The Federal Communications Commission (FCC) recently made AI-generated voices in robocalls illegal. As technology evolves, mortgage fraud is becoming increasingly frequent and authentic looking. Among the most common types are mortgage wire fraud, appraisal fraud, and title fraud. Understanding these risks and knowing how to protect yourself is crucial in the homebuying process.
Mortgage Wire Fraud
Wire fraud occurs when a scammer intercepts communication between a homebuyer and a mortgage lender or title company, often through email phishing. The fraudster impersonates the legitimate party and falsifies wiring instructions. The scammer’s goal is to deceive you into wiring your closing costs into an illegitimate account.
What to Look For:
- Unsolicited emails or phone calls requesting urgent wire transfers.
- Changes in payment instructions, especially if they involve different bank accounts or last-minute requests.
- Spelling or grammatical errors in emails, or slight variations in email addresses.
How to Protect Yourself:
- Always verify payment instructions directly with your mortgage lender or title company using a known phone number.
- Be cautious of any sudden changes in wiring instructions, especially via email.
- Use secure, encrypted email communication for financial transactions.
Appraisal Fraud:
Appraisal fraud occurs when the value of a property is deliberately misstated at a value well above fair market value causing homebuyers to pay an inflated price.
What to Look For:
- Appraisals significantly higher than comparable properties in the area.
- Inconsistencies in the appraisal report, such as incorrect property details or omitted defects.
- Pressure from sellers or real estate agents to use a specific appraiser.
How to Protect Yourself:
- Hire an independent, reputable appraiser with knowledge of the local market.
- Review the appraisal report thoroughly and question any discrepancies.
- Obtain a second opinion if the appraisal seems unusually high or low.
Title Fraud:
Title fraud occurs when someone illegally steals your identity to transfer your home title into their name, or another party’s name, leaving the homeowner potentially in financial ruins.
What to Look For:
- Unexpected notices or bills for a property you own.
- Missing property documents or signs of tampering.
- Offers to buy your property from unknown individuals or companies.
How to Protect Yourself:
- Regularly check your property records with your local land registry office.
- Consider title insurance to protect against potential fraud.
- Be cautious of unsolicited offers to buy your property or requests for personal information.
Protect yourself by verifying information received, reviewing documents closely, and working with reputable companies. If you suspect fraud, report it to your mortgage lender, the FCC, or the Financial Crimes Enforcement Network (FinCEN). By staying informed, you can play a crucial role in preventing mortgage fraud and safeguarding your hard-earned investment.