For most people, their home is their greatest asset. The average mortgage-holding homeowner currently has $299,000 of equity in their property.
Since homes store so much of consumers’ wealth, they’re an enticing target for fraudsters. In fact, one in 20 Americans have suffered financial losses from real estate fraud schemes. Two common types of schemes are wire fraud and title fraud.
In this article, we’ll define these two types of fraud and examine their prevalence in today’s market. After that, we’ll provide practical tips to protect yourself against their costly consequences.
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What is Wire Fraud?
Mortgage wire fraud takes place when a hacker impersonates your loan closing agent online to get you to wire your down payment or closing costs to their account. Before they make their move, they may:
- Hack your email account to obtain as much information as they can about your upcoming real estate transaction.
- Create a fake email address that closely resembles your loan closing agent, real estate agent, escrow agent, or attorney.
- Craft a message with updated wire instructions that divert your money to their account instead of the intended recipient.
During these schemes, wire fraudsters often claim that the money must be sent urgently to facilitate a smooth sale. This sense of urgency leads many borrowers to overlook suspicious details about their new wire transfer instructions.
Once a wire fraudster has received their stolen funds, they may send them to an offshore account, making it nearly impossible for victims to get their money back. Since down payments and closing costs can involve tens to hundreds of thousands of dollars, losing this money to wire fraud may derail mortgage applicants’ ability to afford a home for years to come.
What is Title Fraud?
Title fraud, also known as deed fraud, occurs when someone forges a deed to illegally transfer someone else’s home into their name. During these schemes, fraudsters will:
- Gather publicly available information about their target property, such as its address and legal owner.
- Craft stolen identity documents, such as fake IDs or Social Security cards.
- Forge signatures on the home’s deed and bill of sale to transfer the property’s ownership.
- Submit these forged documents to the local county’s deed office to transfer the title into their name.
- Sell, lease, or take out a second mortgage on the property for financial gain.
Some common victims of title fraud include elderly homeowners with high levels of home equity, owners of vacant vacation properties, and people who have already fallen victim to identity theft.
While title fraud is relatively rare, it can cause considerable financial damage. After all, reversing the illegal title transfer requires costly legal support, ranging from tens to thousands of dollars. Additionally, title fraud can wreak havoc on victims’ credit scores.
Wire and Title Fraud Risk in 2024
Now that you know the basics about wire and title fraud, you may be wondering how common they are in 2024. Unfortunately, these schemes reached an all-time high in Q4 of 2023 and they’re likely still on the rise. Take a look at these concerning statistics:
- In 2023, one in ten Americans were targeted for real estate fraud.
- Over 50% of real estate transactions have issues that raise their risk of wire and title fraud.
- The medium consumer loss in a real estate fraud scheme is over $70,000 per incident.
- 51% of consumers are inadequately educated on the risks of wire fraud before closing.
- Of all the age brackets, consumers over 65 were the least aware of real estate fraud, despite being one of the most popular targets.
The recent increase in wire and title fraud risk may be attributed to the digitization of communication within the lending process. Email phishing, in particular, has allowed fraudsters to hijack or imitate real estate professionals’ email addresses and communicate with consumers directly.
6 Tips for Preventing Wire Fraud
While wire fraud and title fraud are on the rise, you can protect yourself by being vigilant and proactive. Here are some steps for avoiding wire fraud during the mortgage lending process:
- Gather your recipient’s contact information early on – When you wire your down payment and closing costs, you should call your agent first to confirm that you have the correct wire instructions. By collecting their contact information early on, you can ensure its accuracy.
- Set up a secret passcode with the wire recipient – Today’s fraudsters are very tech-savvy. To add an extra layer of security to your transaction, consider setting up a secret passcode with your wire recipient. After that, ask them to include this phrase when they email over their wire transfer instructions.
- Be cautious about any last-minute changes – Since wire fraud schemes often rely on last-minute wire instruction updates, you should always call to verify your intended recipients’ account name and number before initiating the transaction.
- Confirm the transaction – After sending your wire, call the recipient again to confirm that the funds reached their account. This way, you can act fast if any fraud has taken place.
