Mortgage wire fraud is one of the biggest risks to look out for when you buy a home. Use these 4 steps to safeguard your money and data.
Mortgage wire fraud is one of the biggest risks to look out for when you buy a home.
What is mortgage wire fraud? It occurs when scammers send homebuyers false information about where to wire their closing funds, including their down payment and closing costs.
These scams can cost homebuyers tens of thousands of dollars and jeopardize their ability to buy their homes.
We’ll tell you how to avoid mortgage wire fraud and what you need to know about protecting your data as a homebuyer.
First, choose the right lender
Choosing a reputable, reliable mortgage lender is one of the most important decisions you’ll make when you buy a house.
Before you enter into any kind of contract, research the lender and make sure they’re an experienced, legitimate company. And beware any sweeping promises, unrealistic guarantees, or interest rates that are so low that they’re hard to believe.
“It may sound cliché, but ‘if it sounds too good to be true, it probably is,’” says Joe Pessolano, a branch sales manager with Fairway Independent Mortgage Corporation (Home.com’s parent company) in Garner, N.C. “Research your lender's profile on social media and online. See what others are saying about their experience.”
“It may sound cliché, but ‘if it sounds too good to be true, it probably is.’”
Joe Pessolano, Fairway branch sales manager
It’s crucial that you work with a lender that is licensed in your state and that has a reputation for being communicative and closing on time.
You also want to know that they’re doing what they can to protect you from mortgage wire fraud, identity theft, and unexpected solicitations. Ask what they do to protect your personal information and your money, as well as how much help they’ll provide on these topics throughout the process.
“We stay in touch with our clients not just during the loan process but after as well,” says Sandy Krestan, a senior loan officer with Fairway in Phoenix, Arizona. “From beginning to after closing, we are here to answer your questions and always there to help you decipher all of the spam emails, calls, and mail pieces.”
How to avoid mortgage wire fraud
Mortgage wire fraud is a risk when buying a house – but it’s one you can avoid by being conscientious and working closely with your loan officer at every step.
You will typically receive information about where to wire your closing funds from the settlement agency that is overseeing your closing. But scammers sometimes send emails or text messages to homebuyers that appear to be from the settlement company with instructions on where to transfer the money.
Wiring your closing funds to a scammer or to the wrong account could cause you to lose thousands, or even tens of thousands, of dollars. And without enough funds to close, you will not be able to purchase the house.
Here’s how to avoid wire fraud:
Always verify the wiring instructions with your lender and your settlement agent
Instructions on where to wire your closing funds will come from the settlement agent. However, this might be the first contact you have with the agent or their office prior to closing.
To ensure that the instructions you received are legitimate, ask your loan officer to confirm the details, says Ted Layne, Chief Security Officer at Fairway.
Your loan officer will have been your point of contact throughout the homebuying process, so by this time, you should trust and have a rapport with them. They will also have been in touch with the settlement agent at this point, and they will have the most accurate contact information for the company.
Ask your loan officer to reach out to the settlement agent and confirm the instructions you’ve been given. Once your loan officer verifies that the details are correct and were issued from the settlement agent, you can go ahead and wire the funds.
Even if the phone number or email address from which you receive the wiring instructions seems familiar, it’s still wise to have your loan officer verify the information. Scammers can spoof phone numbers or create official-sounding email addresses that are misleading, Layne says.
Even if the phone number or email address from which you receive the wiring instructions seems familiar, it’s still wise to have your loan officer verify the information.
Do not wire money to an account designated by your real estate agent
Real estate agents do not have access to the account information established by your settlement agency. If you receive a message that appears to be from your real estate agent with instructions on where to wire your closing funds, do not reply to the message or transfer funds there.
Let your agent know that you suspect a scam is being perpetrated in their name, and do not transfer any money until you’ve confirmed the account information with your lender and settlement agent.
Trust your instincts
There’s no such thing as being too careful when it comes to your money and your home, so follow your gut if something feels off.
“If it’s at all suspicious, call someone. Don’t be ashamed to do that,” Layne says. “Call someone that you know on a number that you know that’s involved in the transaction. And I would recommend that they go to their loan officer first.”
