DATE: September 1, 2021
TO: Massachusetts Agents and Approved Attorneys
FROM: Massachusetts Underwriting Department
RE: Payoff Fraud
Mortgage payoff fraud is on the rise. Both the Secret Service and FBI have issued advisories due to the sharp increase being reported in real estate transactions due to the large volume of sales and refinances occurring.
In this scheme, fraudsters send altered or fictitious payoff statements to the title/settlement agent while impersonating
the mortgage broker, lender, borrower or borrower’s representative. In many cases, an email or phone call is made to the settlement agent requesting a copy of the payoff to review prior to closing. After the requested payoff statement is provided, subsequent communication is made to the settlement agent stating the lender has been contacted for an updated payment. The fraudsters come up with a variety of reasons why a new payoff was needed including- an error on the original payoff, and subsequent payment was made after the original which changed the amount owed. The settlement agent receives the “updated” payoff via email, eFax, Fax or courier service. Typically, the only change on this “updated” payoff is the banking information and payment options.
Below are some protective measures you can take to help minimize diversion of payoff funds:
- Obtain payoff statements as early as possible in the transaction to allow sufficient time to properly review and verify prior to disbursement.
- Verbally verify banking information and payoff amount directly with payee using known, trusted numbers rather than information from the payoff.
- If prior payoffs have been made to the same payee, refer to prior payoffs to confirm banking information on the current payoff matches previously used banking information.
- Maintain repetitive wire information within production systems or other secure databases to use for future wires made to the same payee. The repetitive information should be locked to restrict alterations.
- When verbal verification via a known, trusted number cannot occur, consider other payment options, including overnighting a check to the payee.
If you have any questions, please contact any of our underwriters.