For the past few years, the favorite topics of the mortgage industry have included regula- tion and enforcement, the purchase market and federal interest rate hikes. During that
period, however, a more ominous threat has emerged:
mortgage fraud, particularly wire/identity fraud at closing, which has grown at an alarming rate.
Mortgage fraud is now forcing itself into the headlines, however, and with good reason. The FBI estimates that compromised e-mails may have accounted
for as much as $5.3 billion in business losses globally
between 2013 and 2016. In addition, the FBI’s Internet
Crime Complaint Center reported that wire-fraud scam
complaints from real estate title companies spiked by
480 percent in 2016. These figures are estimated to
include just 20 percent of the actual number of wire-fraud incidents that hit the industry.
All indications are that fraudsters are only growing
more sophisticated, more aggressive and more successful each day. In all likelihood, you or your business
could find itself ensnared in the next big fraud case
that makes the headlines. Even if it doesn’t make the
news, any fraud scam will have a significant impact on
your operation.
Fraud is an issue that impacts everyone involved in
the mortgage process, from originators and their lenders to borrowers, and even title companies. It will take
a concerted effort from all participants in the process,
including originators, to help stamp out this menace.
The threat is real
Even though the numbers are appalling, it sometimes
takes a story or two to convince people that a threat
is indeed credible. In spring 2015, one Michigan-based
title agency was the victim of an identity-based fraud
that cost it $180,000. The company spent the better
part of two years investigating the circumstances and,
in the process, learned just how sophisticated cyber
criminals have become.
As is the case in so many examples of wire fraud,
this example involved a cashier’s check, a wire re-
quest after that check was deposited and a check that
bounced a few days later. The perpetrators included
a cast of criminals from around the world, including
a German citizen working in Europe, a Nigerian
national participating from Canada and a vast net-
work of stateside “money mules” who laundered the
cash on tight time frames — often in just minutes.
Today, some of the participants are in prison, and
the company recovered about $140,000 of the stolen
funds, but not without a tremendous amount of work
and collaboration.
Another eye-opening example comes from Colorado, where a couple lost their life savings during the
purchase of their dream retirement home. The couple sold their house with the plan to use the $272,000
in proceeds as a downpayment on their new home.
Weeks later, the home was not theirs as planned —
and their $272,000 had vanished into thin air.
Thomas W. Cronkright II is co-founder and CEO of Sun Title
and CertifID in Grand Rapids, Michigan. CertifID is a guaranteed identity verification system designed to prevent wire
fraud in real estate transactions. Founded in 2005, Sun Title
has grown into one of the largest commercial and residential
title agencies in Michigan. Cronkright is a licensed attorney
and frequent speaker on identity theft, cyber fraud, real estate
and financial topics. Reach him at tcronkright@suntitle.com.
Lawrence R. Duthler is president and co-owner of Sun Title
and co-founder of CertifID. A licensed attorney, Duthler also
is an active developer and real estate investor, with numerous award-winning commercial real estate projects. He is
a regular speaker on title and real estate subjects as well.
Reach Duthler at lduthler@suntitle.com.
The Emerging Wire-Fraud Menace
When a borrower’s funds disappear at closing, everyone suffers
By Thomas W. Cronkright II and Lawrence R. Duthler
Continued on Page 68 >>
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