Real estate scammers emailing you

real estate scammers
Business email scams (infographic from fbi.gov)

The warnings of real estate closing scams were rapidly broadcasted in 2015 .  And by 2016, there was awareness that criminals were wholeheartedly targeting all parties involved in real estate transactions through phishing emails.  The phishing emails that were sent seemed legit, and in many cases appeared to have come from your agent or title company, but were actually sent by criminals intent on having you wire money to them.  No one was immune from receiving these emails. Real estate scammers targeted home buyers and sellers, real estate agents, title companies and attorneys.

The FBI (fbi.gov) categorizes this type of crime as Business E-mail Compromise (BEC)/E-mail Account Compromise (EAC).  The scam didn’t begin in 2015, but the FBI began tracking this type of crime in 2013.  But it wasn’t until 2015 that it seemed as if the real estate scammers used BEC/EAC to target the real estate industry, and it spread ike a plague.  And despite efforts by the real estate industry to prevent such crime, BEC/EAC is on the rise.  Real estate scammers have adapted and have become increasingly sophisticated.  Many of the phishing emails (calls) are not distinguishable from the real thing.

Statistics compiled by the FBI Internet Crime Complaint Center (ic3.gov) indicate that there were 78,617 incidents of BEC/EAC worldwide between October 2013 and May 2018.  Over half of these victims (41,058) were in the U.S.  Total global losses during this time period is calculated to be $12,536,948,299 (U.S. losses were $2,935,161,457). 

Unfortunately, the real estate industry has been a target of interest since 2015.  According to FBI statistics, the number of BEC/EAC real estate related victims increased 1100% between 2015 and 2017.  So far, the highest number of BEC/EAC real estate victims were reported in May 2018, while the highest dollar loss from real estate victims was reported in September 2017.  The number of complaints and losses is likely correlated to real estate market activity (notwithstanding efforts to thwart such crimes).

How do criminals know about your real estate transaction?  The internet.  Real estate scammers use information available on real estate portals to identify homes that are pending (under contract) along with agent contact information.  The information is used to infiltrate agents’ emails to compile client names and closing information to target everyone involved in the real estate transaction with phishing emails.  The emails typically request changes in settlement funding.  The changes can request wire in lieu of check, and/or changes in the wire instructions (which would send funds directly to the criminals). 

The FBI has also described BEC/EAC spilling over into phone calls!  In addition to sending spoofed emails, the criminals are also calling you asking for personal information for “verification purposes.”  Experts suggest you be cautious about calls asking for changes in payment types and/or wire instructions.  The fake calls are so real such that victims have reported not being able to tell the difference. Security experts recommended that you create code phrases to verify phone calls with your agent and title company. 

Experts also warn of any communication that is exclusively email and/or asks you to call for verification purposes.  It is likely that any contact information listed in the phishing email is fake.  If the email sender claims to be from the title company or your agent, call them directly to verify the authenticity of the email.  If you receive any email requesting personal information and/or changes in payment/wire instructions, verify the email is legitimate by calling the sender directly (and use your code phrase).

Original article is published at https://dankrell.com/blog/2019/11/19/real-estate-scammers-emailing-you/

By Dan Krell
Copyright© 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Title fraud protection

title fraud
Title fraud and house stealing (infographic from fbi.gov)

In the wake of the largest consumer data breach in history, ads for credit monitoring and other related services are flooding the airwaves.  One of these associated services is home title monitoring.  These commercials claim that they will protect you from home stealing and title fraud.  But what is home title monitoring and is it worthwhile?

According to a FBI report (fbi.gov) “House Stealing, the Latest Scam on the Block,” house stealing is a combination of two popular “rackets:” identity theft and mortgage fraud.  The 2008 report described a couple of versions of how the scam is perpetrated.  One form of this crime is committed by obtaining a cash-out mortgage posing as you to get a check at settlement.  Another form is committed by fraudulently taking title to your home and then selling the home for the proceeds.  Although fraudsters frequently target vacant homes, house stealing can also occur while you’re still occupying your home.  The FBI describes how scammers perpetrate house stealing and title fraud:

Here’s how it generally works:
-The con artists start by picking out a house to steal—say, YOURS.
-Next, they assume your identity—getting a hold of your name and personal information (easy enough to do off the Internet) and using that to create fake IDs, social security cards, etc.
-Then, they go to an office supply store and purchase forms that transfer property.
-After forging your signature and using the fake IDs, they file these deeds with the proper authorities, and lo and behold, your house is now THEIRS* [*Since the paperwork is fraudulent, the house doesn’t legally belong to the con artists.]
There are some variations on this theme…
-Con artists look for a vacant house—say, a vacation home or rental property—and do a little research to find out who owns it. Then, they steal the owner’s identity, go through the same process of transferring the deed, put the empty house on the market, and pocket the profits.
-Or, the fraudsters steal a house a family is still living in…find a buyer (someone, say, who is satisfied with a few online photos)…and sell the house without the family even knowing. In fact, the rightful owners continue right on paying the mortgage for a house they no longer own.

