The Scam That Keeps On Taking – NMP Skip to main content

The Scam That Keeps On Taking

Cyber thieves are relentlessly targeting buyers in the middle of their title insurance and escrow process.

Lew Sichelman headshot
Lew Sichelman
A cyber criminal commits wire fraud

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, 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 headshot
Lew Sichelman,
National Mortgage Professional Contributing Writer

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.

Published on
Aug 05, 2021
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