How to Avoid Mortgage Wire Fraud

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The final days of closing on your new home can be hectic, and the excitement, stress and mountain of paperwork can make it difficult to slowly think through every decision. Unfortunately, that's when fraudsters tend to strike and try to trick you into wiring money to their account.

What Is Real Estate Wire Fraud?

Real estate wire fraud—also called mortgage wire fraud—is a complex scheme that may cost victims tens or hundreds of thousands of dollars. Homebuyers are often targets, but you also want to beware of this scam if you're refinancing a mortgage.

Here's how it works: In the days and weeks leading up to the execution of the scam, fraudsters typically sit on the sidelines and gather information about you, the people or companies you're working with and the details of your transaction. At the last minute, they'll impersonate a real estate agent, escrow agent, title company, attorney or lender that's involved in the process and reach out with "new wire transfer instructions."

The unsuspected homebuyer then wires money for a down payment or closing costs to the fraudster's account. It may be a few days before the victim realizes they were duped, and the fraudsters could be long gone with the money.

How Does Mortgage Wire Fraud Happen?

Compared to some types of fraud and scams, mortgage wire fraud may be more sophisticated and difficult to detect. Since these targeted attacks often start with reconnaissance, fraudsters can be more effective at passing off their communications as legitimate.

The fraudster may gain access to a real estate agent or other important party's email account via phishing or hacking. They'll then monitor the account, looking for home sales that will close soon. Or, they may look for clues on social media that someone is about to buy a home.

Once the fraudster finds someone in the final stages of buying a home, they'll send instructions for wiring the money to an account they control. There could be a plausible reason for the change and, as is often the case in scams, the victim may be warned that you need to act quickly.

The tricky part when it comes to detecting this type of fraud is that the fraudster's message might look like it's coming from someone you've been going back and forth with for weeks. For example, while your real estate agent sends you an email from agent@realbank.com, the fraudster might use agent@reallbank.com—a small change that a rushed or unsuspecting buyer might miss. And the email may have the exact signature and company logo that you're used to seeing.

The fraudster may also attach legitimate documents they've downloaded from a compromised email account, or cc: email addresses that closely match the other people involved in the deal.

Unfortunately, once you wire the money to the fraudster, it might not be possible to reverse the transaction.

How to Avoid Real Estate Wire Fraud

Being abundantly cautious isn't a bad idea, particularly when there's a lot of money on the line. Remember, the fraudsters may be able to read and use anything that's been sent by email. They may also be able to spoof a call, making it look like they're calling from a different number.

Some of the steps you can take to detect and avoid mortgage wire fraud are:

  • Collect contact information early on. Having legitimate phone numbers you can call to confirm wire instructions is important. Try to get these early in the process, either when you meet people in person or by initiating a call to the person's office. If you get an email telling you that someone's phone number has changed, call the original number to verify that it's true.
  • Create secret passcodes. As an added layer of security, you could create a secret word or phrase with key people, such as your real estate agent. But make sure it's never mentioned in an email.
  • Don't trust last-minute changes. Don't immediately respond to an email or phone call with new payment instructions. Instead, call (using the number you previously recorded) to verify the instructions first.
  • Pick up the phone before you send a wire. Even if there wasn't a last-minute change, call the receiving party (the lender or title company, for instance) to confirm the account name and number. Also, ask your bank or wire-transfer company to verify the receiving account's name and number.
  • Verify the transaction after it's complete. Once you send the wire, pick up the phone again to make sure the money was received in the correct account.

If you get caught by a real estate wire fraud scheme, contact your bank or the wire-transfer company right away. It's not always possible, but they may be able to get your money back. You can also file a complaint with the FBI's Internet Crime Complaint Center.

Monitor and Protect Your Identity

There are other types of fraud related to home ownership, such as home title fraud and mortgage fraud, and many schemes and scams that can cost you time and money. Monitoring your identity can help you quickly detect when something is amiss—and act before it gets worse. Did you know that there are several forms of identity theft, and each one can affect you in a different way.

Free credit monitoring from Experian is a good place to start. Experian IdentityWorks℠ adds additional types of monitoring, such as dark web scanning for your personal information, plus services and insurance that can help identity theft victims.

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