Both forms of house stealing (or title fraud) are typically intertwined with mortgage fraud.  And because of the process, mortgage fraud usually has multiple conspirators carrying out the scam.  An example of this is the 2013-2014 sentencing of at least five co-conspirators (including a title company manager and mortgage broker).  These criminals perpetrated a complex multi-million-dollar mortgage fraud scheme that occurred in Maryland.  One conspirator sold homes that did not belong to her.

According to the FBI report, house stealing is difficult to prevent.  However, vigilance on your part is highly recommended.  Red flags include receiving payment books and/or late notices for loans for which you did not apply.  Additionally, it is recommended to routinely monitor your home’s title in the county’s land records. Any unrecognized paperwork or fraudulent looking signatures may be an indication of title fraud and should be looked into.  Title fraud should be reported to the FBI.

Title fraud protection

You can visit Montgomery County’s land records office and get information on searching your home’s title from the very helpful staff.  You can also search land records online.  However, you should consult a title attorney for a detailed title search.

A problem with searching land records is that it is not always definitive.  Of course, accuracy depends on those who prepare and file the documents with the county.  Common issues that are found in title searches are misspelled names and aliases.  Deeds and other related documents (such as quit claim deeds and mortgage satisfaction letters) are not always filed timely, or sometimes not at all.

After the Equifax breach, millions of consumers’ identifications are available to criminals to perpetrate house stealing/title fraud.  Title monitoring services tout their ability to protect you from such scams.  Before you decide to enroll, be aware of the fees, the limitations, and how it compares or differs from your owner’s title insurance policy (including cost).

Your title insurance policy may already protect you from title fraud.  According to the Maryland Insurance Administration’s A Consumer Guide to Title Insurance (insurance.maryland.gov), “Title insurance protects real estate purchasers and/or lenders from losses that arise after a real estate settlement…A title insurance policy provides coverage for legal defense, as well as the coverage amount listed in the policy, which usually equals the purchase price of the real property.”  Basic coverage typically protects you for fraud that occurred prior to settlement.  However, enhanced coverage may provide protection for fraud that occurs after settlement.

You should consult with a title attorney about your title insurance coverage and how it protects you from title fraud.

By DanKrell
Copyright© 2017

Original published at https://dankrell.com/blog/2017/10/22/title-fraud-protection

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Mortgage fraud is not victimless

Mortgage fraud (infographic from corelogic.com)

Since the foreclosure crisis, there have been many enhancements to the mortgage process to deter fraud.  Some of these changes include licensing of loan officers and indicating the license on government loans, choosing appraisers randomly, and limiting who can speak with appraisers.  Fraud detection before and after settlement has also been improved to thwart criminals.  But even with modern advancements, mortgage fraud has been trending upward.

Mortgage fraud schemes are increasingly sophisticated.  You may think that that those who are involved in mortgage fraud are career criminals operating in remote areas.  However, anyone can knowingly or unknowingly be involved, including real estate agents, attorneys, loan officers, appraisers, etc.  And it can happen anywhere, even in your neighborhood.  Where are is the most fraud trending? CoreLogic (corelogic.com) tracks fraud risk, and an interactive map can be found here.

Innocent consumers can get caught up in a mortgage fraud scheme too.  Historically, home flipping schemes were the traps where unwitting home buyers would get cheated.  However, since the foreclosure crises, distressed home owners have been a major target of mortgage modification scams.

The Federal Bureau of Investigation (fbi.gov) maintains that mortgage fraud is typically a material misstatement, misrepresentation, or omission in relation to getting a loan.  It is also considered fraud to lie to influence a bank’s decision to approve a loan and/or to get favorable loan terms.  The information you provide for your mortgage application should truthful.  Even indicating falsely that you will be occupying the property after settlement to get a better interest rate, when your intention is to use it as a rental property, is mortgage fraud.

After the mortgage crisis, the FBI (and other law enforcement agencies) broadened the scope of mortgage fraud to include frauds targeting distressed home owners.

