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It’s estimated that in 2016, almost $20 million in wire transfers, like down payments and settlement funds, from bona fide real estate sale transactions were diverted to criminal’s bank accounts. This was accomplished by manipulating legitimate email accounts. How much more may have been lost from other types of mortgage fraud?
Although mortgage fraud is reportedly down, as the real estate and mortgage industries digitize the home sale and mortgage process, cybercriminals are adapting and thriving in the new digital world. A new era of cyber mortgage fraud may be on the horizon.
The increased use of techniques such as identifying realtors via real estate websites, spoofing, phishing, social engineering, chat rooms, spam, and malware, with more mortgage applications now residing online is making it easier for criminals to gain vital information about and interject themselves into a real estate transaction.
With more of the consumer, realtor, and lender information available on the internet, hacking is easy.
Criminals can break into a transaction and direct the consumer, lender or title agent to wire money to their account through the use of a hijacked email account or one created to very closely mimic that of the entity supposedly making the request.
Care must be taken to validate such information before moving money, documentation, or information, especially when such instructions seem to change or contradict prior instructions.
Last year, wire fraud actually outpaced online fraud, check fraud, and credit card fraud. The result was more than $50 billion (that’s with a ‘B’) in losses. That’s a whole lot of money going to the wrong people’s pockets. And, it’s just the beginning.
You can’t be too careful. Consumers must be notified of the potential for fraud and such misdirection and be instructed to contact the company when anything seems to be amiss.
Authenticate and then re-authenticate; that should be your mantra…know who you’re dealing with when doing business online.
According to FHA, lenders still need to be on the lookout for the good old-fashion fraud schemes like illegitimate property flips, fake verification documents, and use of straw buyers.
However, these threats are now compounded by the increased use of the internet for real estate transactions and loan originations.
It’s easy for a criminal to impersonate an applicant when they already have all of the applicant’s personal information. Hacking has become big business.
We’ve taken our lumps and worked very hard to clean up the mortgage business. QM, ATR, and TRID have provided some challenges but none that couldn’t be overcome.
The mortgage loans being made today are some of the best loans ever originated. Mortgage lenders are a resilient group and should be very proud of their performance in righting the ship and in staying the course.
Now, we have our next challenge; one that doesn’t come from new regulations, rising rates, or a down economy. This challenge comes from the common criminal looking for ways to make a quick buck at everyone else’s expense.
Fraud is real and cyber fraud in the new digital age will only get worse.
Diligence through constant loan monitoring with ongoing timely pre and post-close loan reviews is paramount.
Loan quality and compliance are as important as ever. Don’t assume everything is okay. Check to be absolutely sure.
Trust but verify.
