Even more startling is the second quarter summary from CertifID, which reported a five-fold increase in mortgage payoff fraud attempts between the first and second quarters. The Grand Rapids, Mich., company predicted losses would accelerate in the third quarter, and Marketing Vice President Claudia Lee told me just before deadline for this story that “we are continuing to see elevated levels of payoff fraud attempts.”
Wire fraud, a sub-category of business email compromise, represents one of the most financially damaging fraud schemes and has become a major focus of the FBI Internet Crime Complaint Center “due to its prevalence in the United States and the effect it can have on the individual victims.”
A New Ruse
Clamp, the Texas title pro, probably ran into a good old-fashioned attempt at money laundering through real estate. But the hottest new scheme is seller impersonation fraud. Nearly three out of four real estate firms have seen an increase in the ruse since the start of the year, CertifID reports.
“Scammers continue to advance the social engineering and fake ID tactics to divert funds,” says the fraud detection and protection company’s co-founder, Thomas Cronkright. “Seller impersonation fraud started with vacant land and is now morphing into entity-held properties that have higher price tags and larger payouts for fraud syndicates.”
(Fraud has even infected the commercial property field, reports Leonard Prescott, division counsel at First American, who led a session at the recent American Land Title Association’s convention on fraud trends in the commercial sector where he went over the latest statistics, specific events, and the most common rip-offs. “Wire and title fraud have reached an alarming high,” he said.)
Vacant property “was the just the low-hanging fruit,” says Cronkright, who also owns Sun Title in Grand Rapids. Originally, the bad guys were looking for the quick profits in the five-figure range. But now the deception has been “perfected” by scammers working together on what appears to be a nationally coordinated effort.
“The potential to harvest large sums of money has attracted the resources of organized crime syndicates,” the title executive reports. “They’re increasingly emboldened and they are targeting higher value properties.”
As Cronkright sees it, “It’s not a matter of if your transactions will be targeted, but when.”
How The Dodge Works
Here’s how the dodge works: The scammer searches the public records to find mortgage and lien-free properties, then uses the information he finds to pose as the owner. He then uses an online search to find a local real estate agent, one with whom he has no previous relationship. He wants to list the property for far below what it’s worth on the open market and states his preference for an all-cash deal to avoid detection. He quickly accepts an offer without negotiations and requests a remote notary of his choosing.
The real owners of the property aren’t the only ones being scammed here. So are the legitimate buyers who stand to lose their down payments if financing the deal or every dime if they are paying with cash. Fortunately, there are several ways realty and mortgage professionals can protect them and themselves.
One, of course, is for everyone in the home-owning, buying, and selling arena to be far more vigilant — and cautious.
Owners can best protect their rights by signing up for free property monitoring services offered by their county’s recorders office. That way, says Diane Tomb, CEO at the American Land Title Association, they will be alerted of any skullduggery in advance.
The hair on real estate agents’ necks should stand at attention if the buyer has no interest in seeing the property in person. “Buying a house sight unseen leaves buyers vulnerable to seller impersonators,” reminds Tomb. “Only the real property owner can offer access to the home — a testament to the legitimacy of their ownership.”
