Protecting Yourself from Fraud

Team Simplist
Feb 10, 2022

Like any financial transaction in 2022, real estate transactions are a major target for cyberattacks. We dive into how you can protect yourself – and your money – from mortgage fraud.

Furthering a pre-pandemic trend, COVID-19 shutdowns meant a shift in real estate from mainly in-person interaction to more end-to-end virtual transactions. To comply with state-mandated health measures while still getting deals through to completion, real estate professionals made more use of online communications, social media accounts, and video messaging platforms.

While this transformation provides more convenience and safety for clients themselves, it also means that, if improperly handled, buyer information is more vulnerable to hacks and cyber-attacks. Unscrupulous actors can then use that information to reach out and do even more damage through a variety of fraudulent schemes.

What is mortgage escrow fraud?

Mortgage escrow fraud can take different forms, but is typically focused on diverting funds placed into an escrow account as part of a home purchase. This can include either the earnest money deposit (EMD), payments to vendors and suppliers, or wire fraud involving the wire transfer of closing funds.

According to the National Association of Realtors, real estate was the second most targeted industry for cyber-attacks in 2018. According to the FBI, there was almost $150 million in real-estate-related fraud in 2018, with industry-related scams rising more than 1,000% since 2015.

How does it happen?

Spoofing – when criminals set up fake websites and fake email accounts in someone else’s name – is among the most common methods of mortgage-related fraud. For example, a hacker enters the computer system of a title company, real estate broker, or real estate lawyer. From there, the hacker learns details related to a current real estate transaction and a customer’s Personal information The hacker then sets up a fake website and email address designed to redirect the unsuspecting home buyer to a false platform.

Fear not, by being more informed you can help to protect yourself and avoid fraud:

Double-check information: Spoofing works by changing one minuscule and barely noticeable detail of a player in the transaction—for example, changing Johnson Title Company to Johnson's Title Company in a URL or email address. The fraudster then sends fake wiring instructions from the fraudulent email address and takes delivery of the tens of thousands of dollars you’ve been saving for your down payment. Check and double-check any information you receive—especially if it’s coming from an unexpected source. If you’re unsure of a contact, reach directly out to the person with whom you’ve already been in contact.

Communicate with your real estate agent, loan officer, or title company: Even if you’re careful, you can still fall victim to sophisticated fraud schemes. For example, many fake instructions include a phone number to call for verification that is fake as well. Instead, be sure to contact your real estate team at the email address or phone number you already have in your contacts and, as needed, ask for verification regarding information that only they would have access to.

Talk to your title company about the protections they have in place: Unfortunately, some smaller title companies have not yet implemented sufficient cybersecurity provisions. Find out what security your title company has in place, including cyber fraud insurance in the event of a fraudulent incident.

Be wary of rushed requests or those that contain threats: Criminals often apply pressure to motivate victims to act by creating a false sense of urgency. This may include a deadline after which the closing will be delayed or canceled. Or, it may include a threat of legal action or other adverse consequences. While time is always of the essence in real estate transactions, be wary of any communication that makes you feel that you don’t have time to double-check with your real estate team before complying.

Consider setting up a secure means of sharing information: Specialized document sharing platforms (i.e. Dropbox or Dotloop) facilitate document sharing far more securely than email. Talk to your real estate team about their transaction management system or set up your own shared folder where you decide who has access. That way, unknown third parties are less likely to surreptitiously access your information.

Ask lots of questions: Whether you are a first-time homebuyer or have bought and sold homes in the past, it pays to ask questions whenever something doesn’t add up. Remember that you have a team of professionals working hard to help you close. Don’t hesitate to reach out and ask for their guidance as needed.

If you suspect that you have been approached by a fraudulent entity, it is important for you to double-down on protecting your information and your finances. Contact your real estate team and law enforcement, including the FBI’s Internet Crime Complaint Center, in order to begin the process of tracing and, hopefully, shutting down the cybercriminals.

In addition, your bank or credit union will have a fraud prevention department and plenty of information about best practices. Talk to them about ways that you can protect your transactions, including wire transfers, from fraudulent activities. Ask them what their process is in the event that a fraudulent transaction occurs.

At Simplist, privacy and security are our top priorities. That’s why we use bank-level encryption to protect your private information. In addition, you’ll have a dedicated loan expert as your point of contact, so that you always have someone to ask when you need clarification or confirmation. Ready to get started? Get pre-approved or begin the process of applying for your mortgage or refinance.

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