Wire Fraud: Money Laundering & Scams
Closing a home is stressful enough. No homebuyer needs the added stress of potentially being a victim of wire fraud. In the newest scam, hackers are scamming buyers out of their closing costs, leaving them thousands of dollars in debt and causing them to delay or even cancel their closing.
Mortgage wire fraud is more common than you might think. According to the Federal Trade Commission, more than $1 billion in real estate transaction costs fell into the hands of scammers last year alone.
What Is Mortgage Wire Fraud?
Mortgage wire fraud is a scam where a hacker poses as your real estate agent, convincing you to wire your closing costs to a bank account created by the scammer. Relying on the hacking technique known as phishing, the scammer impersonates a trusted party (i.e. real estate agent, lender, attorney) through the use of fake emails or phone numbers designed to look like those of your agent or lender.
Another technique called spoofing is also used to make the scammer appear more legitimate. Spoofing involved mimicking your agent’s phone number or email through the use of specialized software. If you are contacted from a spoofed account, it will legitimately appear that it came from a trusted source. The ultimate goal of mortgage wire fraud is for you to authorize the wiring of your closing costs into the scammer’s bank account.
How Does This Wire Fraud Scam Work?
Scammers will email you from a legitimate-looking email address, often addressing you by name while spoofing your agent’s phone number and signature.
To better recognize the makings of a scam, here’s a synopsis from the National Credit Union Administration:
A few days before closing on your home, you receive an email with the subject line: “IMPORTANT: Instructions for Wiring your Closing Costs,” or something to that effect. The email looks to be from your real estate agent so you open it, and since it includes your agent’s correct phone number and signature, you figure it is legitimate. The email states there’s been a change in closing procedures and you must wire the money to your lender directly instead of paying with a check at closing and that if you don’t send the money immediately, you could lose the home. In a confused and panicked state, you wire the funds to a new address.
A couple of days after you sent your money to who you thought was your lender, your real estate agent asks if you have your closing costs ready. When you inform your agent that you’ve already submitted the closing costs, they contact the lender who ultimately confirms that the funds were never received.
It’s then you realize the person you were emailing wasn’t your agent; it was a scammer who hacked their email with phishing software. With the valuable information they gained about you, your loan, and the closing amount owed, they created a fake bank account so you would wire money to them instead of your lender.
How Can I Avoid Mortgage Wire Fraud?
Staying vigilant can protect you from fraud and make your closing a success.
- Understand The Closing Process. Prior to sending money to anyone, knowing and understanding your closing process is one of the simpler ways to prevent mortgage scams. Discuss with your real estate agent how the closing process will be completed. Confirm valid payment mentors and wiring instructions with your lender. As an extra layer of security, you may want to create a password for identity confirmation when communicating about your closing. Details about your closing should not be done via email; phone conversations and in-person discussions are safer choices. Be suspicious of last-minute changes or a representative urges you to wire the money immediately. It is likely a scammer trying to confuse you by wiring money to their account and not the closing company.
- Document Contact Information. When you’re in the process of closing, you should have contact information (name, phone number, email) for all parties involved including your lender, real estate agent, settlement agent, and attorney (if applicable). If you’d rather store this information electronically, you can download the Consumer Financial Protection Bureau’s Mortgage Closing Checklist. Don’t share your completed checklist with anyone.
- Confirm Wiring Instructions. Email scammers are notorious for sending legitimate-looking emails with detailed wiring instructions. Before you wire your money to the closing company, contact a trusted individual to confirm the wiring information, including the name on the account, account number, and amount to be transferred. This information should be supplied by your lender without hesitation. If you don’t recognize the phone number or the only time you’ve seen it is in an email, chances are it’s a spoofed number created by a scammer.
- Don’t Use Email. If you are providing personal or financial information, do so via phone conversations or in-person meetings. Email is not a safe or secure way to transmit information. Even if you are emailing someone you trust at a verified email address, scammers can still use this information against you after you’ve been hacked.
- Be Wary of Phone Calls. While many mobile carriers offer spam blocking free of charges, there will always be a few calls that get through the scam detector. If you suspect it is a spoof or scam caller, do not supply your personal information even if the caller requests it.
- Follow Your Instincts. If something doesn’t sound or feel right, contact your real estate agent, title company, or other trusted party immediately. They will be able to verify specific wiring instructions or updates to the closing process.
What If I’ve Been Scammed?
Once the money is sent, it can be very difficult to get back. However, there are a couple of things you can do to retrieve your hard-earned money.
- Contact Your Financial Institution. If your gut tells you that you may not be sending the closing costs to a trusted party, contact your financial institution or the wire transfer company immediately. By reporting the error, requesting a wire recall, and explaining that you may be the victim of a scam, it can increase your chances of getting your money back - but only if you act quickly.
- File a Complaint. If you are a victim of wire fraud, you can submit a report with the FBI’s Internet Crime Complaint Center. The more information you provide, the more likely the FBI will be able to assist you in retrieving your money.
The process of buying and selling real estate can sometimes be confusing. Let Guarantee Abstract Co. help you every step of the way! Our licensed abstract and title company has many years of experience in all areas of the real estate closing and title insurance industry. Contact us today to schedule an appointment or to learn more about our title services. We look forward to serving you.