Why Mortgage Payoffs Are a Prime Target for Cybercriminals

The rise of digitization of our personal and professional life is a double-edged sword: While the benefits of automation, connectivity, social media, and flexibility are hard to quantify, these innovations have also increased the risk of cyberattacks and data breaches.

This dichotomy is especially true for real estate professionals, who have found new and creative ways to stay connected and streamline their workflows while keeping a constant watch for cybercriminals looking for a quick payday.

One of the most sensitive aspects of the real estate closing process is handling the mortgage payoff. Criminals are after potentially hundreds of thousands of dollars only to leave clients and real estate professionals left to pick up the pieces.

So why is the mortgage payoff process such a big risk for real estate professionals, and what can your business do to prevent this form of fraud from affecting your business and your clients?

What is mortgage payoff fraud?

With the average mortgage balance in the U.S. in 2023 coming in at $241,815, cybercriminals have a huge incentive to find a way to manipulate the mortgage payoff process in hopes of scoring a big payday.

One common but complex technique is mortgage payoff fraud, where criminals find a way to trick parties involved in a real estate transaction by updating the destination for a loan payoff. 

While their initial access vector into the transaction can vary, ultimately, the criminal is able to spoof legitimate information about an upcoming payoff, pretend to work with a title agent or represent a buyer or seller, or directly alter key data about an upcoming mortgage payoff in order to have the payoff funds sent to the fraudster’s account. 

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Because of the way the wire transfer process works, it can be difficult to recover the funds once the process is well underway.

What are some common ways criminals work to commit mortgage payoff fraud?

While the digitization of key parts of real estate transactions has made it easier for buyers and sellers to move through the process, these new technology tools have also introduced new ways for criminals to inject themselves into the process and attempt wire fraud. 

Some of the more common methods of attack include:

Business Email Compromise (BEC)

With BEC, criminals work to collect legitimate email account credentials through phishing emails or finding other vulnerabilities in order to gain access to payoff amounts and bank account information.

Criminals can also begin new email conversations under the guise of a legitimate email account or intercept messages to alter how payoff information is collected and confirmed.

Spoofed Bank Web Portals

In an even more creative and complex approach, criminals create working web portals that spoof the portal of an actual lender or mortgage company to trick buyers and sellers to provide precise loan and closing date details.

This information can then be used to create false payoff information and wire instructions to have funds sent to the criminals.

Fake Urgency or Issues

Using a text message, email, or even a phone call, criminals fake actual real estate professionals and communicate urgent and convincing reasons why a mortgage payoff statement was “updated” or “revised” so that the title company employee or client doesn’t question it.

Criminals take advantage of the stress and pressure of the closing process to update payment information.

Manipulated Faxes

While traditional fax machines aren’t as common, many businesses still have access to electronic facsimile accounts which, if breached, can be used to collect or send fraudulent mortgage payoff instructions to customers or title company employees to have funds wired to a criminal’s account.

CertifID protects from mortgage payoff fraud

No matter how the fraud attempt begins, real estate professionals and buyers and sellers now have a powerful tool at their disposal to protect themselves from mortgage payoff fraud: CertifID.

Instead of relying on the time-consuming and manually driven callback procedures that criminals can use to manipulate payoff processes, CertifID creates a secure online session protected by end-to-end encryption that verifies wire transfer account details. For extra peace of mind, each payoff verified by CertifID is insured by Lloyd's of London by up to $1 million per wire transfer.

CertifID mitigates the risk of a fraudulent payoff statement being used to finalize wire account information and ensures customers that they are receiving the gold standard for verified payoff account details before wiring.

Want to learn more about how you can fight back against this financially devastating form of fraud? Then take a moment to download our latest resource, the “Mortgage Payoff Prevention Checklist.”

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