Mortgage Payoff Statements Becoming Gateways to Mortgage Fraud, White Paper Says

November 8, 2018

Fraudsters increasingly are initiating wire fraud scams by targeting the industry practice of emailing or faxing payoff requests to title and escrow companies, according to a new white paper from CertifID. As a result, the company is observing an increase in the use of “spoofed” mortgage payoffs and fraudulent payoff statements to pull off wire fraud schemes. 

According to the white paper, over $1 trillion in mortgages are paid off each year; with most done so by wire. Traditional mortgage wire fraud scams usually began with a fraudster deceiving a buyer or key party to the transaction into believing that imposter was a key party to the transaction (such as the seller); then changing already established wiring instructions (with the funds then being diverted to the scammer).  Now, fraudsters are deceiving title companies by issuing counterfeit mortgage payoffs and wire instructions from the start.

“Fraudsters now understand that it’s not that hard to ‘spoof’ or imitate an authentic payoff statement—and that statement is the ultimate authority for title or escrow companies awaiting official wire instructions,” said Thomas Cronkright, CEO and co-founder of CertifID. “As a result, the agent’s guard is down and, once the fraudulent payoff statements are received by fax or email, the funds are quickly and mistakenly wired directly to the criminals.”

Cronkright noted that this new wrinkle directly attacks the conventional best practice that marks any change to wiring instructions as a red flag. “Now, the fraudulent directions are often the first instructions the escrow or title agent even sees,” he added.

 The white paper describes five emerging examples of payoff fraud, including how the schemes work and what title and lending professionals can do to identify and prevent them.

  1. Spoofed Lender Payoff Portals
  2. Lender Payoff Statements Received Directly from the Lender
  3. Payoff Received from Current Borrower
  4. Land Contract Payoffs, Seller-Held Mortgages and Other Third-Party Payments
  5. Payoff Trolling

“These new payoff fraud schemes serve as a reminder of the domain expertise that cybercriminals have obtained over the past few years,” the white paper says. “All information needed to start a wire fraud in connection with a real estate transaction is either publicly available or easy to find online. We must remain diligent and confirm that payoff instructions are authentic and trustworthy before we wire funds.

“Always remember that cybersecurity is a journey, not a destination. There is no silver bullet that will keep anyone safe at all times. A commitment to training, infrastructure, policies and procedures around data security will create a multi-layered approach to combat the ever-growing and evolving cyber threat,” the paper concludes.

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