A recent conviction of local fraudsters detailed such a scheme.  The co-conspirators claimed that they could help home owners modify mortgages and prevent foreclosure.  Evidence presented during their trial showed that the scammers charged their victims upfront and monthly fees that were to be used to pay down mortgages as part of a “principal reduction” plan.  Even though the victims received monthly invoices from the scammers showing their mortgage balances being paid down, there were no negotiations with lenders.  Many victims lost their homes.  The defendants will be sentenced later this year.

One of the most common tactics in mortgage fraud schemes is the use of a “straw buyer.”  A straw buyer is often used by con artists as part of their mortgage fraud scheme to make the transaction appear legitimate.  Although a straw buyer often knowingly consents to the use of their information to go along with the scheme, they are also sometimes the victim.  A Baltimore real estate agent was sentenced earlier this year to twenty-seven months in prison, ordered to pay $735,363.47 restitution, as well as forfeit $962,274.95 for his part of a mortgage fraud scheme.  The scheme used naïve and financially limited straw buyers to purchase renovated distressed properties at inflated prices, which the scammers profited.  To facilitate the loan process, the conspirators gave false information to loan officers including the intent of buyers to use the property as their primary residence.

Mortgage fraud is not a victimless crime.  Besides defrauding banks and their shareholders, mortgage fraud affects the neighborhood and community.  Unwitting consumers who have been caught in scams are usually left holding the bag and are foreclosed.  Residents of neighborhoods where mortgage fraud has occurred are affected by decreased home values and other effects of vacant and foreclosed homes.

Common mortgage fraud schemes listed by the FBI:

Foreclosure rescue schemes: The perpetrators identify homeowners who are in foreclosure or at risk of defaulting on their mortgage loan and then mislead them into believing they can save their homes by transferring the deed or putting the property in the name of an investor. The perpetrators profit by selling the property to an investor or straw borrower, creating equity using a fraudulent appraisal, and stealing the seller proceeds or fees paid by the homeowners. The homeowners are sometimes told they can pay rent for at least a year and repurchase the property once their credit has been reestablished. However, the perpetrators fail to make the mortgage payments and usually the property goes into foreclosure.

Loan modification schemes: Similar to foreclosure rescue scams, these schemes involve perpetrators purporting to assist homeowners who are delinquent in their mortgage payments and are on the verge of losing their home by offering to renegotiate the terms of the homeowners’ loan with the lender. The scammers, however, demand large fees up front and often negotiate unfavorable terms for the clients, or do not negotiate at all. Usually, the homeowners ultimately lose their homes.

Illegal property flipping: Property is purchased, falsely appraised at a higher value, and then quickly sold. What makes property flipping illegal is the fraudulent appraisal information or false information provided during the transactions. The schemes typically involve one or more of the following: fraudulent appraisals; falsified loan documentation; inflated buyer income; or kickbacks to buyers, investors, property/loan brokers, appraisers, and title company employees.

Builder bailout/condo conversion: Builders facing rising inventory and declining demand for newly constructed homes employ bailout schemes to offset losses. Builders find buyers who obtain loans for the properties but who then allow the properties to go into foreclosure. In a condo conversion scheme, apartment complexes purchased by developers during a housing boom are converted into condos, and in a declining real estate market, developers often have excess inventory of units. So developers recruit straw buyers with cash-back incentives and inflate the value of the condos to obtain a larger sales price at closing. In addition to failing to disclose the cash-back incentives to the lender, the straw buyers’ income and asset information are often inflated in order for them to qualify for properties that they otherwise would be ineligible or unqualified to purchase.

Equity skimming: An investor may use a straw buyer, false income documents, and false credit reports to obtain a mortgage loan in the straw buyer’s name. Subsequent to closing, the straw buyer signs the property over to the investor in a quit claim deed, which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place several months later.

Silent second: The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender.

Home equity conversion mortgage (HECM): A HECM is a reverse mortgage loan product insured by the Federal Housing Administration to borrowers who are 62 years or older, own their own property (or have a small mortgage balance), occupy the property as their primary residence, and participate in HECM counseling. It provides homeowners access to equity in their homes, usually in a lump sum payment. Perpetrators taking advantage of the HECM program recruit seniors through local churches, investment seminars, and television, radio, billboard, and mailer advertisements. The scammers then obtain a HECM in the name of the recruited homeowner to convert equity in the homes into cash. The scammers keep the cash and pay a fee to the senior citizen or take the full amount unbeknownst to the senior citizen. No loan payment or repayment is required until the borrower no longer uses the house as a primary residence. In the scheme, the appraisals on the home are vastly inflated and the lender does not detect the fraud until the homeowner dies and the true value of the property is discovered.

