Allegiant Reverse Services sees uptick in mortgage wire fraud attempts

Across the mortgage lending space, wire fraud attempts are on the rise as hackers become increasingly sophisticated in their methods of deception.  

In 2016, the American Land Title Association revealed that title companies reported an alarming 480% increase in wire fraud scams.

Allegiant Reverse Services, a California-based reverse mortgage title company, said it has spotted multiple incidents where a scammer poses as a HECM borrower requesting a wire transfer.

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Allegiant Reverse Vice President Megan Hafenstein said that while all mortgage loan transactions are susceptible to scammers, it makes sense that this could be especially prevalent in HECM transactions.

“The reverse world does seem to have a high number of originators who use non-company email addresses, and those do leave more room for problems,” Hafenstein said.

She also said that reverse mortgage transactions can sometimes involve multiple parties like kids and a power of attorney, and this can also increase the risk for fraud.

“Sometimes there are additional parties involved in these transactions, and with every extra person involved, we are more exposed,” she said. “There are more opportunities for the information to be threatened.”

Hafenstein said sometimes companies will try to help a borrower or their power of attorney cut corners for convenience, but this is problematic.

“Some companies that allow the borrower (or POA) to sign a waiver to circumvent some of the safeguards that are in place to ensure the monies are sent to the intended parties,” she said. “Although it sounds preferable in a situation where the borrower does not have a bank account with just their name on it, waivers such as these remove the liability to that particular company, but it doesn’t protect the transaction as a whole.”

Hafenstein shared examples of fraudulent requests for a wire transfer that revealed common red flags, including improper English, a notification that the message was sent from an iPhone, and a barely perceptible modification to the borrower’s email address.

To prevent fraud, Allegiant will not accept electronic requests for wire transfers via fax or email. It also requires borrows to sign an agreement regarding the use of wire transfers.

If a borrower’s request for funds falls outside Allegiant’s parameters, they’ll get a check in the mail instead.

“We often have a borrower sign that they will be getting a check and a loan officer will email asking to change to a wire and include the wire information,” Hafenstein said. “This is not something that can be done and there are multiple checks and balances that we go through should there be any changes requested after closing.”

Hafenstein said originators can help by explaining to borrowers how their title companies are putting rules in place for everyone’s protection. 

“It’s helpful to fully explain to the borrowers why instructions can’t change after the signing. At the onset, if borrowers are made aware of the requirements, they understand and can be prepared why they may be receiving a check versus wire and how it’s for their protection and for the protection of all parties involved,” she said. “Loan officers can work with the borrower and family members to understand why the instructions are important and we do not deviate for convenience.”

Hafenstein said there is sometime pressure to accommodate borrowers based on their particular situations, but with fraud on the rise, sidestepping the rules is unsafe.

“The recent increase in fraud has taken the leeway away from us,” she said. “We must be diligent in our efforts to protect everyone who is a party to the transaction.”