Mortgage Fraud Red Flags - How to Protect Yourself Against Scams when Buying a Home
If you’re like most people, buying a home constitutes the single largest purchase you will make in your lifetime. Unfortunately, scammers and fraudsters are also zeroing in on that fact and will try to take advantage of homebuyers with nefarious schemes to steal your identity or your money.
It’s important to protect your purchase!
Learn to recognize if you’ve become the target of a scam and safeguard yourself during the homebuying process.
How Scammers Target Homebuyers
Scammers have been known to operate a number of schemes that target homebuyers as they go through the buying process.
Bogus Mortgage Company
These fraudsters lure in unsuspecting homebuyers with ultra-low rates and then, go on to approve mortgages with little pre-qualification. The goal here is to gather sensitive information from homebuyers that can then be sold or used illegally.
In a twist on this scheme’s theme, scammers will try to trick borrowers into wiring them funds under various guises. In many cases, the scammer will then simply close shop and is never heard from again.
Fraudsters, in this case, will target individuals with enticements to refinance. Again, the scam usually starts with an offer for an unexpectedly low interest rate. From there, the homeowner may be asked to provide sensitive information such as social security numbers, wire a fee to start the application, or even sign over the title of their home.
Fortunately, fraud at these levels is rare. Fraudulent bank or mortgage provider schemes account for less than three percent of all fraudulent activities, according to the, and refinancer fraud is less than one percent.
Wire Transfer Fraud
According to the FBI, scammers are increasingly targeting homebuyers during the closing process. In this scheme, fraudsters attempt to divert the buyer’s down payment or closing costs into a fake account—theirs!
This is usually accomplished by someone, pretending to be a tile company representative, contacting the homebuyer via email with fraudulent wire transfer instructions.
These types of activities most commonly start with phishing exercises, in which the scammer contacts the homebuyer with an intent to gain sensitive information. Often, these communications seem legitimate to the homebuyer or appear to come from a trusted source.
Once information is revealed, hackers mount a full-scale attack by infiltrating legitimate email conversations between the homebuyer and the title company or their bank. Using legitimate looking email addresses, hackers will even send official-looking digital copies of closing documents and wire instructions. If the homebuyer is not paying close attention and verifying all communication, these deceitful practices can result in the consumer sending money to fraudulent accounts and the nightmare of stolen funds that may never be recovered.
How to Protect Yourself Against Mortgage Fraud
Fraudsters are becoming increasingly sophisticated in their methods, so it isn’t always easy to recognize when something is wrong. Here are several steps you can take to protect yourself during the mortgage process:
- Always select a legitimate mortgage company with a verified history. Better yet, work with the bank where you have existing accounts. Qualified loan officers will help you understand the mortgage process, so you will be more likely to recognize when something doesn’t seem right.
- Never send information or loan documents electronically unless you are doing so through a secured and verified channel. Legitimate lenders will provide a platform that encrypts documents, making it far less likely that scammers can intercept these communications and use the information against you.
- Never leave confidential information, including social security numbers and bank account information, on voicemail accounts. Doing so exposes your private data, making it vulnerable to theft.
- Never open an attachment from an email account you don’t recognize or can’t validate with a phone call to your lender/title company. These could contain malware, giving hackers a way into your computer where they can gain control of email accounts, and possibly additional personal information.
- Always verify requests for information or fund transfers by personally visiting or phoning your lender. Just remember, if you place a phone call, use a known number for the institution or your loan officer, and not one provided in the email communication asking for money or information.
- Trust your gut! If something feels wrong, it probably is. A phone call to your bank is often your best recourse as legitimate lenders can quickly identify when you’ve been targeted with fraudulent communication.
By buying a home and getting a mortgage, you’re building personal wealth and securing your financial future. As fraudsters become increasingly skilled at the schemes they perpetrate, their aim is to take that away from you. Now, more than ever, it’s important to identify the signs and make sure you’re taking the steps necessary to put up your guard and protect yourself from being scammed.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.