Commercial real estate loans: Owners of distressed commercial real estate (or those acting on their behalf) obtain financing by manipulating the property’s appraised value. Bogus leases may be created to exaggerate the building’s profitability, thus inflating the value as determined using the ‘income method’ for property valuation. Fraudulent appraisals trick lenders into extending loans to the owner. As cash flows are lower than stated, the borrower struggles to maintain the property and repairs are neglected. By the time the commercial loans are in default, the lender is often left with dilapidated or difficult-to-rent commercial property. Many of the methods of committing mortgage fraud that are found in residential real estate are also present in commercial loan fraud.

Air loans: This is a nonexistent property loan where there is usually no collateral. Air loans involve brokers who invent borrowers and properties, establish accounts for payments, and maintain custodial accounts for escrows. They may establish an office with a bank of telephones, each one used as the fake employer, appraiser, credit agency, etc., to fraudulently deceive creditors who attempt to verify information on loan applications.

Original published at https://dankrell.com

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Real estate fakery

“Fake news” is the cause du-jour that has energized many into a movement to stop the spreading of falsehoods.  Ironically, the crusaders who point their finger at alleged sources of fake news may also be guilty of promoting it; Fake news accusations are sometimes used to promote misinformation and half-truths.  Unfortunately, fake news has become a meme that is becoming trite and meaningless.  The promotion of fake news may be found throughout history, but real estate fakery is well established in the industry.

Fake real estate news isn’t always a manufactured story.  It is more often a story that is misleading.  When reporting real estate, the media typically sensationalizes a headline without reporting all the facts, which can make you draw inaccurate conclusions.  An example of this is when the local media report on rising national average home prices, giving the false impression that the local market is expanding at the same pace.  This is a mischaracterization of the local market because the regional data is often much different from the national trends.

The National Association of Realtors® is sometimes guilty of real estate fakery too by stating conjecture as fact when explaining market deviations.  An example of this is when existing home sales declined about seven percent during February 2014 (March 20, 2014; nar.realtor).  It was explained away because of the poor weather and snow that occurred that month.  However, if snow is causal to poor winter home sales; then why was there a five percent increase in Montgomery County Home Sales during February of 2010 – when Snowmageddon and Snowzilla occurred? From “Real Estate, Climate Change, and Data-Porn” :

The National Association of Realtors® (realtor.org) March 20th news release reported that February home sales remained subdued because of rising home prices and severe winter weather.  The decline in existing home sales was just 0.4% from January, but was 7.1% lower than last February’s figures.  NAR chief economist Lawrence Yun stated that home sales declines were due to “weather disruptions, limited inventory, increasingly restrictive mortgage underwriting, and decreasing housing affordability.”  And although it may sound bad, Yun actually has a rosy outlook saying, “…Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

So, if a snow filled and cold February is to blame for poor home sales, was Snowmagedden and Snowzilla the reason for increased home sales during February 2010?  Of course not.   And although home sales increased 5.1% year-over-year here in Montgomery County MD during February 2010, it was mostly due to increased home buyer demand that some speculate was due in part to the availability of first time home buyer tax credits.

Housing data cause and effect is only conjecture unless it is directly observed.  To make sense of the “data-porn” that is excessively presented in the media, often without proper or erroneous explanation; economic writer Ben Casselman offers three rules to figure out what the media is saying (Three Rules to Make Sure Economic Data Aren’t Bunk; fivethirtyeight.com): Question the data; Know what is measured; and Look outside the data.  Casselman states, “The first two rules have to do with questioning the numbers — what they’re measuring, how they’re measuring it, and how reliable those measurements are. But when a claim passes both those tests, it’s worth looking beyond the data for confirmation.”

Consumers also perpetuate fake real estate news by exaggerating their (good and bad) experiences, usually offering unsolicited advice or posting to the internet (to real estate forums and websites).  Facts are often distorted or misrepresented about specific real estate situations, such as divorce, short sales, and foreclosure.  Unfortunately, people in similar situations who are looking for answers are at their most vulnerable; and can take the “advice” as gospel, seeking a similar outcome with their transaction.

More real estate fakery on the internet comes in the form of fake reviews.  Fake reviews has been an ongoing issue for a number of years.  And although the online real estate portals have claimed to use artificial intelligence and other means to thwart the trend, fake reviews and those who provide them have adapted and have become more sophisticated such that it is increasingly difficult to spot.  Even back in 2011, Cornell researchers claimed that detection of fake reviews is “well beyond the capability of human judges” (Proceedings of the 49th Annual Meeting of the Association for Computational Linguistics, pages 309–319).

