You’ve saved for years, found the house of your dreams, and just sent your exorbitant down payment to your mortgage broker. But your mortgage broker never received the payment, and your money has disappeared.
This worst-case homebuying scenario happened to Rana Robillard. The tech executive told CNBC she was in the midst of purchasing a house in Orinda, CA, when she received an email from her broker with instructions on wiring her down payment to them. Robillard sent over her $398,359.58 down payment to a J.P. Morgan account, as instructed.
But she soon realized the email she’d responded to was not from her broker—but from a scammer.
Within seconds, her life savings disappeared—and she lost out on her would-be home, too.
It is a nightmare, and Robillard is one of a growing number of people affected by mortgage wire fraud. According to the latest figures from the FBI, consumers lost $445.1 million in fake email-related real estate scams in 2022, up from $9 million in 2015.
After a spate of publicity, Robillard’s banks refunded her money (after five months), but many other victims are not so lucky. Here’s what all homebuyers need to know to protect themselves.
The price of doing business online
Unfortunately, mortgage wire fraud has exploded in popularity in recent years as scammers gain access to new technology and the real estate industry has moved to do business primarily online, according to Shawn Waldman, CEO and founder of cybersecurity consulting firm Secure Cyber.
The scams usually begin at a title company.
“Somehow, an employee at the title company gets their email password compromised, allowing the threat actor to monitor emails going back and forth,” explains Waldman.
This access gives scammers insight into how to mimic the legitimate conversation you are having with the company and allows them to assess whether or not the scam is worth it moneywise.
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“Upon gaining email access, the threat actor is able to read the victim’s emails to better understand the environment for a successful scheme,” Eder Ribeiro, the director of global incident response at TransUnion, explains. “They are able to add rules and use native tools to give them long-term access to the email account without having to actively monitor it. Ultimately, the threat actor is able to hijack client conversations at the right moment, with the goal of obtaining a fraudulent funds transfer.”
The scammer then accesses your broker’s real email address to send a fake email, offering new wiring instructions that enable transactions to go directly to them.
Everyone is vulnerable to targeted crimes
Wire transfers are especially attractive targets for scammers because they occur quickly. Money can disappear through a chain of accounts within minutes.
These types of scams, sometimes referred to as spear phishing attacks, often fly under the radar because, unlike the usual email phishing attacks, which attempt to scam thousands of people at once, these attacks usually target one person at a time.
“These scams are very sophisticated and convincing, and even the most vigilant individuals can be deceived,” says Ribeiro. “They are often meticulously engineered to exploit vulnerabilities in human psychology and security systems. Cybercriminals have shown they are willing to invest a lot of time in creating complicated, realistic schemes when there’s the potential for a large payday.”
Bad actors also use multiple techniques to steal people’s money. For example, a scammer might first contact a potential victim over the phone and then follow up with email instructions.
The emails are more advanced, too. By now, many of us have trained ourselves to look out for clunky wording or misspellings. But scammers are now using generative AI to construct their messages, making them harder to detect, warns Ribeiro.
How to protect yourself from scams
To save yourself from falling victim to real estate fraud, first secure your personal and sensitive information. You may want to pay for identity theft protection, which monitors the safety of your online accounts.
You should also confirm payment instructions directly with your loan officer or agent and verify wire instructions through a known phone number before you send any money.
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“Wire transfers can be a convenient way to send and receive money, but keep in mind they usually cannot be reversed,” says Darius Kingsley, head of consumer banking practices at Chase. “Be cautious and always ask if there are other ways to pay if you are requested to send a wire.”
Lisa Gaffikin, a home loan specialist with national lender Churchill Mortgage, recommends that homebuyers call the escrow officer assigned to their file and cross-check the wire instructions with the document given to them when they signed their closing loan package.
“Before they order the wire from their outgoing bank, they should have the banker confirm the receiving wire location and account owner to make sure the recipient matches the title company’s bank account,” she says. “Do not trust wire instructions sent via email solely.”
Waldman advises that you talk directly to your brokerage company about what security controls it has in place to prevent wire interruptions.
Above all: “Never accept someone trying to change the details of the transaction at the last second,” he says. “This should be the biggest red flag.”
