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Mortgage Wire Fraud: What It is and How to Prevent It

Cybercriminals scammed more than 11,000 Americans out of nearly $150 million through mortgage wire fraud in 2018, according to the FBI. Even homeowners looking to refinance are at risk, but knowing how this type of mortgage fraud works and the steps to prevent it may keep you from becoming a victim.   

What is mortgage wire fraud?

Mortgage wire fraud is a sophisticated cybercrime where fraudsters convince a borrower to wire funds into a bogus account during the closing process. Homebuyers (or homeowners getting a refinance) receive fraudulent wiring instructions from a scammer impersonating the real estate agent, escrow officer or lender.  

Unless the fraud is discovered soon after the wire is sent, there’s a good chance the money will be gone.

How mortgage wire transfer scams work

Mortgage wire transfer scams target victims primarily during the mortgage closing process. Here are some ways criminals use to commit mortgage wire fraud.

  1. Phishing emails. Using internet listings, scammers usually look for pending sales and collect any information they can get online about the seller and the listing agent. The scammer then pretends to be someone who’s involved in the transaction, using an email address that looks legit, to “phish” for personal/financial information from the borrower.
  2. Hacking into databases. Hackers target the online systems that real estate agents, lenders and title companies use to get information about active real estate purchases.
  3. Sending emails to the buyer. The hacked email account is used to send emails to the buyer, pretending to be the real estate agent or title insurance company.
  4. Sending new wiring instructions. Disguised as the lender, title company or real estate agent, the hacker sends the borrower fraudulent wiring instructions. This typically involves a request for the home closing wire transfer to be sent to a new bank.
  5. Taking the money and run. In many cases, the funds are sent to a bank account controlled by an organized crime group in an offshore account that’s untraceable.

Although homebuying scams using fraudulent wires have recently been aimed at buyers, cash-out refinance borrowers are also being targeted. The fraudster may use your or your lender’s email address to trick the title company into sending your funds to their account. Bring a copy of your bank’s wiring information to closing so you’re protected.

Steps to avoid mortgage wire fraud

Take precautions early in the mortgage process that might help you avoid becoming a victim of mortgage wire fraud. Here are six steps to follow.

  1. Gather names and numbers from day one. When you sign a purchase contract, the phone numbers and email addresses for the seller, real estate agents and the title company or attorney should be listed on the agreement. Keep this contact page handy to compare to emails and calls from certain phone numbers you receive before closing.
  2. Confirm wiring instructions with a phone call.  Legitimate wiring instructions that you receive in writing or via email should come with an escrow account number, the physical address of the property you’re buying and routing information for a local bank. Always call someone at the title company first to confirm wiring instructions before you wire funds.
  3. Don’t reply or refer to emails for wiring. Don’t click on any links, or reply to or call phone numbers in an email to confirm wiring instructions. Use the contact information gathered at the onset of the process to re-verify the information.
  4. Be suspicious of incoming calls. If you’re being asked for any personal financial information on the phone, ask for a name, title and phone number to call back. Then check the number against the data you collected when you signed the contract. 
  5. Call your lender as a backup. A quick call to your loan processor or loan officer, who works closely with the escrow agent, provides an extra level of protection.
  6. Verify that your money was received. Call your title company to confirm receipt of funds the same day that you wire them. 

What to do if you’ve been scammed

If you think you’ve been duped by a real estate wire fraud scheme, minutes count. Take the following steps to potentially avoid losing your down payment and closing cost funds.

  • Request a wire recall immediately. Your bank may be able to stop the funds from being transferred. 
  • File a complaint with the FBI. Go to the FBI’s Internet Crime Complaint Center and give as much information as you can about what happened.  If you file a police report, give a copy to your bank. 

The wire fraud statute of limitations is five to 10 years, so cybercriminals can be prosecuted long after a crime is committed. A wire fraud felony conviction may come with penalties of 20 years in federal prison, as well as steep fines.  

 

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