How to Report Mortgage Fraud

Learn the steps you and your customers can take to identify, stop, and recover lost funds from a criminal committing mortgage fraud.

How to Report Mortgage Fraud

Learn the steps you and your customers can take to identify, stop, and recover lost funds from a criminal committing mortgage fraud.

Written by:

Matt Kilmartin

Read time:

7 Minutes

Category:

Fraud Recovery

Date:

Oct 4, 2022

The only thing worse than falling victim to mortgage fraud is not knowing what to do next.

Whether it is losing hundreds in fees thanks to a fraudulent loan provider or thousands due to wire fraud, there are specific steps you can take to not only identify and stop the fraudster, but also potentially recover some of your funds.

If you think you may have been a victim of mortgage fraud or believe you got the raw end of a deal in a real estate transaction, it helps to know where to go next. That’s why the team at CertifID has compiled this list of red flags for mortgage fraud and key steps on how to report it. 

The Risks of Mortgage Fraud

The rise of digital tools that facilitate mortgage closings—from email and text messages to banking portals—has made it easier for criminals to pull off mortgage fraud.

Although there are several types of mortgage fraud, it typically involves a person making false statements or listing inaccurate financial assets to qualify for a mortgage loan or obtain ownership of a piece of real estate. The two primary types of mortgage fraud include:

  • Fraud for housing: This is when criminals posing as legitimate buyers and mortgage borrowers, for example, misrepresent their income and assets to bank representatives to qualify for a loan or convenience a property appraiser to manipulate a property’s appraised value in their favor.
  • Fraud for profit: These are crimes in which the mortgage lending process is misused to steal cash or equity from homeowners, banks, or renters. Fraud for profit can also include predatory foreclosure relief programs, debt relief scams, or illegal mortgage loans.

How Cybercriminals Pull Off Mortgage Fraud

The tools your business and customers use for legitimate purposes are exactly the tools criminals want to mimic, manipulate, and use maliciously to lay the groundwork for mortgage fraud. 

Although their tools can vary, some of the more common vectors include:

  • Fake web portals: These match legitimate or legitimate-looking financial institutions or mortgage companies, capturing user credentials or prompting the sending of funds. 
  • Business email compromise: Through phishing or other vulnerabilities, a criminal gains access to a legitimate email account and uses it to coordinate inaccurate wiring instructions.
  • Misrepresentations: This involves coordination with other real estate professionals, including appraisers, to misrepresent their income or the property’s value or ownership history, jeopardizing the legitimacy of a closing or property transfer.
  • Stolen identities: Criminals can use stolen identities of buyers or sellers to manipulate banks, title agents, or buyers to redirect payoffs post-closing.

How to Report Mortgage Fraud: Your Must-Do Next Steps

You believe that you or one of your customers has fallen victim to mortgage fraud. What do you do next?

First, remember that time is of the essence. Then follow these steps:

1. Notify federal, state, and local law enforcement. 

The Department of Justice has many resources based on the specific type of fraud you’ve encountered, including organizations to contact to report a crime and initiate a claim.

One of the best first moves is to contact the FBI, followed by your local police department and the office of your state attorney general. Most attorney general offices have hotlines available to report financial crimes or provide resources for mortgage fraud victims.

2. Notify necessary financial institutions, lenders, and real estate agents.

Depending on when the fraud is identified, contacting the financial and real estate professionals involved can help limit the impact of the fraud. These professionals may be able to stop fund transfers or provide additional evidence and information to law enforcement.

For other concerns or less serious complaints (i.e., unethical but not reaching the threshold of a crime), you can file a complaint with any of the entities that license or regulate financial institutions or real estate professionals, including:

  • Office of the Comptroller of the Currency (OCC)
  • National Credit Union Association (NCUA)
  • State Department of Finance
  • State Real Estate Commissions

3. Attempt to recover the funds.

If money was sent through a wire transfer, there may be a chance to recover some or all of the money. Have your bank initiate a SWIFT recall of the wire transfer with the recipient bank or ask for additional information about the owner of the destination account.

4. Perform your incident response process.

Regardless of the outcome of the fraud, your security team should work to identify the source of the data breach, secure vulnerable systems and accounts, and increase the cybersecurity hygiene of everyone with access to sensitive information.

Fight Back Against Mortgage Fraud

Unfortunately, in today’s digital world, it is a matter of when your real estate business will be impacted by mortgage fraud, not if. However, with the right preparation, knowledge, and tools, your business can protect its reputation and your customers’ financial interests.

In addition to the above steps, utilizing a platform like CertifID can reduce the risk of your customers and business falling victim to mortgage fraud. The platform creates a secure, encrypted tunnel to collect account information once user identities are independently verified. 

Want to learn more about mortgage fraud and how the CertifID team can protect your business? Then take a moment to read our latest 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.

Getting started with CertifID is easy.

Request a Demo