Real Estate-related Fraud

Diverting seller proceeds and mortgage payoffs appear to be happening with more frequency in markets such as Michigan and Wisconsin where split closings are commonplace.

The United States Department of Justice announced Wednesday they were launching a National Cryptocurrency Enforcement Team. The team’s objective is to enforce and investigate illegal activities that utilize cryptocurrency to fund or receive payment for crime. The Department of Justice announcing a new form of cryptocurrency enforcement comes with a string of regulations to the industry being proposed throughout all branches of the United States Government.

The U.S. District Court for the District of Arizona weighed in on the issue whether a professional liability policy provided insurance for a fraudulent wire transfer. This decision is not the first to tackle this issue, and like the other opinions issued across the country, this case demonstrates that the answer to this somewhat thorny question depends heavily on the specific policy wording at issue.

One ruse that has been particularly persistent is the wire transfer dodge in which cyber-criminals impersonate title firms in trying to steal mortgage payoffs. So much so that the Secret Service recently issued an advisory warning on a “drastic increase” in the scam. ALTA offers a number of resources to help protect against wire fraud and raise awareness about the threat, including a wire preparation checklist, videos, infographic and a rapid response plan for wire fraud incidents.

Authentication and training are important, but why aren’t we thinking about attacking the threat from other angles as well? Read on as Paymints.io CEO Jason Doshi discusses solutions to wire transfer fraud.

Real estate transactions, with each deal involving tens or hundreds of thousands of dollars, are a rich target for patient and coordinated thieves. The American Land Title Association is working behind the scenes with regulators, financial institutions and mortgage lenders to install consistent wire fraud prevention education and practices into professional and consumer education at critical junctures, said Chris Morton, senior vice president of public affairs.

The current real estate market has many people making large down payments to get their new home. But a growing real estate scam targeting people in the region nearly snared Allison Boekenoogen. Scammers pose as the title company to try to make you send that down payment into the wrong account, losing both your future home but a fortune in cash.

Real estate wire fraud is likely worse than it looks. According to the FBI, only about 12 to 15% of all cases get reported. As Diane Tomb, CEO of the American Land Title Association, puts it, “The problem is actually much larger. It’s a national epidemic.”

The U.S. Secret Service issued an advisory warning of a drastic increase in wire transfer fraud related to mortgage payoffs.

Cybercriminals ransomed millions of dollars from businesses during the COVID-19 pandemic, using time-tested tactics like phishing, social engineering and other hacker tools of the trade. For companies, the average cost of a data breach soared to $21,659 per incident during the pandemic, with most incidents ranging from as little as $800 to more than $650,000, according to a new report from Verizon. But 5% of successful attacks cost businesses $1 million or more.

Federal law enforcement and industry experts see a sharp increase in wire fraud targeted at buyers paying cash for homes.

Title insurance professionals reported cyber criminals attempted to trick employees to wire funds to a fraudulent account in a third of all real estate and mortgage transactions, according to ALTA’s 2021 Wire Fraud and Cyber Crime Survey. However, training and education seem to be working as funds were only wired to a fraudulent account in a little over 8% of these attempts.

According to the FBI’s 2020 Internet Crime Report, the Internet Crime Complaint Center (IC3) received 791,790, complaints with reported losses exceeding $4.2 billion last year. Business email compromise (BEC) schemes continued to be the costliest, with 19,369 complaints resulting in losses of $1.8 billion. In regard to real estate, there were 13,638 fraud victims with $213,196,082 in reported losses. 

Every year mortgage closing scams cost homebuyers millions of dollars and, tragically, sometimes even their homes. These scams aren’t new, but with the COVID-19 pandemic, there’s been a rise in this type of fraud. AARP talked with a recent homebuyer who moved back to his hometown to care for his mother but finds that his life savings and his new home are in jeopardy because of a scam. AARP also spoke with ALTA CEO Diane Tomb and Tom Cronkright, CEO of CertifID, about the anatomy of mortgage closing scams and how consumers can protect their money.

As a second-time home buyer outside of Denver prepared for the purchase of his new home, he received an email appearing to come from the title company asking him to wire his closing funds early in the transaction. The buyer wired nearly $80,000. Two days later, he was notified that the money did not arrive at the title company. Fortunately, the title company quickly engaged and advised him how to notify the financial institutions involved of the crime.