Fraudsters are always looking for new ways to take advantage of consumers. One of the latest schemes involves targeting individuals who are in the midst of purchasing a home. The nature of the real estate closing process is often hurried. The fact that email is a commonly used method for providing legitimate instructions for sending funds at closing makes this scam attractive to fraudsters.
What is Mortgage Wire Fraud?
This scam operates by the fraudsters convincing a borrower to wire funds into an account controlled by the fraudsters. Posing as a trusted party (e.g. legitimate settlement or real estate agent) during the home buying (or refinance) process, a fraudster will send “updated” wire transfer instructions to the borrower. The borrower, expecting to receive wire instructions to facilitate the closing process, unwittingly sends the funds to the fraudster.
Often, scammers will replicate trusted email addresses and phone numbers, through a technique called ‘spoofing’. Spoofing makes it appear that the phone call or email is coming from a company (or person) that you know and trust, so that you will not question the updated instructions. The scammer usually provides some type of excuse in the email: e.g. that the bank account number has changed, or that there has been a mix-up in instructions or details, and they will often mention that they are unable to be reached by phone or to contact them at an alternate phone number or email.
Convinced that the wire instructions originated with a trusted party, borrowers will send the wire transfer to the fraudster’s account. Unfortunately, this fraud is discovered when the title company or closing agent informs the buyer that they did not receive the anticipated funds.
Below are ways to protect yourself against this type of complex fraud.
How you can avoid becoming a victim of Mortgage Wire Fraud:
- Know who you are working with. If you are in the process of purchasing a home, discuss in person the closing process and payment protocols with your lender, real estate agent, or closing representative to understand the process and what is expected. Retain their contact information so that you can compare it to phone calls and emails that you receive before the closing.
- If email will be used, insist on encrypted emails. Require the persons you are working with to communicate with you using encrypted emails.
- Always confirm wire transfer instructions. Prior to sending any money, make sure to confirm the exact closing instructions (including the bank and the account number) with the intended recipient. Contact a trusted representative over the phone. Do not use any of the contact information provided by email, and instead, use information you have confirmed. (Perhaps through their business card or contact information listed on the website)
- Beware of ‘URGENT Changes’. If you receive an email alerting you that information has changed for the wire instructions, STOP, it is likely a scam. Legitimate lenders will not notify you by email that the account and bank for your wire transfer has changed. This is often a scam in which fraudsters are providing new and updated details so that they can steal your hard-earned money.
- Review sender details. If you have received an email with new wire instructions, pause and do not comply. In addition to calling a trusted source about your closing, review the sender’s email address. Legitimate emails will originate from professional sender addresses linked to the company. If you receive an email from a sender that contains @yahoo.com, @comcast, or @gmail.com (for example), this is probably a scam.
- Do not provide personal information. Always be cautious of information provided by email. Do not provide any personal details (such as date of birth, social security number, etc.) or any of your bank information by email. Email is not a secure method, so always proceed with caution.