How One Woman Stopped Scammers From Taking Her $50K Down Payment

mortgage down payment

You’ve scrimped and saved for years, and the moment has finally arrived: You’re closing on your first house. Tens of thousands of dollars are sitting in the bank, waiting to become a mortgage down payment. You can almost feel the key to your very own home in the palm of your hand.

Then you get a phone call from the title company. “When are you wiring the down payment money?” Your heart stops. You wired that money two hours ago. What happened to it?

And that’s when the title company tells you that several homeowners in the past few months have been victims of wire fraud mortgage scams. Your life savings might be gone forever.

The mortgage down payment scam ruining homeowner dreams

Shannyn Allan, a Texas-based social media manager and founder of Virtual Charity Runs, worked for years to save just over $50,000 to achieve her dream of homeownership with a 20 percent down payment. She almost lost it to wire fraud.

“Unfortunately, the hectic and scattered nature of homebuying, and the ignorance of being a first-time homebuyer, made it easy for fraudsters to target me,” Allan said. “And the title company wasn’t much help either. In fact, the title company and the process served me up on a platter.”

The day before Allan’s May 5, 2017, close date, the title company emailed her wire instructions. However, she didn’t receive the email until after the daily wire transfer cut-off. She knew she’d have to go first thing in the morning. Overnight, Allan received a new email, apologizing for sending her the wrong information and providing new instructions.

On the way to the bank, Allan contacted the two real estate agents working with her. One apologized for the inconvenience of the abrupt change of plans, and the other didn’t get back to her. Attempts to talk to someone at the title company failed.

“The file was encrypted and contained the title company’s letterhead,” Allan said. “It looked just like the first document, but with different information. I was scared I’d miss the deadline and not get the house. I wired the money.”

Two hours later, the title company texted Allan with the location of the closing and with a question: “When will you send the money?”

“My heart dropped to the floor,” Allan said. “I sent a photo of the wire transfer receipt, and they told me it wasn’t their bank. The told me to try to cancel.”

Later, after talking to the title company and the FBI, Allan learned that this is one of the fastest-growing mortgage scams. Fraudsters hack into a title company’s email to steal their letterhead and other information. They watch for signs that an email is going out to a homebuyer. A few hours later, they send an official-looking email with an encrypted document containing their bank information. Because you’re harried and worried, you don’t question it. You follow the new instructions to the letter.

And then you lose everything you have — as well as your dream home.

Why mortgage scams like this fool so many

Unfortunately, homebuying industry norms contribute to the wire transfer fraud problem. You often wait anxiously for your closing information. During the process, you might work with up to a half-dozen different people at the title company — on top of the people you’re already in contact with at the mortgage lender and the real estate agents’ offices. An email from someone new doesn’t raise red flags anymore.

You’re given short notice to wire money, and the consequence if you miss the deadline is a new closing date (or the deal falls through completely). On top of that, Allan said, she felt unimportant because the communication with the title company was so sparse leading up to the closing.

“It’s very ‘assembly line.’ They send you an email, and then they’re off to send another. It’s about getting these lined up with homebuyers quickly,” Allan said. “I tried to contact them several times during the process, and no one would get back to me until two hours before the closing appointment when they wanted the money. By then it was too late.”

The stress of the situation and the pressure on you to collect everything within a day weighs on homebuyers, especially if this is the first time.

“You’re buying a house, you’ve got work, maybe you’re moving from across the country. There’s a lot going on, and you’re being pressured, and you have to move fast,” Allan said. “The process is confusing, people aren’t getting back to you, and you’re scared you’ll miss your chance. All this combines, and you don’t think too much about it. You wire the money.”

In this situation, many victims never get their money back. But Allan managed to beat the odds and recover all but about $400 of her mortgage down payment money.

What to do if you’re the victim of a wire fraud mortgage scam

Allan admitted she was relatively lucky through this process. Because everyone realized something was wrong fairly quickly, she was able to save most of her mortgage down payment.

“Call your own bank first thing,” Allan said. “Let them know the wire transfer is fraudulent.”

The next step is to call the recipient bank, she continued. You have the scammer’s account number, and they can flag it as fraudulent.

If the scammers haven’t withdrawn the money from their account, your bank and the recipient bank should be able to freeze the assets. What comes next is wrangling, as the two banks try to figure out who will give you the money back (or if anyone will).

Next, Allan said, you should notify the FBI’s Internet Crime Complaint Center (IC3). You can do this online at Allan said the FBI was responsive and helpful. Plus, having a copy of the FBI report helped her efforts.

After contacting IC3, Allan recommended filing a local police report as well. “The police probably won’t know how to handle it, but they’ll make a record, and you can have a copy,” she said.

Once you’ve done that, Allan said to keep the pressure on the banks. “Call them every day. During your lunch hour, carve out time to call and ask for updates from both banks. Get on social and have your friends re-tweet.”

After three weeks, the money was released to Allan, and she was able to close on her home.

Buying a home? Skip the wire transfer

“I was lucky,” Allan said. “Most people aren’t. Most people in my position lose their money.”

So how do you prevent falling victim to one of these mortgage scams? Allan said she’ll never use a wire transfer again. “You can use a cashier’s check to make your down payment. Many people don’t realize that because there’s so much emphasis on wire transfers.”

Wire transfers take less time to clear, and the liability rests with consumers. “If something goes wrong with the cashier’s check, they are on the hook to take me to court and get the money back,” Allan said. “If something goes wrong with a wire transfer, the consumer is on the hook, and you are liable.”

Allan also recommended thinking about cybersecurity. “When closing on your home, you don’t know if your real estate agent, mortgage company, or title company information could have been compromised,” she said. “Phishers scrape information seamlessly and re-route your experience so nobody sees it happening but you.”

The homebuying process is fraught with pitfalls. Allan pointed out that, even though you are frazzled, it’s a good idea to take a deep breath and slow down. Protect your mortgage down payment by using a cashier’s check instead of a wire transfer.

Finally, trust your intuition. “I thought something didn’t seem right, but I was so scared of losing my chance at the house that I wired the money anyway,” Allan said. “Trust your gut and don’t send anything until you are sure it’s legit. There will always be other houses.”

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Published in Mortgage