Understanding Mortgage Fraud And What To Do If You Become Victim


This ARTICLE On Understanding Mortgage Fraud And What To Do If You Become A Victim Was PUBLISHED On November 20th, 2019

Understanding Mortgage Fraud
Gustan Cho Associates

Mortgage Wire Fraud And What To Do If You Become Victim

Gustan Cho Associates are mortgage lending experts in all areas of the business.

  • Unfortunately, mortgage wire fraud is still a large part of our industry
  • In this blog, we are going to go over some basics of mortgage wire fraud
  • We take fraud very seriously and plan to do all we can to help our clients stay up to date with fraudulent schemes
  • We will detail the new common scheme fraudsters are using to take your money

In this article, we will cover and discuss Understanding Mortgage Fraud And What To Do If You Become A Victim and what happens if borrowers become a victim.

Types Of Mortgage Wire Fraud

What are Types Of Mortgage Wire Fraud

It is a common misconception that mortgage wire fraud can only be done by yourself, the borrower.

  • Providing fake documentation to inflate your income or assets is a scheme of the past
  • Or even asking an appraiser to inflate the value of your home, this is no longer happening
  • With the rules and regulations stemming from the real estate crash of 2008, mortgage fraud has evolved rapidly
  • Mortgage fraud typically refers to miss representation, misstatement, or omission of information relied on by an underwriter to fund a mortgage loan
  • A lot of times fraud becomes a criminal case that may be prosecuted at the state or federal level
  • The more ancient mortgage fraud schemes typically involve income fraud, employment fraud, occupancy fraud, appraisal fraud, and even schemes paying cash-back to borrowers

As stated above, these are the schemes of the past. Let’s bring you to the new age.

Borrowers Need To Be Aware Of Scammers During The Mortgage Process

Why Borrowers Need To Be Aware Of Scammers During The Mortgage Process

Understanding Mortgage Fraud and the new scams that are becoming common:

  • The main reason for writing this blog is to keep our borrowers up to date on new mortgage fraud schemes
  • WIRE FRAUD is a growing problem in the industry
  • This is a scheme to have you wire funds to a criminal
  • The FBI has reported that scammers are taking advantage of homebuyers during the closing process on their mortgage
  • They use sophisticated Internet schemes such as “phishing” to have you wire your closing costs and down payment funds to a fraudulent account
  • This scheme is on the rise
  • In 2017 the Consumer Financial Protection Bureau (CFPB) estimates a loss of $1 billion in real estate transactions

The scheme may not seem as far-fetched as you may think. Let’s go over how this is scheme is completed.

Understanding Mortgage Fraud Via The Internet

What does Understanding Mortgage Fraud Via The Internet mean?

INTERNET SCAMMERS will target real estate professionals, seeking to compromise their email in order to monitor correspondences with clients and identify upcoming real estate closings.

  • During the closing process, scammers will send a spoof or look-alike email identifying your closing date
  • They may send you an email that looks 100% legitimate

They will pose as a title company involved in the closing of your mortgage.

Things To Look Out In Understanding Mortgage Fraud

What are Things To Look Out In Understanding Mortgage Fraud

Always be on alert for potential scammers:

  • They will send you wiring instructions to send your down payment and closing cost funds to

However, this is not part of your transaction and is a scam. A few things to look out for:

The email addresses the phishing/lookalike email is sent from.

  • Usually, this will come from a Gmail account
  • Your REAL title company will have a business email address such as closing@titlecompany.com
  • It will not have a Gmail or Yahoo email account
  • The name of the title company
  • The phone numbers

Always Be Alert And Suspicious With Unfamiliar Emails And Contacts

Why you should be vigilant and suspicious of receiving unknown emails

Make sure you call to make sure legitimate.

  • It is important to avoid these scams
  • You will want to double-check the wiring instructions with trusted representatives of your transaction
  • We recommend calling your loan processor or loan officer for the name and contact for the title company
  • From there you should always contact the title company directly and confirm the wiring instructions are legitimate
  • The title company will be expecting your call
  • This is a standard procedure
  • You will want to double-check this just so you do not wire the funds to a criminal
  • If you are using a real estate attorney to close on your mortgage transaction, they more than likely have gone over this double-check procedure with you

Real estate attorneys are not common in all states but are a great tool for preventing fraud. They are another member on your team helping ensure your transaction goes as planned.

What Happens If You Become A Victim Of Mortgage Fraud

What Happens If You Become A Victim Of Mortgage Fraud

What to do if you sent your funds to a criminal? 

You need to contact your bank as fast as you possibly can and request a wire recall.

  • There is a small fee to complete a wire recall. Depending on how long ago you sent the funds, this may or may not be possible
  • If you catch this the same day, you will be able to recall your wire funds
  • If it is over 24 hours, the chances of a wire recall are slim to none
  • Assuming you cannot recall the wired funds, you must then file an Internet crime complaint with the Federal Bureau of Investigation
  • That’s right, the FBI needs to be involved
  • Here is the link to file a CLAIM WITH THE FBI
  • From our understanding, if you bank with an FDIC bank, each transaction you make is insured up to $250,000
  • You will get your funds back in 48 to 72 hours
  • At that time, the investigation is far from over

The FBI I may need your assistance to catch the scammers.

Understanding Mortgage Fraud During The Mortgage Process

How Understanding Mortgage Fraud During The Mortgage Process

It can be naïve to think these scams will not happen to you.

  • In today’s digital age, scammers are advancing rapidly
  • The look-alike emails are spot on and hard to tell they are fraudulent
  • Many times, they even have the same name as your title company or the same physical address
  • Once you wire funds to somebody, they may go back into your account and make more funds
  • During the FBI investigation, most banks will lock or freeze your bank account for a few days
  • They need to make sure the scammers do not have access to wire more funds from your account

All of these procedures are put in place to protect you but can screw up the closing on your home. 

You Can Never Be Too Careful

You Can Never Be Too Careful

As you can see from this article, your safety is one of our number one concerns. The last thing we want to see is you wire your hard-earned money to a criminal. If you are fooled by this scam, it may delay or cancel your closing. It can take multiple days to get your funds back into your account. During those days, the contract may expire, and you may not purchase the property. Even if you have more funds to the wire, most of the time your account will be frozen until the investigation is complete. Not allowing you to access funds in that account. This is a serious manner. Gustan Cho Associates offers a wide range of mortgage products without LENDER OVERLAYS, but each loan is vulnerable to these scams.

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