Lender Landscape: What we learned after protecting $37B in mortgage payoffs

When I joined CertifID 18 months ago, mortgage payoff fraud was the hot topic. With payoffs becoming the largest source of loss from incoming recovery requests, our customers were proactively reaching out and asking us if we had any way of expanding our technology to protect this part of a real estate transaction. 

12 months ago, we launched our solution: PayoffProtect (or “PoP” as we lovingly call it). The problem to solve seemed simple: verify payoff details and stop fraud. Alas, there was so much to learn. We quickly realized that fraudsters were targeting payoffs because…well, it’s easy. The industry is complex; with more than 5,000 lenders, infinite protocols, and loads of human intervention, preventing payoff fraud was a big challenge. Our biggest learnings ended up creating our strongest value to customers. Here’s what those entailed:

1. Callbacks: The long, the bad, and the unknown

Anybody who's ever picked up the phone to confirm wiring instructions knows what I’m about to say…It can be incredibly difficult, time consuming and frankly, shocking. In both the research to build PoP and eventual launch, we uncovered:

• A large population of the lender representatives do not know their company’s payoff process. An all-too-common response we receive is: “just trust whatever you see on the PDF statement.”
• You can spend a lot of time in a phone tree, bouncing from one lender representative to the next. On average, our team is transferred anywhere between one to five times before finally getting to someone who can help.

Our solution: In building PayoffProtect we not only wanted to automate the payoff callback, but we also wanted to save our clients time and the risk of human error. 

2. Change management: A fraudster's paradise

We learned fairly quickly that payoff processes can change as company policies evolve. Change is good, right? It is when everyone, especially lender representatives are made aware. When those changes aren’t trickled down, we see:

• Lender representatives confirming wire instructions that are outdated and wrong. Talk about scary. 
• We’ve identified fraudulent payoff statements and called the lenders to understand if they’re aware, only to hear them confirm the fraudulent instructions. Brace yourself…in one instance, we called a lender to confirm wire instructions we knew to be fraudulent, only to have four (yes, four) representatives confirm the details. 
• Extra PSA - If you go through a manual callback, please, be specific in your inquiry. You are asking about a "payoff" and not just, "is this account active at your bank?" This should clarify that you’re asking about specific payoff wiring instructions, not "is this a good account to wire funds to?”

Our solution: Verify payoff instructions instantly through PoP. In the event PoP cannot instantly verify details, our team gets involved.

3. Lenders for days: 5K and counting…

We knew the lender space was vast, but more than 5K lenders nation-wide? That’s a lot of banks, the majority of which have their own protocols and processes. In the absence of a holistic approach to payoffs, we see: 

• Almost anyone with the right information can order a payoff statement from these lenders. This could be the attorney on the deal, the real estate agent, borrower themselves, or the title company. 
• Payoff documentation can change hands numerous times, opening up countless opportunities for fraudsters to intervene. 
• Account numbers can be anywhere from 4 characters to 25. The opportunity for human error and fraudster manipulation grows with every character.

Our solution: The more payoffs we verify, the better our system becomes and the more fraudsters we’re able stop.

The lender space is complex to put it lightly. With every payoff that flows through PayoffProtect, we further demystify the industry: removing the risk and hours associated with callbacks, taking the guesswork out by instantly verifying account details, and finally, connecting the dots by bringing a consistent process to a distributed industry.