- Call your bank right away – If you fall victim to a wire fraud scheme, let your bank know as soon as possible. The sooner you inform them about the fraud, the greater your chances of successfully reversing the transaction.
- Report wire fraud to the Federal Bureau of Investigation (FBI) – If your wire transfer goes awry due to fraud, file a report with the FBI’s Internet Crime Complaint Center. They may be able to uncover your fraudster during the investigation and collect your stolen funds.
8 Tips for Avoiding Mortgage Title Fraud
While wire fraud can only take place during your mortgage transaction, title fraud can occur at any time during homeownership. As such, it requires ongoing prevention efforts. You can reduce your chances of falling victim to title fraud by:
- Closely reviewing letters you receive from mortgage companies – If a title fraudster takes out a second mortgage on your home, you may receive mail from their new lender. Thus, it’s a good idea to review any mail you receive from mortgage lenders, even if your name isn’t listed on the envelope.
- Exercising caution when clicking on email links or attachments – Title fraud schemes often use phishing or malware to capture your personal information. Thus, it’s important to exercise caution online. You can do so by verifying email senders’ information, hovering over hyperlinks to see a preview of URLs, installing antivirus and anti-malware software on your computer, and updating your operating systems to prevent security vulnerabilities.
- Leveraging credit monitoring services — Credit monitoring services can alert you to suspicious changes to your credit information, helping you detect potential signs of identity theft or title fraud. Some of these services even include dark web monitoring, which scans the dark web for any signs that your personal information is being bought or sold.
- Regularly reviewing records from your county’s deeds office – Changes to your home’s title are recorded at your country’s deeds office. By reviewing these records periodically, you can catch title fraud sooner rather than later.
- Using home title lock services – Home title lock services monitor activity about your home title and alert you of noteworthy changes. Thus, they can save you from the hassle of requesting your home title records from your county’s deed office manually. Just keep in mind that these services typically involve an ongoing fee.
- Checking on your vacant properties – If you own a vacation home, have someone check on it from time to time to make sure there aren’t any “For Sale” signs or unexpected tenants.
- Reporting fraud immediately – If you suspect that title fraud has taken place, inform your county’s deed recorder, your financial institutions, the FBI, and the Federal Trade Commission (FTC) right away. You should also hire an attorney so you can start the process of restoring legal ownership of your home.
- Taking advantage of your title insurance policy – Title insurance protects lenders and homebuyers against property title issues that may arise, such as undisclosed liens, public record errors, fraud, and forgery. If you suspect title fraud and have title insurance, make a claim with your insurance provider right away.
Lastly, it’s a good idea to select a mortgage lender who employs strong fraud prevention practices on their end. At Certified Credit, we offer several cutting-edge fraud protection solutions for mortgage lenders, including our:
- Wire Transfer Fraud Report can help lenders verify borrowers’ bank account information and offer status reports on settlement agents.
- Mortgage Participation Report helps lenders do their due diligence to ensure they don’t lend to any borrowers who are on government exclusion lists.
- Flex ID Smart Select Shield can verify key identity information during the mortgage application process.
Stay One Step Ahead of Wire and Title Fraud
While wire and title fraud can wreak havoc on unsuspecting borrowers and homeowners, there are many steps you can take to safeguard your home and finances, from verifying wire instructions to monitoring your credit. Now that you know how to protect yourself, you’re already one step ahead of many consumers!
To learn more about the home-buying process, credit scores, and other mortgage-related topics, check out the Certified Credit blog.
Prevent Mortgage Fraud With Certified Credit
Are you a mortgage lender looking to fortify your fraud and risk mitigation efforts? At Certified Credit, we have a robust suite of solutions that can help reduce your underwriting risk, enhance your loan quality, and keep your portfolio safe. You can schedule a demo with our team to learn more about these game-changing solutions.
In addition to our fraud and risk mitigation tools, we also offer:
- Affordable credit reports
- Automated lead generation solutions
- Automated prequalification
- Automated verification of income and employment
- Automated undisclosed debt monitoring
- Automated credit supplements
- Property and valuation support
- Flood zone determinations
- Underwriting compliance
- Settlement services
Find out how Certified Credit can elevate your mortgage lending practices today.
