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What Homebuyers Need to Know About Closing Scams

I love to talk about mortgage loan programs, and how PurchaseOurNewHome.com can direct you to great mortgage professionals who can put you into those mortgage loan programs.  Unfortunately, today I think we should cover a recent scam targeting homebuyers just days before closing on their new home.

How do homebuyers get tricked?  Scammers are using a sophisticated phishing scam designed to divert your closing costs, plus down payment into a fraudulent account by confirming or suggesting last minute changes to your wiring instructions.  Reports of these attempts have risen 1100 % (percent) from 2015 to 2017.  While you might think you wouldn’t fall for this, consider that $1 billion in real estate transaction costs were lost to these scams in 2017 alone.  The texts look like they are coming from your real estate or settlement agent, and they arrive at nearly the last minute before closing the loan.

How do scammers know?  Real estate professionals are increasingly targeted.  Once the emails of these professionals is compromised, scammers can monitor correspondences with clients and identify upcoming real estate transactions like loan closings.  Then they send out a text or email to “notify” the borrower or borrowers of new wire information for their down payment funds to close.  Because they are monitoring the real estate pros, they know the normal method of communication being used in the transaction.

How do homebuyers avoid the mortgage scam?  Consumerfinance.gov offers the following tips:

  • identify two individuals to confirm both the closing process and the payment instructions for any funds to close.  Before you are ready for the mortgage closing, discuss, in person or by phone (not text nor emails), the closing process and money transfer protocols.  Create a code phrase, known only by you and these two people, to be used in case information must be sent out by text or email at the last minute.
  • Write down contact names and phone numbers of the two trusted individuals.
  • Always confirm with these two individuals before wiring any funds anywhere.  This verification must by the given contact phone or in person.  Never follow emailed instructions. 
  • Avoid using phone numbers or links in an email.  Scammers can closely, or completely,  replicate the email address, phone number and format of a real exchange from your agents.  Avoid clicking links.  Avoid downloading attachments until your orally confirm with one of the two trusted individuals by phone or in person.
  • Do NOT email financial information.  Encrypted email may be safe, but avoid the risk.  Today, email is not a secure way to send financial information.
  • Be mindful on phone conversations.  A phone call may seem legitimate.  Remember that you selected two individuals with which to confirm any requests regarding your loan closings.  Scammers may call and ask you to verify your personal or financial information.  Refer to your trusted professions to confirm the call’s legitimacy.  Remember, $1 Billion is lost.  The scammers have become incredibly professional and you will need to be more wary to shield yourself.

If it happens to you…

  • Contact your bank or wire transfer company immediately.  Ask for a wire recall.  The sooner you report the problem, the more likely the funds can be recovered.
  • File a complaint with the FBI.  Contact the FBI’s Internet Crime Center.  As scams become more and more sophisticated, the chance of you being convinced the call, text or email is legitimate increases.  By being aware and taking a few critical proactive steps, you can protect yourself.