New Developments in Wire Fraud – Payoff Fraud

Payoff fraud is when fraudsters impersonate a lender or another title company to receive the funds from disbursement after the settlement process, either from refinancing or the sale of a property. Fraudsters use common tactics found in other wire fraud scams to send a falsified payoff statement with wiring instructions to the targeted settlement agent. The usual phishing and social engineering are part of the payoff fraud scheme, but they also create elaborate spoofed portals and pose as individuals involved in the transaction, usually the lender or mortgage holder.

According to the American Land Title Association (“ALTA”), fraudsters are increasingly deceiving title companies and settlement agents by issuing counterfeit mortgage payoffs and wire instructions from the start. By way of example, ALTA stated:

The California Land Title Association reported an altered payoff statement appeared to come from a loan servicer on behalf of a private party loan. However, the payoff really came from a spoof email account created to impersonate an employee of the loan servicing company.

While there is no sure fire way to protect yourself against fraud, ALTA provided the following tips to avoid falling victim to fraud:

1. Set up a repetitive wire transfer feature in your production system.
   • Include the bank wire transfer information of the entities you repeatedly wire to the most, then lock down the wire information for that entity. If an employee receives a payoff statement containing bank wire information differing from the account information in your system, you will know they received fraudulent account information to illegally divert funds.
2. Disbursement should always make sense.
   • If a nationally recognized bank supplies a loan payoff, the payoff should not direct the funds to another banking institution. Don’t send Trustmark payoffs to BancorpSouth (and vice versa).
3. Pay attention to the details of each payoff statement.
   • The account name on the wire instructions should be that of the payee or corresponding bank and no one else.
4. Verbally verify all bank wire information on payoff statements received from outside third parties.
   • Only use a known, trusted telephone number and not the number reflected on the payoff statement. Statements with differing contact information are a red flag of fraud.
5. Verbally verify every non-institutional payoff every time.
   • This is critical since the bank wire information is typically not available from previous successful wires.

Click here to read more about protecting payoffs from wire fraud.

Important Notice

No matter the dollar loss, title and settlement companies are encouraged to report wire transfer fraud activity to the FBI. This will help the bureau have a better understanding of the frequency of fraudulent activity. Complaints can be filed at www.ic3.gov. You will need to provide the following information: (1) victim’s name, address, telephone, and email; (2) financial transaction information (e.g., account information, transaction date and amount, who received the money); (3) subject’s name, address, telephone, email, website, and IP address; (4) specific details on how you were victimized; (5) for Business Email Compromise (BEC) events, copy email header(s); and (6) any other relevant information that is necessary to support the claimant.