Getting a mortgage is one of the biggest investments most people will make in their lives. Our company takes pride in protecting our borrowers’ finances and personal information during the mortgage process, but we can’t do this without their help. Part of our job as a lender is educating our clients on how to protect themselves from the risks of mortgage closing scams.
What are mortgage closing scams?
Mortgage closing scams are a form of phishing that targets people who are obtaining mortgages. The scam attempts to trick borrowers into sending their closing funds (down payment and closing costs) to the wrong recipient by sending false instructions that appear to come from a trusted source. An estimated total of $1 billion in mortgage closing scams occur every year, costing some victims tens of thousands of dollars or more.
Here’s how a mortgage closing scam can happen:
- The borrower receives an email, text message or other communication from their settlement agent, lender or another professional working on their transaction.
- The message includes instructions for the borrower to send their closing funds electronically. Everything looks good, so they follow the instructions and send their money.
- The borrower eventually learns that their closing funds were never received. They show everyone the instructions they followed, but no one recognizes them. These were fake instructions sent by a scammer!
- The borrower calls their bank as fast as they can to try to reverse the transfer, but it’s too late. Their money is gone for good, and now their closing is in jeopardy.
How can you protect yourself from mortgage closing scams?
Here are the instructions we provide to our borrowers to help them keep their closing funds safe:
- NEVER trust any wire instructions from anyone until you verify the instructions. No matter how authentic an email, text message, phone call, letter, website or other message seems, it can easily be a fraudulent imitation.
- DO NOT call, click or use any phone numbers, hyperlinks, email addresses or email attachments you receive in an unverified message. These items may be false or dangerous. If you receive a phone call you do not trust, politely hang up and call a number you do trust.
- ALWAYS verify your wire instructions by calling your settlement agent at a trusted phone number. This should be a number you have on file or receive from a trusted source. When you call, be sure to verify any account numbers or names included in the instructions.
- ONLY obtain wire instructions from your settlement agent. As a lender, we do not send wire instructions, and if you receive them from anyone but your settlement agent, it may be a sign of an attempted scam.
- STOP, think and take your time. Be on your guard if anyone tries to push you to send money immediately or surprises you with last minute changes. Only send your funds after you have confidently followed these steps without rushing.
- ONLY send your funds by wire transfer using validated wire instructions from your settlement agent. Never send funds by ACH (automatic clearing house) bank transfer, PayPal, Venmo, Zelle or any other payment transfer method.
- IMMEDIATELY notify your bank or wire transfer company and request a wire recall if you believe your wire was sent to the wrong recipient. Do this only by calling phone numbers you trust. Your chances of reversing a fraudulent transfer decrease the longer you wait.
To learn more about how to stay safe from mortgage closing scams, click here to visit the Consumer Financial Protection Bureau’s page on the topic.