From “Are internet Realtor® reviews real or fake?“:

The National Association of Realtors® (NAR) code of ethics prohibits deceptive practices, which includes posting or encouraging fake reviews. However, Lani Rosales of AGBeat (Sketchy new trend – hiring fake online review writers) argues that there has always been an element posting fake Realtor® reviews and testimonials.

Scammers and fraudsters also use fake real estate news to their advantage.  Fake real estate listings have been an issue since the inception of the internet.  Fraudsters publish pictures and information from a prior sale or rental, or may lift the photos and information from a legitimate listing being marketed by an agent.  The con is to have the consumer send money, often before the home can be seen.  Craigslist warns consumers: “Avoid scams, deal locally! DO NOT wire funds (e.g. Western Union), or buy/rent sight unseen.”

Real estate agents are also culpable for spreading fake news, which may be why agents are often characterized as being fake or phony sales people who will bend the truth to make a sale.  Of course there are some in the industry who fit the stereotype, but many are “straight shooters.”  Unfortunately, it is common for agents to use puffery to make a home seem nicer (until you visit it and realize the “rustic charmer” is a neglected home).  Not as often, agents may create a history for the home that is not real to promote a lifestyle or even hide relevant defects.

When it comes to real estate news, advice, and listings – don’t take anything for granted.  Don’t fall prey to real estate fakery – know the source, and verify the information with a local real estate professional or your real estate agent.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Evolving real estate scams – vigilance needed

Last year, an old wire transfer scam evolved to target Realtors® and their clients. A December 15th “Alert” put out by the National Association of Realtors® (realtor.org) reminded NAR members and consumers to be vigilant. “The hackers often send an email that appears to be from an individual legitimately involved in the transaction, informing the recipient, often the buyer, that there has been a last minute change to the wiring instructions.  Following the new instructions, the recipient will wire funds directly to the hacker’s account, which will be cleared out in a matter of minutes. The money is almost always lost forever.”

real estate
From nar.realtor

NAR offers guidance and “best practices” to prevent being a victim of scams and cybercrime. Even though your agent should be mindful and exercise caution, you should take the initiative to protect yourself. You should be attentive and alert to the possibility of email scams by: not sending sensitive information via email; never trust unverified email; you should not interact with suspicious emails; clean your email regularly; do not conduct business over free WiFi hotspots; and use strong passwords that are changed regularly.

NAR stipulates that the guidance is “not all-inclusive,” and you should check with your agent about their office’s cybersecurity policy. The warning states that the scammer emails are “extremely convincing,” such that “many sophisticated parties have been duped.” No one is “too small” to target, and don’t be over confident about being tech savvy. “This fraud is pervasive, convincing, and constantly evolving.

According to an August 28th report issued by the Federal Bureau of Investigation (Business E-Mail Compromise, An Emerging Global Threat; fbi.gov) BEC (Business E-Mail Compromise) is an insidious scam that is not only targeting real estate, but all businesses and consumers. According to FBI Special Agent Maxwell Marker (of the FBI’s Transnational Organized Crime–Eastern Hemisphere Section in the Criminal Investigative Division), “BEC is a serious threat on a global scale…It’s a prime example of organized crime groups engaging in large-scale, computer-enabled fraud, and the losses are staggering.”

BEC statistics compiled by the FBI’s Internet Crime Complaint Center (ic3.gov), from October 2013 to August 2015 reported 8,179 total victims (U.S. and non-U.S.) and $798,897,959.25 combined U.S. and non-U.S. exposed dollar loss. The IC3 has reported that computer intrusions related to BEC are on the rise; and can be initiated via a phishing scam that downloads malware that can access the victim’s data, passwords, and financial information.

Multiple versions of the scam are being implemented, and it’s likely that the tactics will change as cybersecurity catches up with the scammers. The most recent version identified by the IC3 has fraudsters claiming to be a law firm handling confidential information (including real estate transactions). The scammer may use email and/or telephone to contact potential victims, who are pressured to act quickly at the end of the business day.

To learn more about BEC, protection strategies and how file a complaint – visit the Internet Crime Complaint Center (ic3.gov). If you are a victim of BEC, the IC3 recommends that you: contact your financial institution immediately; request that your financial institution contact the corresponding financial institution where the fraudulent transfer was sent; contact your local FBI office (if the wire is recent, the US Department of Treasury Financial Crimes Enforcement Network might be able to help return or freeze the funds); and, regardless of dollar loss, file a complaint with the IC3.

By Dan Krell
Copyright © 2016

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