How to Detect Mortgage Payoff Fraud

Learn the mortgage payoff fraud red flags that settlement and title companies should look out for.

How to Detect Mortgage Payoff Fraud

Learn the mortgage payoff fraud red flags that settlement and title companies should look out for.

A woman looking very concerned as she reads a paper in front of her laptop. How to Detect Mortgage Payoff Fraud
Written by:

Matt Kilmartin

Read time:

5 minutes


Mortgage Payoff


Jun 6, 2023

In a time when average mortgage balances are reaching $346,339, mortgage payoff fraud has emerged as a growing and lucrative form of crime. In fact, mortgage payoffs accounted for a staggering 47% of all funds lost to wire fraud in 2022, making them the biggest contributor to real estate fraud and exposing the vulnerabilities inherent in this critical phase of real estate transactions.

Driven by the potential for huge financial gains, criminals have become increasingly cunning, employing advanced and creative techniques to carry out their crimes, ranging from social engineering and business email compromise to network attacks. In their wake, title and settlement companies are left picking up the pieces, suffering significant—if not irrecoverable—reputational and financial damage. 

This is why it’s more important than ever for title and settlement companies to know the red flags that signal potential mortgage payoff fraud and what to do when the unthinkable happens.

How to detect mortgage payoff fraud before it happens

Detecting mortgage payoff fraud requires a vigilant eye and attention to detail. Fortunately, a combination of experience, the right tools, and best practices can help.

Guard the digital gates

Implement robust security tools and access controls to identify and flag unauthorized access attempts to your email accounts and business systems. 

Go the extra mile

Thoroughly scrutinize all documents associated with the payoff, including the payoff statement and wire transfer instructions. Ensure that every detail is accurate and aligns precisely with the terms in the loan agreement, including the destination accounts and key points of contact. Have your team highlight anything that deserves a second look.

Trust, but verify

Pick up the phone and call the lender to validate the instructions. Verifying instructions directly with the lender is a standard best practice that adds an extra layer of protection against fraudulent activities. This can be time-consuming for your internal teams; vendors like CertifID can provide additional resources to take on this key element with the PayoffProtect product.

Stay aware of warning signs

Be on high alert for red flags that may indicate mortgage payoff fraud, such as sudden changes in payment instructions, requests for urgent wire transfers, or pressure to expedite the transaction without proper verification. Any deviations from established processes or unexpected changes in involved personnel should raise a red flag.

Maintain strong lines of communication with partners

Don’t overlook the power of building strong relationships with lenders, banks, and other parties involved in real estate transactions. Regular communication and coordination will not only facilitate a smoother client experience, but also more holistically protect clients from various forms of fraud.

Leverage PayoffProtect

CertifID’s PayoffProtect is designed to quickly and independently verify the authenticity of payoff instructions. With just two minutes of effort from an escrow manager or case file manager, PayoffProtect compares the details against a comprehensive lender database that encompasses more than 95% of all payoffs, including major lenders. When potential fraud risks are detected, the CertifID team contacts lenders to ensure verification. Once validated by PayoffProtect, each payoff transaction is backed by $1 million of insurance.

Responding to mortgage payoff fraud: What to do next

If your transaction falls victim to mortgage payoff fraud, it’s vital to act swiftly to mitigate the damage. 

The first step is to contact your bank and ask them to stop or recall the wire transfer. In some cases, the bank can contact the receiving bank to freeze the funds, helping prevent the money from being forwarded to other banks—a common tactic used by fraudsters.

Once your team takes this step, it is time to initiate a coordinated response, which is where CertifID's Fraud Recovery Services division comes into play. CertifID has a strong  track record in combating fraud and can offer invaluable assistance in coordinating with law enforcement, participating banks, and other parties to the transaction. 

Safeguard your business with CertifID

When mortgage payoff fraud strikes your settlement or title company, every second matters. 

Although CertifID, law enforcement, and banking partners can help in the aftermath, it’s better to establish security processes, prepare safeguards, and implement CertifID’s PayoffProtect before cybercriminals can wreak havoc on your business. With these controls, your team can continue to serve clients with confidence and peace of mind.

Do you want to take your mortgage payoff fraud prevention to the next level? Then take a moment to download our comprehensive resource, Mortgage Payoff Fraud Is Rising; Here's How to Protect Your Business.

Matt Kilmartin

VP of Sales

Matt has over a decade of experience bringing disruptive Software-as-a-Service (SaaS) solutions to market in the automotive, MarTech, and real estate industries. He excels in high-growth tech companies with a passion for building and leading sales teams that deliver a memorable, consultative experience to prospective clients.

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