How Reverse Mortgage Professionals Can Prevent Wire Fraud

Real estate transactions—including reverse mortgage transactionsare increasingly a target for scammers, as seen by title and closing professionals on an ongoing basis. But there are precautions and measures loan originators and others who participate in the reverse mortgage market can take in order to avoid the unfortunate consequence of a borrower’s funds being stolen.

“The same technology that has helped us to work faster and more securely has opened a whole new application for scammers,” said Adan Gutierrez, client solutions manager for Allegiant Reverse Services, a division of FNC Title of California, during a webinar hosted by ARS on Wednesday.

“In particular, wire transfer funds are what’s targeted because they are an immediate transfer of goods,” Gutierrez said. “…By the time someone catches the fraud, the money is already gone.”

Advertisement

Most fraud schemes that target wire transfer funds fall under the category of phishing, or a type of scheme in which a fraudulent individual purports to be someone else and seeks personal information relating to a transaction. Typically, these wire transfer phishing schemes involve an email compromise, in which the scammer registers an email address similar to that of one of the involved parties as a way to confuse the people who are communicating. For example, the insertion of an extra character or symbol into a familiar email address. Or, the scammer might register an address with an email domain that is similar to one of the domains being used by the parties in the transaction.

The participation of one of the parties is critical in the success of these scams, Gutierrez said.

“A fraud can only happen once someone participates,” he said. “Meaning us, or the other end. The hacker will continue to phish. At the end of the day it’s one person who didn’t do due diligence. It can happen to anyone.”

Fraudulent contact can be characterized in many ways, but commonly, it has some of the following qualities, according to ARS: Questionable wire instructions; wire instructions for an account holder who is not someone recognized in the transaction; international wire instructions; an urgent change in requested method of disbursement or wire instruction; out of band communication (meaning an email that’s not in the known domains such as gmail, yahoo); requests initiated outside of normal business hours; requests for secrecy or urgency; correspondence from similar, but unfamiliar domains; any communication that feels strange; or a free and clear property accompanied by a change in vesting.

Yet there are some common defenses professionals and borrowers can take, including simply informing borrowers about these types of fraud.

  • Have a standard procedure for the wiring of funds. Explain to the borrower that he or she will never be directed to change the account.
  • Do not share passwords, even with IT representatives, and change passwords regularly.
  • Limit the number of people who have the ability to transfer wires.
  • Require a secondary sign off. Add an additional employee to check the wires.
  • Avoid open-source email such as gmail, hotmail, or other free platforms. “Even though it may be easier to communicate that way, it’s a lot easier for hackers to imitate,” Gutierrez says.
  • Double check email address. Once an address is recognized, it may be “auto-filled” by the email system, meaning a fraudulent email may continue to be used.
  • Consider registering all the domains similar to your own. This prevents hackers from gaining access to them.
  • Consider establishing a DMARC record on your domain. This quarantines emails that spoof your real domain.
  • Confirm all wire sources via multiple sources. If you received instructions via email, don’t rely on this alone.
  • Consider refusing all wire instructions received via email or fax.

While many of these processes take time and effort, the extra steps are well worth the protections for borrowers.

“It may seem inconvenient, but what conversation do you want to have with the borrower?” Gutierrez says. “‘We will have to wait to fund until Monday?’ Or, ‘We lost your $100,000?’”

Raising any issues that seem abnormal is a first step, and reporting any instance of fraud is also important. Reports can be made with local law enforcement, and local FBI offices, which investigate cybercrime.

“We work in a business where fraud is constantly evolving,” Gutierrez says. “Educate yourself on how criminals are developing new ways. It will only happen if you participate. Never let the wiring of funds be a casual act…The success of these frauds depends on you.”

Written by Elizabeth Ecker

Join the Conversation (2)

see all

This is a professional community. Please use discretion when posting a comment.

  • Hi, I have been trying to figure out my mothers RM. She went to US Bank here in town. Has pretty much done all her biz with them. Back in 2008 my mother wanted to remodel her home. She was also taking over the bakery biz that her parent started back in 63. She was very busy. She went to the banker and she had a local contractor. They recommended demolishing her home and build a new one and it would be paid for by RM and she would also receive an income. US Bank as her financial advisor set the deal up with a broker. So we had a contractor, banker and a broker. They told her they had it all worked out. In 2014 I came to live with and take care of her. After I found all this out, I was shocked. She already had a house that was paid for with a large equity. Well they had it torn down and built her a new one. So what happened to the equity that she had in a free and clear house? They did a RM on the new house and she had to pay all title insurance, mortage insurance, etc all up front. It took almost 2 yrs for them to finalize the RM. In the meantime they are collecting RM payments and mortage insurance intrest from the servicer Livewell Financial. She has never received any income from any of this. Her HEMC loan amount came out to around $475000.00. Monthly payment @ $4580.00 + $458.00 a month mortgage insurance, which she already paid upfront, yet they charge her 5% monthly on top of the $4580.00 they deduct from her equity. She had reached her limit with Livewell, she got notice that $675,000.00 was her balance and they had sold the RM to HUD. If they had already deducted that amount from her equity and got paid, then the home should be free and clear. Yet they say the loan amount was $458,000.00 yet they took $765,000.00. Without a calculator on hand, it looks like they got paid an extra $300,000.00. Then also the mortgage insurance they have charged should not have been because she paid it in full up front. So now she has gotten notice that her new servicer is Novad. Still claiming the same amount again by a second servicer, actually 3rd. HUD was 2nd. Her property value assessment skyrocket in 1 yr from $458,000.00 to being assessed at $1.3 mil. Now remember, she has not received any income at all from this deal. I feel that this whole set up was just that, a fraudulent RM, where everyone involved has taken advantage of her, her situation, her age, and her trust of her financial advisor. There is something definately wrong here. I have looked for some kind of help to figure this out and keep hitting brick walls of no information. Her age is catching up with her now and I need to get this handled soon because I will be on the street. If that really matters to anyone.
    Anyway her taxes have doubled about every 2 yrs. She is now up to $13,000.00 a yr property taxes. So I also believe that they inflated the numbers to make more money and drain her equity quicker, then for close on prime coastal property. I also remember something about having to place another piece of property along with this deal as collateral.
    If you could recommend someone who knows about these kinds of situations, please let me know. I need help !!! I don’t think she really realizes what has happened to her.
    Thank you so much for you time.
    Penny

string(102) "https://reversemortgagedaily.com/2018/04/18/how-reverse-mortgage-professionals-can-prevent-wire-fraud/"

Share your opinion