Warning: Cash-out Mortgage Refis New Target for Wire Transfer Fraud

August 27, 2019

Historically low interest rates have resulted in a surge of mortgage refinance activity in recent weeks. According to recent data, as many as 10 million borrowers may be able to save at least 0.75 percentage points by refinancing at current rates. As homeowners flock to take advantage of this opportunity, wire fraud prevention solution provider CertifID issued an alert warning that fraudsters are implementing new strategies to divert wire transfers away from borrowers in connection with a cash-out mortgage refinance transaction. This latest fraud trend stacks on the already active fraud scam of diverting mortgage payoffs in real estate closings.

In recent days, CertifID became aware of cybercriminals focusing on defrauding title and escrow companies that are assisting lenders and borrowers in a mortgage refinance transaction where the borrower is receiving a cash-out payment as part of the closing. The scam is executed when perpetrators impersonate a lender or borrower and send fraudulent wiring instructions to the title or escrow company that is responsible for closing and funding the mortgage refinance transaction. Believing the wiring instructions came from a trusted party in the transaction, title companies wire funds to fraudulent accounts thinking they are wiring funds to the borrower.

According to a recent report issued by the Treasury Department’s Financial Crimes Enforcement Network monthly losses attributable to business email compromise (BEC) last year exceeded $300 million per month which cost U.S. based businesses and consumers billions of dollars last year. BEC is a form of cybercrime where a cyber perpetrator uses targeted phishing emails to specific parties in a transaction designed to obtain sensitive data and/or divert payments to fraudulent bank accounts. Cyber scammers are using BEC strategies in this new fraud scam that threaten the integrity of cash-out mortgage refinance transactions. 

How do industry participants combat this new fraud threat? CertifID provides the following five strategies as a way to lower the risk of fraud in these transactions:

  1. Educate the borrower and other transaction participants about the risks of wire fraud.
  2. Clearly explain how wiring instructions will be shared prior to funds being disbursed after closing. It’s important to include examples of what not to expect so that fraud attempts may be identified and thwarted.
  3. Securely share wiring instructions via encrypted email or other secure platforms. Do not share or rely on wiring instructions sent through standard email messaging.
  4. Confirm the identity of the party sending wiring instructions as well as the bank credentials being shared before initiating a wire funds transfer.
  5. Verify the wire transfer was transferred into the proper account. Most wire transfers are completed within a few hours but should not take more than one business day.

“Times are good in real estate, and industry participants are absorbing the influx of new refinance transactions,” CertifID said in a release. “As closing volume increases, so does the stress level of those responsible for coordinating and closing loans. This may result in the failure to fully comply with company policies designed to prevent wire fraud, so remember to stay alert and take the time to follow the steps necessary to protect all parties in a transaction.” 


Contact ALTA at 202-296-3671 or [email protected].