In real estate, as in war, forewarned is forearmed. It’s especially true today because of the use
of wire transfers between parties, banks and title insurance agents and
companies, to deliver funds for contract deposits, mortgage payoffs and buyer’s
funds.
We are writing about the weapon used by scammers – the falsification
of wire instructions.
A recent article from National Mortgage
Professional magazine written by Lew Sichelman dives into the scam.
Here’s the text of the article which can be found on line at
nationalmortgageprofessional.com/news/scam-keeps-taking
The Scam That Keeps On Taking
Cyber thieves are relentlessly targeting buyers in the
middle of their title insurance and escrow process.
Fraud schemes come and go. Romance scams are hot right now.
So beware of a new “love interest” who could trick you into falling for them
when all they really want is your money.
But one ruse that has been particularly persistent is the
wire transfer dodge in which cyber-criminals impersonate title firms in trying
to steal mortgage payoffs. So much so that the Secret Service recently issued
an advisory warning on a “drastic increase” in the scam. “We have seen a sharp
increase in real estate wire fraud in recent months,” says Stephen Dougherty of
the agency’s Cyber Investigation Division.
I first wrote about wire fraud about a half-dozen years ago
in my nationally syndicated newspaper column when I heard the general counsel
of the National Association of Realtors warn an audience to be alert to what
was happening. Six years or so later and the subterfuge is still popular with
the thieves who perpetrate it.
It’s easy to see why. Wire fraud is far more lucrative than
robbing a bank. Whereas bank robbers get away with just $1,400 on average per
heist, according to Bruce Phillips, senior vice president and information
security officer at WFG National Title insurance in Portland, Oregon, the
average lost to swindlers in a wire heist is $140,000-$160,000. One poor soul
lost $1.2 million, never to be seen again.
Taken To Task
Sometimes marks get lucky. Listen to the tale of Aaron Cole,
a vice president of a gear and machine company in Oregon City, Ore., who lost
all his money – $123,000 to be exact – when he complied with phony wiring
instructions. The e-mail certainly looked legit. It wasn’t, though, and in the
click of a mouse, his money was gone. The criminals quickly whisked the dough
to various accounts in the United States and overseas.
Cole had sold his old home and was ready to move with his
wife and two children into a new place. But that happy occasion turned into a
nightmare when he had to tell his wife their closing money had vanished. “I
never felt like that before in my life, and I hope I never feel like that
again,” he told my associate, Mark Fogarty.
“The scammer got between my correspondence with the title
company and me,” he said. “To my untrained eye, [it] looked to be from the same
people I’d been working with all along.”
By the time the legit title company called a week later with
the actual wiring instructions, he recalled, “I knew my money was gone and
there was .very little chance of ever recovering any of it.”
Luckily, WFG, his title company, [Vested Land Services is a WFG agent, ed.] made Cole whole, allowing
him to close on his home and move in just in time for Christmas. In return, he
became something of a spokesman for the company, telling his story to media
outlets to warn consumers about the dangers of real estate “phishing” scams.
Taylored Appeal
More recently, the American Land Title Association told the
story of a chap named Taylor – his last name was omitted to protect his privacy
– a move-up buyer outside of Denver who received an email appearing to come
from the title company and asking him to wire his closing funds early in the
transaction.
“The emails appeared convincing and included my exact amount
for closing that had previously been discussed by the title company,” Taylor
told ALTA. “I received the wiring instructions and wired just under $80,000 as
instructed. Two days later, I was notified that the money did not arrive at the
title company and that’s when I realized my life savings had been stolen.”
Fortunately for Taylor, his title company, Title Forward,
advised him how to notify the financial institutions involved of the crime. But
after two days, the banks provided no assurance his funds were secure, so the
company called in Thomas Cronkright, a funds recovery expert who himself was a
wire fraud victim.
Cronkright, who runs a company called CertifID, gathered the
emails and bank information and deployed CertifID’s Funds Recovery Services to
launch a coordinated effort that involved the Secret Service to recover the
funds. Within a few hours, Taylor’s money had been secured. And within a week
of complying with the criminal’s wire request, his life savings was back in his
bank account.
FBI Interest
Of course, very few victims are as fortunate as Taylor or
Aaron Cole. Nevertheless, Taylor said he found the entire experience
“shocking,” adding that “if I can be tricked, anyone can.” Turns out, many
people are. According to the FBI’s latest Internet Crime Report, wire fraud --
technically referred to as Business Email Compromise – has cost companies and
home buyers more than $3.5 billion in recent years.
You rarely hear of these victims’ stories, largely because
they are too embarrassed to come forward. But the scheme accounts for nearly
half of all cyber crime losses. It starts with a “phishing” expedition in which
fraudsters search the Internet for folks involved in a real estate transaction.
And with more than five million sales a year, there are plenty of those.
Once the bad guys latch on to e-mails between buyers and
their agents and lenders, they gain transaction details, including the amounts
buyers are required to transfer for their pending closings. Armed with that
information, they send fake wiring instructions under the guise of the title
company or other professionals involved in the transaction.
The instructions often tell buyers to send the money
immediately – sometimes as digital currency – or the transaction will be
delayed or canceled altogether. And if an unsuspecting buyer complies, his
money is gone in a flash.
LO Alert
Consequently, it’s incumbent upon real estate agents and
loan officers to alert their clients that it’s entirely possible they will
receive such a request and what to do about it. Reminding them frequently of the
possibility so often won’t hurt, either. Warn them that if they receive any
e-mails from anyone claiming to be a part of the transaction, they should call
you to verify that fact before doing anything else.
Cronkright, the recovery expert, also advises lenders and
title agents to communicate clearly with clients about how and when the buyer
will be called upon to transfer closing proceeds. Tell them, too, that the
wiring instructions will never change.
When the final instructions are sent, do so prior to sharing
the final settlement statement. Don’t send the instructions by regular e-mail.
Rather, send them in a secure, encrypted message. Make sure you obtain written
proof from the buyer that he received your instructions.
Meanwhile, ALTA, the title business trade group, offers a
number of resources to help protect against wire fraud and raise awareness
about the threat, including a wire preparation checklist that can be used as a
best practice for verifying outgoing wire information and a rapid response plan
that can help aid in the recovery of funds. The organization also has produced
a rack card explaining wire fraud and the steps consumers should take to avoid
becoming a victim.
Meanwhile, all you lonely guys and gals out there, your
antenna should wiggle when someone of the opposite sex comes on to you. Be
particularly wary of a tragic story or an emergency that pops up after you’ve
known that person for only a short period. That’s how romance scams begin.
This article was originally published in the NMP Magazine
August 2021 issue.
Lew Sichelman has been covering the housing and mortgage
sectors for 52 years. His syndicated column appears in major newspapers
throughout the country. He also has been the real estate editor at two major
Washington, D.C., dailies and spent 30 years on the staff of National Mortgage
News, formerly National Thrift News.
Keywords: cyber crime cybercrime wire fraud
We are the New Jersey title insurance agent that does it all for you.
For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!
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