Wire Fraud has become one of the biggest threats to cybersecurity for homeowners during the closing process. Read on to learn more about this fast-growing type of scam, as well as steps you can take to protect yourself from becoming a victim.
Marino & Marino, P.C. Source: Rocket Mortgage
What Is Wire Fraud In Real Estate?
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 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 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 Wire Fraud 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 house 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 their 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. They say 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 theiremail 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?
Watch out for these red flags to prevent mortgage wire fraud.