A new breed of scammers is taking advantage of homeowners during the stressful closing period. And if you aren’t careful, you too could lose your closing fund.
We’ll cover information about mortgage closing scams. We’ll show you how scammers take advantage of homeowners and how you can protect your closing funds. Finally, we’ll provide you with a few resources you can use if you’re the victim of a mortgage scam.
Overview: What's Mortgage Wire Fraud?
Mortgage wire fraud is a scam in which a hacker poses as your real estate agent and convinces you to divert your closing costs to a fraudulent account. Mortgage wire fraud relies on a complicated hacking technique called phishing. In a phishing scam, a hacker uses fake emails, phone numbers or websites to impersonate someone you trust.
A scammer who runs a mortgage wire fraud might use an email address or phone number that looks like the one your real estate agent or lender uses. These emails and texts can look authentic and even contain personal information that only someone you know would have. Of course, the scammer phishes your personal information out of your agent’s inbox beforehand.
Scammers might also use a technique called “spoofing” to make themselves seem more legitimate. Spoofing occurs when a scammer uses special software to mimic your agent or lender’s phone number or email. When a scammer calls or emails you from a spoofed account, it can look exactly like you’re talking to someone you trust.
The goal of a mortgage wire fraud is to get your closing costs into an account that the scammer owns. The scammer may tell you that there’s been a last-minute change in their banking procedures. They might also tell you that they sent the wrong address the first time. The truth is that the address the scammer gives you will actually go straight into their pockets. Once you initiate a wire transfer, it’s very difficult to get your money back. Mortgage wire fraud can leave you thousands of dollars in debt and delay your closing.
It’s easy to assume you’ll never fall for a scam. Unfortunately, the truth is that mortgage wire scams are much more common than many people want to believe.
Reports of mortgage wire fraud attempts rose 1,100% between 2015 and 2017 according to data from the Federal Trade Commission. In 2017 alone, consumers lost over $1 billion in real estate transaction costs to scammers.
How Does This Scam Work?
Let’s go through a common script a scammer might follow to help you better recognize a wire scam.
Let’s say you’re buying a home and you’re finally ready to close on your loan. You finalize all of your closing details and you know exactly how much you owe at closing. Suddenly, you see an email in your inbox a few days before closing: “URGENT: New Instructions For Wiring Your Closing Funds.” Panicked, you open the email. The message looks legitimate: It’s from your real estate agent’s email address, it has her signature and it addresses you by name.
The email tells you that there’s been an error with your closing. You can no longer bring a check to closing and you must wire the money directly to your lender. Your “agent” urges you to move quickly. She says if you don’t move fast, you could lose your home. The email also includes a new address where you should wire funds. In a panic, you immediately send over the money.
It isn’t until a few days later that your real estate agent contacts you asking if you have your closing costs ready. Confused, you tell your agent that you already wired over the money. The agent contacts your lender and confirms that the lender never received any money from you.
The person you’ve been communicating with over email was never your agent – it was a scammer spoofing her email address. The scammer hacked your agent’s email using phishing software and learned a ton of valuable information about you, your loan and how much you owe for closing. The scammer then set up a fake bank account and convinced you to send money to them, not your lender.
This scenario is a common method of operation for scammers involved in mortgage wire fraud. Scammers can email you from addresses that seem legitimate and their emails can be convincing. They may even spoof your agent’s phone number. Staying cautious and aware of current phishing tactics can help you protect yourself and make it safely to closing.
What Can I Use To Identify Fraud And Avoid It?
Let’s take a look at a few red flags you should watch out for to prevent mortgage wire fraud.
Know Your Closing Process
Understanding your closing process before your money is due can help you avoid scams. Speak with your real estate agent in person or over the phone and discuss how you’ll complete the closing process.
Ask about valid payment methods and talk with your lender directly about how you should wire money. You may want to use this opportunity to set up a password that trusted parties can use to confirm their identity when communicating.
Be very hesitant to discuss the closing process via email. Phishers can use this information later to pose as someone you trust.
Write Down Contact Information
You should have a couple of contact methods for everyone involved in your closing transaction. This includes your lender, your real estate agent, your attorney and your settlement agent. Write down each party’s name, phone number, email address and any other form of contact information you have.
You can also use the Consumer Financial Protection Bureau’s Mortgage Closing Checklist to store this information. Don’t email your completed checklist or any outside contact information to anyone.
Beware Of Last-Minute Closing Changes
Scammers cause confusion and panic to convince you to go against your better judgment and wire money to an undisclosed party. Be wary of anyone who urges you to act fast or send money immediately, especially if the request comes over email.
Call To Confirm Any Wiring Instructions
Don’t follow any emails with wiring instructions, even if the letter looks legitimate. Contact a trusted representative either in person or over the phone and ask them to confirm the account number and name. Your lender should be able to repeat the name on the account, the amount due and the account number over the phone without prompting.
Only use phone numbers you know and trust. Don’t use phone numbers contained only in the email. Scammers can spoof numbers and create fake phone numbers.
Never Email Your Financial Information
Email is never a safe way to transmit your financial information. Phishers can use this information against you later after a hack, even if you’re emailing someone you trust. Stick to in-person meetings or phone conversations to share important information.
Be Wary Of Phone Conversations
Thanks to spoofing, it can be difficult to distinguish whether a phone call is a scam or legitimate. A scammer might call you and tell you that they have information for you but they need to confirm your identity first.
Trust your gut. If something doesn’t feel right, hang up the phone and contact one of your trusted parties on a phone number you know. They’ll be able to confirm specific wiring instructions or any legitimate changes to the closing process.
Action To Take If You Believe You’ve Been Scammed
Take a deep breath and follow these steps if you think you’re the victim of mortgage wire fraud.
Contact Your Bank Or Wire Transfer Company Immediately
Contact your bank or wire service if you have any inkling that you’re not sending money to a trusted party. Request a wire recall as soon as possible after you make the transaction. In some cases you may be able to get the money back that you sent, but only if you act fast.
Report the error quickly and explain what you think is going on to increase your chances of getting your money back.
File A Complaint With The FBI
The FBI has an internet crime division that might be able to help you if you’re a victim of fraud. You can contact the FBI’s Internet Crime Complaint Center and submit a report. The more information you include in your report, the more likely the FBI will be able to help you.
Mortgage wire fraud is a serious issue that can put your closing costs at risk. Scammers use techniques like phishing and spoofing to convince you via email or phone that you’re communicating with a trusted agent or lender. The scammer then tells you that there’s been a change in closing procedures and that you must wire money to a new account. In actuality, the account belongs to the scammer. Once you send the money, it’s very difficult to get it back.
There are a few ways you can protect yourself from scammers. Make sure to confirm your closing details in person and collect legitimate contact information. Avoid sharing sensitive details over email and be wary of attempts to get you to send money quickly. Contact your bank or wire company and request a wire recall if you think you’re the victim of a scam. You should also submit a complaint with IRS Criminal Investigation.
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