Quality Control & Risk Management
SECURITY RISK:
Fraudulent Closing Transfer Instructions Stealing Mortgage Pay-Offs By Ted Claypoole & Dominic Panakal, Womble Bond Dickinson
The past decade has seen the growth of an especially painful and pernicious type of fraud. Criminals have been inserting themselves into the middle of real estate closings, sending believable money transfer instructions to the buyer’s bank or the escrow agent, and absconding with the money. This money was supposed to pay off the remainder of the seller’s mortgage, and has the potential to affect any mortgage banker. Court cases in this space describe a third party pretending to be a known and trusted vendor and instructing purchase payments sent to a supposedly new account, and the payer bank following that instruction without verifying the account change.1 This article will define and explain this problem, legal underpinnings of claims against The MORTGAGE BANKER Magazine
the criminals, and how companies are guarding against this type of disaster. We also discuss what mortgage bankers should do to minimize their risks of taking the loss for such thefts at the end of the day.
HOW COULD THIS HAPPEN AND HOW CAN WE STOP IT? Consumers, real estate agents, and closing lawyers are vulnerable to these attacks through automated phone calls and phishing text messages. Sophisticated versions of these attacks will trick the recipient into clicking a link or installing or downloading an infected attachment. Bad guys gather information that will make their fraudulent instructions look like they genuinely arise from the appropriate parties, such 30
March 2020
