Mortgage Wire Fraud: What It is and How to Prevent It
Mortgage wire fraud is a type of real estate fraud where someone tricks you into sending your down payment or closing costs to them instead of the right person. The FBI reports that homeowners lost over $350 million in 2021 alone due to real estate fraud.
A scam isn’t always obvious but there are several ways to prevent mortgage wire fraud, including being wary of last-minute, “emergency” changes in the closing process and speaking in person with your trusted real estate agent to confirm transaction details.
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How does mortgage wire fraud work?
Because several thousand dollars can be gained in one successful fraud, scammers will do their research to get as much information as possible about you and your homebuying or refinancing deal. When you’re close to signing, they know you’re likely to be excited and stressed, and they’ll reach out to you.
The email subject line may say, something like:
- URGENT: New Wiring Instructions for Your Closing Funds
- New Wire Transfer Directions – CONFIRM ASAP
The email address will also look legitimate. For example, if your loan officer’s actual email address looks like “[email protected],” the scammers may use “[email protected].” An extra letter in the address is easy to overlook, especially if other legitimate-looking email addresses are copied and the profile photo for the fake account has your agent’s picture.
The “new instructions” will direct you to wire money to the wrong account, which the fraudsters own. Scammers prefer wiring as it’s very hard to cancel or undo a wire transfer.
How to identify and avoid mortgage wire fraud
Whatever type of loan you’re getting — conventional loan, FHA loan, VA loan or other — take precautions early in the mortgage process that might help you avoid becoming a victim of mortgage wire fraud.
- Beware of last-minute changes. As heart-pounding as it is to receive an “URGENT” email saying that you’ll lose your dream home if you don’t wire money immediately… don’t rush. Take a breath and take the time to verify that it’s legitimate.
- Call before you send a wire. Always call someone to confirm wiring instructions before you wire funds. Don’t use the phone number that’s in a potential scammer email. When you call to confirm, don’t talk with an assistant you’ve never heard of. If possible, talk with your agent or loan officer in person.
- Get contact information on day one. As you start to communicate with your real estate agent, loan officer and others, save their contact details. If one reaches out, make sure it’s coming from the right source.
- Consider setting passcodes. Early on in the process, set up passwords with your contacts. If a lender representative does need to contact you about your down payment, they should call you and give a passcode.
- Know the closing process. It can be hard to identify that something’s irregular if you don’t know what to expect in the first place. Go over the closing process so you understand when and how you’ll be expected to make a down payment.
- Don’t discuss finances via email. Scammers often get data from hacking email accounts. Don’t put specific financial information in emails.
- Verify the completed transaction. Call the company to confirm receipt of funds the same day that you wire them.
What to do if you’ve been scammed
If you think you’ve been duped by a mortgage fraud scheme, act quickly.
Request a wire recall immediately. Your bank or the wire transfer company may be able to stop the funds from being transferred. If the transfer already went through, see if the wire company can cancel the transaction and get the funds back. This isn’t always possible but it’s worth trying.
File a complaint with the FBI. Go to the FBI’s Internet Crime Complaint Center and give as much information as you can about what happened. The more details you provide, the more likely the FBI will be able to help.
File a police report. You can file a report with your local police department and give a copy to your bank, credit union or online lender.
The statute of limitations for wire fraud — in cases where it affects financial institutions — is 10 years, so cybercriminals can be prosecuted long after a crime is committed. A wire fraud felony conviction may come with penalties of 20 years in federal prison, as well as fines up to $250,000.