Fraud takes our money and undermines our trust. Real estate wire fraud targets the transfer of funds in the last stages of a transaction. In the worst-case scenario, wire fraud can steal your home. So if you read nothing else today, please read this: No matter what, your initial wiring instructions for your purchase will not change. If you are provided new instructions, STOP! Wiring instructions do not change during the closing process. Call your mortgage loan originator and/or Realtor® immediately if you receive new wiring instructions. If that got your attention, read on.
A Fool And His Money. You probably know the old saying “A fool and his money are soon parted.” While you may feel foolish if you fall for a scam, realize that fraudsters are incredibly sophisticated in their understanding of one thing: people. They rely on their knowledge of humans and human nature to part you from your valuable personal data and your hard-earned dollars. Hackers know that people aren’t as careful as they should be when they set passwords. Phone scammers know how to play on your fears. Real estate wire fraudsters rely on bogus emails and exact timing to take advantage of you in an unfamiliar and stressful situation.
Why Wire Fraud? Broadly defined, wire fraud is a scheme to obtain money on false pretenses using electronic means. So why do fraudsters target wire transfers? Here’s another saying, this one attributed to bank robber Willie Sutton (although he may never have said it). When asked why he robbed banks, Sutton was said to have replied, “Because that’s where the money is.” Consider this. Globally, electronic funds transfers are in the quadrillions of dollars annually. I can’t even imagine what one quadrillion looks like, but if you want to steal money, that’s a very tempting target.
What Just Happened? You’re getting close to your closing. You know you are going to wire funds to the title and escrow company’s trust account, where the money will be secure until it’s time to disburse it according to the closing instructions. An email arrives from the title and escrow company with updated wire transfer instructions. You arrange for the transfer and check another item off your long to do list. The next day, or the day after that, the title company contacts you with a reminder to wire your funds. What? A quick conversation reveals that the money never arrived. You review the wire instructions with them and realize that your money went to an unknown account and the instructions came from a fraudulent email address. By now, your funds are probably gone forever, transferred out of the false account immediately after they arrived. Let’s back up and see how it was set up.
How It Works. The Multiple Listing Service (MLS), Zillow, Redfin and other real estate services are one prime starting point. It’s not difficult to obtain the listing agent’s email address, or see when the home goes under contract. A hacker can break into the agent’s email account and find out who’s involved in a transaction. Fraudsters then try phishing to gain personal information about the buyer, seller or title and escrow company. Because real estate transactions involve multiple parties, each of whom has an email address, that are multiple targets to attack. Scammers send emails that appear to come from a legitimate source, but the email address will be one letter or number off the real one. They request information, or send fraudulent instructions, and suddenly the transaction is compromised. Read a real-life example here.
Protect Yourself. Saving yourself from wire transfer fraud starts at the beginning of your transaction. You are going to receive and send so many emails and phone calls that they’ll become routine and you’ll assume that they are legitimate. Don’t. That’s exactly what the fraudster relies on. Check email addresses carefully. Look for anything in an email that seems off. Don’t trust that a call is really from your bank or the title and escrow company. If they call you, hang up and call them back using a number you know is legitimate.
Never accept wire instructions via standard or unencrypted email or telephone. Even if a fraudster has obtained information to disrupt your transaction, there is one very important thing you can do. Never take instructions for a wire transfer via unsecure email or phone. At First Choice Loan Services Inc., our Closers only provide documentation through a secure portal, where the borrower is required to login to retrieve the documents and information. We prefer working with title agents who do the same. For your protection and to safeguard your personal information, never accept changes to wiring instructions via email or telephone. ALWAYS CALL YOUR LENDER TO VERIFY.
Senior Vice President, Compliance