US Secret Service: Mortgage Payoff Fraud On the Rise

The U.S. Secret Service issued an advisory warning of a significant increase in wire transfer fraud involving efforts to substitute fraudulent mortgage payoffs and thereby divert proceeds for criminal gain.

The government agency reported that criminals send fictitious or altered mortgage payoff statements to title companies, attorneys and others acting as a closing or settlement agent and therefore responsible for paying off existing liens at the closing table.

Wire fraud has been a bane to the mortgage industry for several years now. As lenders have taken steps, on their own and through various fraud prevention tools, to verify settlement agent trust accounts where proceeds are initially received, the criminals have taken a new path to intercept and divert mortgage proceeds by attacking the payments leaving the trust account at the time of the closing. Payoff statements, normally obtained by an attorney or a title company in conjunction with the closing have been, through email intercepts and other email impostor schemes, slightly altered to trick settlement agents to pay funds earmarked to satisfy prior liens, into private accounts. When this occurs the liens remain unpaid thus establishing legal contests to lien priority.

Lenders, title companies, attorneys, escrow officers beware. Payoff statements must be verified at the source, every time, as even if used previously payoff statements can easily be misread or misunderstood in the flurry of closing activity.

Secure Insight is offering clients the opportunity to engage our analysts and fraud prevention tools to verify mortgage payoffs. Contact us for further details. Trust, but verify!

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