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Cyber Wire Fraud is on the Rise

Imagine you have saved money for years… you have skimped on the things you wanted because, ultimately, getting that new home has been your sole focus. A few days before closing, you get an email from the title company directing you to wire your funds for closing, where you follow the instructions they emailed. You go ahead and wire your funds… but when you arrive for closing, a nightmare begins.

It’s not because your figures aren’t in, or that the lender changed their mind, and even the seller is eager to get the transaction done. No – your nightmare starts when you are asked for the funds to complete the transaction… and you tell the closer, you wired them already.

That’s when you find out the title company never sent you wiring instructions… You’ve just been a victim of wire fraud, and your money is gone!

The FBI recently reported a significant surge in wire fraud attempts in the last seven months of 2016. This serious and growing threat is costing consumers millions of dollars and can lead to damaging lawsuits. Lenders, realtors and title companies need to be involved in raising the awareness of their clients to the risk and how to avoid being defrauded.

Here’s how it works:

Hackers gain access to email accounts through captured passwords, often on free email accounts that may have security vulnerabilities that make them easier to penetrate. Free email accounts, while portable and convenient, often lack the firewalls, virus protections and internal security measures common to company issued accounts.

Further, free email accounts are a weak link adding to the risk of wire fraud in real estate and mortgage transactions. Title companies, realtors and mortgage lenders need to be aware that they may face significant risk of liability exposure when wire fraud occurs. NAR associate Counsel Jessica Edgerton recently offered tips for keeping transactions secure. For industry professionals, some of these are:

  • Add a standard warning about wire scams into your email signature.
  • Explain your communication practices to clients at the beginning of the transaction.
  • Consider assigning a staff member responsibility for monitoring, updating and implementing information security systems and procedures.
  • When engaging in a wire transfer, call the company you are wiring money to, confirm the correct routing and account numbers. Then notify them the wire is coming. Your goal is to make sure you know the money is going where it is supposed to go.
  • Use strong passwords and change them regularly. Don’t use birthdays, kid’s names, animals names, etc. Try using something random.

When it comes to hacking wire instructions, these hackers are sophisticated and their attempts are convincing. Their emails appear to be from the genuine source and only a very careful examination would determine that they are not.

As an industry, we need to up our game in protecting both buyers and sellers from getting ripped off.

I recommend counseling clients to call and verify all wiring instructions by phone using the number on the company’s website or a business card (not the number on the email).

Let your clients know that it is not common for title companies to change wiring instructions and to be suspicious when it occurs. Call to follow up immediately with the Title Company or real estate agent to validate the receipt of funds.

It is a good practice to provide all parties to the transaction phone numbers and correct email addresses at the beginning of the transaction – and when in doubt, search for the company’s name online, or on their website (not from an email).

A recent wire fraud case here in Colorado led to a lawsuit against the Realtor, Lender and the Title Company. Reputations, assets and brand image are all at risk when wire fraud occurs. It is imperative that we do everything in our power to prevent it.

Just remember, the best way to prevent wire fraud is to not just take their word for it. Check, double check, and then call the Title Company directly for up to date and specific wiring instructions. The minutes you spend double checking could be the difference between having a move in date and having a bankruptcy court date.

Protecting our clients and ourselves is of paramount importance.

Brought to you by Tony Cavalier, Canyon Title


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