As an expert in the real estate industry, you know the importance of keeping all the moving parts and documents involved in the closing process organized and on track.

However, multiply that stress, effort, and coordination by the size of your portfolio, and a delicate balance can be harder to achieve, making it easier for mistakes to be made and key points to be overlooked.

Unfortunately, criminals are increasingly taking advantage of these processes to facilitate mortgage fraud and make financial gains. 

Mortgage fraud can cause devastating financial and reputational damage to your company and your clients, so real estate professionals should know how to identify it and stop it in its tracks.

Here is an overview of what mortgage fraud is and how to identify and stop it before it spirals: 

What is mortgage fraud? 

Although it can take many forms, mortgage fraud typically involves a person intentionally making materially false statements to obtain a mortgage loan or ownership of a property.

According to the FBI, there are two distinct types of mortgage fraud:

• Fraud for housing: Criminals can purposefully misrepresent their income, assets, or financial information on their loan application or even manipulate an appraiser to bypass the usual loan process to gain ownership of a property.
• Fraud for profit: Criminals misuse the mortgage lending process to steal cash and equity from lenders or homeowners. 

This second form of mortgage fraud, fraud for profit, can be further broken down into two different types:

• Foreclosure relief or debt management scams: This can also come in many forms, with fraudsters promising to lower homeowner payments, help homeowners avoid bankruptcy, or assist with refinancing, all playing on the emotions of homeowners.
• Predatory loans: These are loan issues that take advantage of a borrower’s lack of knowledge of loan terms or requirements.

Mortgage payoff fraud is another unique form of fraud for profit. This involves criminals impersonating a lender or a title company to reroute funds sent from a party to the sale from the disbursement after the settlement process.

How does mortgage payoff fraud happen? 

Mortgage payoffs are such important transactions, so how do criminals pull off fraud?

Here are the common methods:

• Criminals create fake web portals that match legitimate lenders or mortgage companies.
• Criminals steal buyer or seller identities to manipulate the account information, create new accounts, or redirect payoffs post-closing,
• Criminals pursue business email compromise to interrupt and intercept the legitimate sharing of wire transfer data from the buyer to the seller’s bank and replace the data with their account information.

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How can mortgage fraud be prevented?

Criminals are always on the lookout for businesses that make it easy to initiate and pursue their scams. Fortunately, with the right tools and security practices, these criminals can be thwarted.

Here are some ways to prevent mortgage fraud:

• Utilize a phishing awareness training program and regularly refresh staff on how to spot and report phishing scams.
• Practice basic cybersecurity hygiene throughout your organization, including instituting regular password changes, implementing two-factor authentication, and using firewalls to prevent unauthorized web traffic from entering your sensitive servers and database.
• Utilize a platform that features end-to-end encryption to verify parties to a wire transfer and collect their data.

Although there is no way to guarantee mortgage fraud will never happen, implementing these security practices can help protect your and your customer’s assets.

Take the next step.

Although the real estate market is always in flux, the security, privacy, and reliability you provide to your customers will be consistently strong with CertifID as part of your organization’s security practices.

Want to learn more about how to spot and prevent mortgage payoff fraud and how CertifID’s platform can provide the end-to-end encryption your customers deserve? 

Then we welcome you to check out our e-book, Mortgage Payoffs Under Siege.