October is Cyber Security Awareness month, which makes it the perfect time to talk about one of the more complex schemes that criminals orchestrate over the internet to get access to your money:
It’s known as mortgage wire fraud.
Mortgage wire fraud, otherwise known as real estate wire fraud, is a growing problem in the U.S.
In one recent news article on the topic from March 2022, FBI Special Agent Siobhan Johnson commented on the increase and backed it up with hard numbers, sharing that “when you look at 2018 to 2020, we saw approximately a 42% increase in the percentage of real estate crimes that we're seeing.”
Mortgage wire fraud is a costly crime. A successful scheme can cost unsuspecting victims tens to hundreds of thousands of dollars or more.
If you’re in the market for a new home or getting closer to closing on the home of your dreams, spend the next few minutes reading through this article. In it, we’ll help you understand what mortgage wire fraud is, when it happens, how to protect yourself, and what to do if you become a victim of the crime.
What is Mortgage Wire Fraud?
In an article about mortgage wire fraud, the National Association of Realtors shares that “more than 13,000 people were victims of wire fraud in the real estate and rental sector in 2020, with losses of more than $213 million—an increase of 380% since 2017, according to FBI data.”
Mortgage wire fraud is a complex crime that utilizes social engineering as a way to trick eager homebuyers into wiring down payments to fraudulent bank accounts.
Here’s how the crime works:
In the process of buying a home, a homebuyer will eventually need to transfer a large sum of money into escrow to begin the process of closing.
Savvy hackers infiltrate a system at this exact moment in time so they can gain access to the email communication that happens between a buyer, a lender, and a real estate agent to gather the information they need to orchestrate the scam.
They’ll figure out who the parties involved are, then create an email address that looks and sounds like an employee from the mortgage company, title company, or real estate company.
Then they’ll send a legitimate-looking email to the buyer with instructions on where and how to wire the money that will be used for closing costs and as a down payment for the home.
The buyer, eager to move forward with the process, falls for the scam and sends their money to an unknown account owned and operated by the criminal.
The crime goes unnoticed by the buyer until they receive legitimate messages from their lender related to the wire transfer.
When Does Mortgage Wire Fraud Happen?
Mortgage wire fraud typically occurs right before a homebuyer is preparing to close on a new home they’ve agreed to purchase.
There are countless recent stories of homeowners falling victim to this type of crime.
In one story reported by ABC7 Chicago, a homeowner was duped into sending $42,000 to an account managed by the criminal who scammed her. She made the transfer after receiving an email that looked like it came from a paralegal she was working with. After she received a legitimate call from her actual paralegal a few days later, she went back and realized the email address she had been communicating with included two extra letters. She ultimately was able to recover only about $9,000 of the total amount. The rest has been lost.
In another story reported by CNBC, a family was preparing to close on their dream home—a $1.4 million property in northern California. Somehow, hackers were able to obtain real copies of their closing documents and used them to trick the buyers into wire-transferring $921,235.10 to a fraudulent account.
These are just two stories that highlight a growing crime that is impacting homebuyers all across the country.
How Can You Protect Yourself From Mortgage Wire Fraud?
As more stories of this type of crime emerge, homeowners are looking for ways to protect themselves.
Here are some tips to keep in mind if you’re about to enter the process of buying or closing on a home.
Tip #1: Verify with Two Forms of Communication
When you receive information on how to complete a wire transfer, make sure you confirm the information with more than one form of communication. For example, if you receive an email from a paralegal or representative of your lender, pick up the phone and call them to confirm the information you’ve received. If you get a phone call, send an email to confirm the information is legitimate and accurate.
Tip #2: Inspect Names, Emails, and Email Addresses Closely
Spend time closely reviewing the name, email content, and email address you receive that provides you with wire transfer information. As shown in one of the stories above, hackers can gain access to your closing documents and trick you into believing that the information you’ve received is genuine. This is a form of social engineering. The criminal wants you to feel at ease by showing you the information you will recognize.
Make sure the email address matches the email address you’ve been communicating with. Check the spelling of the first and last names. Inspect the content of the email closely and look for oddities.
Tip #3: Don’t Get Swept Up in the Excitement
Buying a home is exciting for most people. It usually represents the culmination of a lot of hard work. You’ve spent a lot of time-saving money, working on your credit, and searching for the home of your dreams. It can be easy to be swept up in the excitement and let your guard down. Buying and going through the closing process on a home is also a fairly complex process.
For most people, that means relying heavily on industry experts to help them through the process. Don’t offer your trust to people without doing your due diligence first. Keep your emotions in check and think logically about the process you’re going through to avoid making costly mistakes.
Tip #4: Inspect Documents Closely
Look closely at the documents you’re receiving from the people you’re working with. Don’t gloss over anything. Read every document carefully and in its entirety. Look for mistakes, typos, or other clues that a document might not be legitimate.
Tip #5: Get Another Set of Eyes
Make sure at least one other person, such as a parent, spouse, or other family members, can help you review and evaluate documents and emails as part of your process to close on a house. Never go through the entire process by yourself.
An objective party can create a second layer of protection against criminals who want you to miss the signs and fall for their scheme.
What to Do if You Become a Victim of Mortgage Wire Fraud
If you find that you’ve unknowingly sent money to a fraudulent account, there are a few steps you should take immediately:
Step #1: Alert Your Bank. Call your bank right away and notify them of the situation. If you communicate with them early enough, they may be able to stop or reverse the wire transfer before your funds are lost forever.
Step #2: Alert the FBI. Contact the FBI and let them know what has happened. They will have a process for you to go through to understand what happened and will help you understand what you need to do next.
Step #3: Alert Your Lender. Contact your lender and explain what has happened. They will need to communicate with the seller and take the necessary steps to delay or stop the closing process from happening.
Mortgage wire fraud is a real crime in the U.S. and around the world. Educating yourself and becoming more aware of how and when it happens is your first line of defense against criminals who want to trick you into sending your hard-earned money to them.