiatives. Mr. Kennedy said the longer the county’s computers are shut down, the greater chance the C.P.F. might see delays or lose out on funding.

“We did the last C.P.F. distribution,” said Mr. Kennedy, “but the next one will be impacted — there will be postponed closings, postponed contributions, or buyers may be making other decisions.”

There appears to be good news on that front: Scott Wilson, East Hampton Town’s director of land acquisition and management, which oversees the community preservation fund program here, said the malware crisis “is not slowing our process or our ability to close on properties. The primary burden seems to be on the title companies that may need to hold deeds in escrow before filing and recording them at the county.”

Mr. Kennedy also suggested that the county’s $130 million backlog in cutting checks to vendors may have a ripple effect on delivering social services to residents in need in East Hampton.

Diane Patrizio, director of the East Hampton Town Department of Human Services, said the agency had so far not experienced negative fallout from the malware attack.

The Retreat in East Hampton, which provides shelter and services to victims of gender violence — be it sexual violence, domestic violence, or bullying — relies on government, foundation, and donor funding to provide a range of services, including a few thousand dollars a month from Suffolk County that goes toward payroll, addressing food insecurity with Retreat clients, and other needs. “There has been a delay in some payments, and we are experiencing some impacts,” said the executive director Loretta Davis, who oversees the organization’s $5.8 million annual budget and its Long Island-wide operations. “It’s a little worrisome for us right now. We have to come up with the funds elsewhere, and that can be constraining for us.”

“All of our services are free,” Ms. Davis said.

“I can’t give you specifics,” said Mr. Kennedy, “but I know for a fact that there are vendors delivering services across the South Fork — whether it’s day care, pre-school handicap programs — it could be just a whole range of different outfits that are providing services for the county that are unable to go ahead to do the regular process for payments.”

The county, he said, had missed five check-cutting runs since early September. The runs average $15 million and $20 million per cycle, adding up to $120 million to $130 million in unpaid receivables to date.

Mr. Kennedy says he’s been furiously cutting checks by hand as he name-checked other county functions that remain in limbo: “How about wastewater system permitting? How about well-testing? How about operations out of our county morgue?”

“And what’s going to happen with HEAP applications for at-risk seniors,” Mr. Kennedy concluded, referring to the Home Energy Assistance Program that helps people of lesser means keep their oil tanks full in winter.

Will the malware crisis be a near-distant memory by then?

“I wish I could give you a realistic number,” said Mr. Kennedy when asked when the malware crisis might be resolved, “but the glaring conclusion appears to be emerging that there were not sufficient firewall breaks between different areas of operation, despite the county spending $15 million — and yet we had bad actors who were able to get in there.”


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