Home Insecurity: Protect Yourself Against Mortgage Closing Fraud

​Buying property is always stressful, but imagine if you found the perfect home, made it to closing, and wired a large chunk of your life savings only to find that they had disappeared forever into the pocket of a thief. That’s what happened to Ryan, a first-time homebuyer who recently told us his story. It’s called “mortgage closing fraud,” and it’s a hot new trend among scammers: the FBI says losses to homebuyers have leapt from $19 million in 2016 to nearly $1 billion in 2017.

​Ryan’s story is typical: “Right before closing, I got an email from the title company with new instructions on where to wire the down payment. But it turned out someone had hacked either the title company or the realtor’s email system. They pretended to be the title company and had me wire the money to their account. By the time I found out what had happened, it was too late.” Ryan reported the crime to the FBI and local law enforcement, but the thief and the money were long gone.

​If you or anyone you know is buying real estate, here’s how to protect yourself:

• Never trust emails with wire transfer instructions. Ryan says that in retrospect, there were warning signs in the fake email he received: the domain name was one letter off from the real title company’s domain name, and the supposed sender at the title company had an odd name. But, like many other buyers, he didn’t notice in all the stress of getting the purchase closed.
• If you have the option of taking a cashier’s check to the title company for the down payment instead of wiring money, do that.
• Before you make your down payment, call the title company at the number on their website, not any phone number given in an email. Talk to the closing agent directly and verify the wire transfer instructions.
• As soon as you’ve made the wire transfer, call the title company to confirm that it went through. In rare cases, the fraud has been discovered within a few hours and banks have been able to freeze the transfer. This fraud has become so rampant that the FBI is also using a method called the “Financial Fraud Kill Chain” to recover stolen funds if they are reported soon enough.

Ryan’s story has a sad and a happy ending: Like most victims of this fraud, he will likely never recover his money, but he was able to close on his house, and he hopes by telling his story to save others from becoming victims.

You can help by warning family and friends who are buying real estate. When you’re the buyer, ask your title company and realtor what they’re doing to secure your information, and ask them to communicate with you only through encrypted email. Often these are small businesses that think they’re too small to be targets for hackers. They’re wrong, and some have been sued for not protecting the customer’s information. By encouraging them to build better security, you’ll be helping everyone.