The increasing sophistication of scammers.

Fraudsters are becoming more sophisticated and using a combination of technology, social engineering, and security breaches to carry out mortgage payoff fraud. These tactics include:

• Technology and social engineering: Scammers use advanced technology to create fake websites and email addresses that appear legitimate. Fraudsters may also use a technique known as business email compromise (BEC), which is when they impersonate a legitimate business email address or even gain unauthorized access to a real account to send fraudulent emails and trick victims into transferring money or providing sensitive information. Although BEC refers to email, it can involve impersonation through other forms of communication such as text, social media, and even voicemail.
• Security breaches: Scammers often break into IT systems, taking advantage of data breaches and data analysis tools to identify potential targets or gain access to personal and financial information. They may also use this information to create fake accounts or impersonate legitimate companies.

The widespread use of digital communications and transactions.

The widespread use of digital communications and transactions also contribute to the rise of mortgage payoff fraud. As more elements of the closing process move to the internet, smartphones, and SMS, it becomes easier for scammers to impersonate legitimate businesses or individuals and deceive their victims. In fact, a 2022 survey by ALTA found that 46% of title and settlement companies received at least one email attempting to change wire or payoff instructions monthly. 

The fast-paced, high-pressure closing process.

The accelerated pace of the closing process in the mortgage industry increases the likelihood of mortgage payoff fraud. Cybercriminals know the typical closing schedule and stress that can define a busy title or escrow company. The pressure of juggling multiple closings can make it easier to overlook a small detail or warning sign. 

The high value of real estate transactions.

Fraudsters view their crimes as a pure numbers game. Even if they are spotted, ignored, blocked, or thwarted dozens of times, they will eventually find one unsuspecting victim to exploit in return for a big payday. And with the average mortgage payoff topping $236,000, one successful fraud attempt can make all the criminals' efforts worth the wait.

What methods can prevent mortgage payoff fraud?

Here are three proven best practices:

1. Be cautious about last-minute changes to payment instructions.
   Be wary of last-minute emails that request changes to banking information related to the payoff transaction. You may think that the updated payoff statement or instruction came from the lender, but be cautious. These documents can be tampered with and made to look legitimate to the naked eye. 
   
   
2. Independently verify all wire transfer instructions.
   Before wiring any funds, verify the payoff instructions directly with the mortgage lender or bank. Do not rely solely on email instructions.
   
   One of the most effective ways to do this is by utilizing CertifiD’s PayoffProtect, which independently validates the authenticity of wiring instructions to confirm that mortgage payoffs are not sent to fraudsters. The PayoffProtect process is quick and trustworthy, with each verified payoff backed by $1M in insurance.
   
   
3. Stay up to date on industry trends.
   Stay informed about industry developments related to mortgage payoff fraudulent threat vectors. Leverage industry articles and webinars. This will help your settlement and title company to stay ahead of scammers, identify any potential red flags, and know if there are new attack vectors you should be aware of.