We received the call on the morning of our closing date. “Your buyer wired his funds to a fraudulent account. Everything is on hold.”
My first reaction was to wonder how, today, a smart, young professional like our buyer gets taken in by such a scam. But what none of us realized is just how pervasive and convincing mortgage wire fraud has become. As details emerged, our buyer was himself mystified and confused. “Everything in the email was correct. Nothing was off. It looked completely legitimate. I don’t understand how the criminals knew what they knew. That’s what authenticated it to me.”
Although it took weeks to resolve and it was an anxious time for everyone – fortunately, the funds were recovered, and the sale moved forward. But my experience drove home the harsh reality that mortgage wire fraud is a real risk that both financial institutions and consumers need to protect against.
The fact is that reported mortgage wire fraud attempts rose 1,110% between 2015 and 2017. In 2018, the FBI reported that more than 11,000 Americans fell victim to mortgage wire fraud schemes, with instances and losses continuing to rise throughout 2019.
Come 2020-2021, mortgage wire fraud significantly increased and became fueled by two primary events:
What sets mortgage wire fraud apart is the sophistication and persuasiveness of the strategies usually employed to carry it out.
In recounting details of interactions with scammers, the majority of mortgage wire fraud victims report that communications by email and phone included accurate information that only a legitimately involved party should know – things like names, phone numbers, email addresses, email signatures, account numbers, and closing dates. In some instances, even the actual closing documents have been attached.
Additionally, unlike many email scams in which grammar and punctuation errors or the cliché nature of the content can tip off a relatively informed recipient, the spoofed correspondence associated with mortgage wire fraud tends to be well-constructed, informed, business-like, timely, and highly relevant to the victim’s circumstances.
Real estate scammers typically obtain this information via successful phishing or hacking campaigns targeting the buyer, real estate agent, or lender. It can be difficult to recognize where the compromise originated – but once the fraudster has access to an inbox, all they must do is monitor communications for the right opportunity to make their move. This explains how the perpetrators can construct emails or make phone calls that say just the right things to put any possibility of a real estate scam out of the victim’s mind.
There are several methods for detecting and avoiding mortgage wire fraud that consumers and financial institutions should be aware of.
First, do not open the door to wire fraud. Be aware of phishing techniques and always ignore emails or phone calls seeking personal information – no matter how legitimate they seem – unless reliable steps have been taken to verify the request. Because these steps may vary and change over time, institutions should provide regular ongoing training to help employees detect mortgage wire fraud schemes. Blocking access to email inboxes creates a significant barrier to falling victim to mortgage wire fraud schemes.
Second, take the time to educate your customers about mortgage wire fraud and real estate scams.
The following information should always be a part of discussions intended to protect clients and make them aware of how to spot real estate scams:
While not yet signed into law, the Internet Fraud Prevention Act was introduced to Congress in June of 2020, requiring (among other things) that financial institutions verify things as simple as ensuring account names match account numbers before processing transfers.
With the substantial increase in successful mortgage wire fraud schemes and its potential to ruin lives, we’re likely to see legislation aimed at mitigating the risks sooner rather than later. But until that time, it is the job of consumers to be aware of the risks of mortgage fraud, as well as the good faith of our institutions to do their part in establishing the most effective barriers possible to prevent real estate scams.
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