“If it’s at all suspicious, call someone."
Ted Layne, Chief Security Officer at Fairway
Layne emphasizes that you should contact a trusted person involved with the home purchase. Even if you have a friend or relative with some knowledge of online scams or IT, they cannot speak to the specifics of your homebuying deal. Talking to your loan officer will help you get the information you need on whether a message is legitimate.
Additionally, if you receive a message from someone who claims to work for your lender but who you have not heard from before, ask your loan officer to verify that this person is who they say they are before you respond or click any links.
The best way to verify any information is to call your loan officer directly, Layne says.
“I know that may be difficult for people who are used to doing most things through text, to go old school, so to speak, and actually talk to a human being,” Layne says. “But in this case, that’s definitely very best way to confirm that information.”
That’s true even when you’re not getting ready to wire funds. Double-check that any communications that appear to be from your lender are in fact coming from a recognizable number or email address.
It’s a good idea to ask your loan officer at the outset how they will communicate with you throughout the application process. If they tell you they will always send information through email or an online portal, you’ll know to be wary if “they” send you a request via text.
Be wary of last-minute changes
It’s very rare that your settlement company will change your wiring instructions at the last minute, Layne says. Although it’s possible, you should be skeptical of any messages telling you to wire funds to a different account.
If you get a message about a change, contact your loan officer immediately so they can find out whether the instructions are legitimate or a scam.
What to do if you’re a victim of mortgage wire fraud
If you realize you’ve been scammed, report the fraud to your bank immediately. Contact your loan officer and settlement agent right away as well.
Time is of the essence when it comes to recovering your money, Layne says. In some instances, homebuyers have been able to stop the transfer and get the money back because they acted quickly.
In other cases, people have lost hundreds of thousands of dollars they had saved for the home.
Although you may feel embarrassed at being taken advantage of, don’t be – and don’t delay in taking action. Mortgage wire fraud scammers are sophisticated fraudsters, and they’ve stolen money from many homebuyers.
The best thing you can do if you are a victim of wire fraud is to report it ASAP and don’t dwell on the fact that you missed the signs.
Scams vs trigger leads
After you apply for a mortgage, you may receive solicitations from other lenders, including ones you’ve never heard of. While the sudden influx of marketing materials may seem like a scam, they’re likely trigger leads – a legal (albeit annoying) outcome of applying for credit.
When you apply for a mortgage, your lender will do a hard credit inquiry. That inquiry “triggers” an alert to other lenders, letting them know you’re in the market for a loan.
The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) allow this practice because they believe it helps consumers get the best possible deals. If you apply for a mortgage with one lender, but another advertises to you and offers you a better interest rate or overall home loan option, that’s good for you as the consumer. So while it can feel invasive to suddenly have all of these companies reaching out to you, the intention behind it is good.
But you still have the right to opt out from receiving trigger leads. See our guide to trigger leads for more information on what they are and how to opt out.
Once you close on your mortgage, you’ve committed to the loan with your chosen lender. At that point, you’re unlikely to keep receiving mail related to trigger leads.
But you may start getting mail from home-related services, such as mortgage life insurance companies (companies that pay off your mortgage if you pass away) and other organizations.
Oftentimes, it looks at first glance as though the mail is from your lender. Look closely, though, because these documents and offers are sometimes marked as “urgent” to “open immediately,” and they reference your lender’s name – but they are not from your lender.
This is a tactic to get your attention. But you are not obligated to respond or enter into any kind of agreement with another company.
To determine whether the mail is from your lender, check the return address, the header on the page, and the logo. Other companies are legally prohibited from sending mail as your lender, so look for official indicators of who sent the offers or letters.
And again, always go back to your loan officer. If you’re unsure whether a piece of mail is from your lender, ask your loan officer to look into it for you.
The bottom line
Mortgage wire fraud is preventable when you slow down and take your time to verify any incoming messages related to your home loan. Communicate often with your loan officer, and don’t hesitate to ask questions when anything seems suspicious or unclear.