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Yesterday, I discussed the impact of today’s “purchase market” on fraud. Today, I want to explore the impact of digital. Because…
It’s a digital world.
A few months ago, we learned that one of the nation’s three credit repositories, Equifax, had been hacked. This hack provided the cyber thieves with valuable personal information on about 145 million consumers. The thieves not only accessed the personal data of consumers in the Equifax database, they actually downloaded the information.
This is scary stuff in a digital age. Many financial transactions are now handled digitally. Applications are submitted online with related consumer information validated electronically. Loans are underwritten and approved through automated systems with digital closings done online via cloud technology. Humans may not physically interact at all during these transactions.
With more consumer data and transaction information accessible online, cyber thieves try to infiltrate a loan transaction and impersonate any of the parties involved. This is done to create a fraudulent loan or to re-route funds, like down payments and closing costs, into fictitious accounts held by the hackers.
First, the thieves hack into sites to steal sensitive data of an impending real estate sale and related mortgage transaction. Then, they assume the identity of one or more of the parties involved. With that, they convince other parties to change things like wiring instructions, having money intended for down payments or settlements sent to the hacker’s account.
What happens? Everyone gets to the digital closing table, but no money arrives! Easy pickings, especially in a digital transaction.
They also cover their bases. Call and verify may no longer be a defense. Some of these guys or gals are now using phone porting technologies to camouflage their phone numbers and resemble those of authorized parties to the transaction.
This gives new meaning to the phrase “Trust but Verify.” But how do you verify?
- Educate your employees, borrowers, and closing agents of such scams.
- Advise borrowers to confirm any such requests directly with their Realtor AND loan originator. They should have a better relationship with these parties.
- Do the same with closing agents.
- Establish wire information up front with closing agents. Don’t wait until just before closing.
- Before you wire money, call the recipient to validate their wire instructions.
- When in doubt, don’t send the money.
If need be, the funds can be wired, at closing, directly to the closing agent. To verify the agent, provide them with a confirmation number within the closing package.
In part 3 tomorrow, I will discuss what else you, as the lender, can do to protect yourself and your borrower.
