Mortgage wire fraud: Don’t send your down payment without first taking this simple step (2024)

Tim Myers was about toclose on a homein Fort Wayne, Indiana, when the email he’d been expecting popped into his inbox. His mortgage loan officer sent wire instructions for his down payment, along with a request to send the money in the next few hours. Myers and his wife went to their Flagstar branch and wired $34,000 to a Bank of America account.

Everything seemed fine — until the next day, when the title company handling the closing sent instructions for wiring the down payment through a secure portal. Myers called the company to say he had already sent the money.

Then came the awful news: He’d been scammed.

Fortunately, Myers was able to close on the property anyway, and eventually recovered the hijacked money. In many cases, victims ofreal estate escrow fraudnever see their cash again, according to the FinCEN, the enforcement arm of the U.S. Treasury Department.

How escrow wire fraud works

The FBI classifies escrow fraud as “business email compromise.” More than 21,000 such crimes were reported in 2023, with total losses of nearly $3 billion that year.

The amounts stolen can be devastating. In one example, the FBI reports that it helped a victim recover $426,000 wired for a home in Stamford, Connecticut, in 2023.

Scammers know a lot of money moves around in real estate transactions. At the time of closing, the buyer presents a down payment or even the entire purchase amount to the seller, a sum in the tens or hundreds of thousands.

With all thatescrow cashat stake, fraudsters look for a weak cybersecurity link somewhere in the transaction, typically affiliated with the real estate agent, loan officer,title companyor closing attorney.

Then the hacking starts. Once the scammers gain access to that person or entity’s online activity, they learn who’s about to buy a home. The buyer gets an email, phone call or text from someone purporting to be from the settlement attorney or title company with instructions about where to wire funds.

That’s what happened to Myers. The email he received included an accurate description of the property he was buying, a company logo and the contact info for the loan officer.

“It looked legit,” Myers says. “It even had the stupid ‘Beware of wire fraud’ instructions.”

Signs of real estate wire fraud

—The email doesn’t quite match. Fraudsters often use Gmail addresses rather than addresses affiliated with a company domain. In one twist, the initial email address might look legitimate, but if you hit reply, you’ll see a different address for the recipient.

—The wire transfer instructions are in the body of the email, rather than in a secure portal.

—The email reads urgent or confusing. The scammer might insist that the wire transfer needs to happen immediately, or the instructions might contradict what your closing agent told you would happen.

—The email contains odd formatting, grammar or spelling. If the email was in fact from your mortgage loan officer or title company, it would be professionally written, with no strange spaces or wording.

—The scammer won’t take phone calls. Even if the email contains a phone number, the fraudster might claim they’re too busy to answer.

—You’re making a significant down payment. Scammers are more likely to target deals involving large down payments, and less likely to go after loans with zero or little down.

Typically, the scammers whisk the money from one bank account to another. From there, the money often moves offshore or into cryptocurrency, where it’s all but untraceable and unrecoverable, says Claudia Lee, vice president of CertifID, a company that provides fraud recovery services and sells wire fraud insurance.

“We’re very realistic that if it’s been longer than 24 to 48 hours, the chances of recovery are not great — not that they were good to begin with,” Lee says.

Myers had wired the $34,000 at lunchtime on a Monday, and realized he’d been scammed by midday Tuesday. He determined he sent the money to a Bank of America branch in Indianapolis. After numerous phone calls, he reached a branch manager who agreed to flag the transaction for further scrutiny.

The criminals had been thwarted — barely.

“They had roughly 24 hours to do what they wanted, and thankfully, I was faster than them,” Myers says.

Myers reported the crime to local, state and federal law enforcement and got in contact with CertifID. After about four months of nerve-wracking phone calls, his money was returned.

Myers got lucky. Just 22% of the 2,000 escrow fraud victims who filed reports in 2020 and 2021 got back all of their money, according to FinCEN.

Despite the favorable outcome, the crime haunted Myers’ finances for months. Because his Flagstar checking account had been compromised, he was forced to freeze activity. That led to automated payments not being sent, such as one to his children’s day care center.

Myers still has no idea who was behind the attempted theft.

“It was a long ordeal,” Myers says. “It was a headache, to say the least.”

Take this one extra step

Wire fraud has gained popularity among criminals for a number of reasons. Partly it’s because home sales are run by a sprawling ecosystem with many ways for scammers to sneak in, and many players who might not exercise constant vigilance around cybersecurity. The National Association of Realtors has 1.5 million members, nearly all of them independent contractors. The American Land Title Association counts 6,000 members, many of them small title firms. More than 5,000 lenders originated mortgages in the U.S. in 2023, according to federal data.

The ultimate target is the homebuyer, many of them muddling through a long, complicated sale filled with seemingly endless steps and bewildering jargon.

“It’s an overwhelming process, especially for first-time buyers,” says Diane Tomb, CEO of the American Land Title Association, who advises buyers to take the quick step of picking up the phone to verify the instructions before executing a wire transfer.

“​​It sounds simple, but it’s not simple when you’re in the middle of it,” Tomb says.

In hindsight, Myers realized he should have been more cautious. While the email with the wire instructions showed his loan officer’s name, on further inspection it proved to be from a Gmail account rather than from the domain of the mortgage company. The recipient of the wire transfer was not a company, but an individual — another red flag.

None of those signs were obvious enough to raise Myers’ suspicions. Lee, of CertifID, says scammers have polished the scheme so that only the most paranoid homebuyers would notice the imperfections.

“They’re good at it,” Lee says. “They make it look and sound so credible. And they take advantage of the fact that the wire transfer is time-sensitive. Nobody wants to lose out on the home.”

Myers also experienced firsthand the gaps in consumer protections. Banks routinely reimburse customers for unauthorized transactions, such as fraudulent withdrawals or bogus credit card charges. Since Myers had authorized the wire transfer to the scammer, those protections didn’t apply.

In Myers’ case, too, the law enforcement response was less than reassuring. He spoke with an FBI agent, but the cross-jurisdictional nature of the crime complicates investigations. So does the lack of an easily identified perpetrator.

Myers figures he learned a valuable lesson: Never again will he wire money without phoning the recipient to verify the information.

“A two-minute phone conversation could have avoided all of it,” Myers says.

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