DRE: beware of fraud!
The Department of Real Estate (DRE) has issued an alert regarding electronic funds transfers made during the course of real estate transactions. The DRE has received reports of individuals who impersonate a party to the transaction, including brokers, agents and title and escrow companies, in order to coerce the buyer into wiring them money.
In the DRE’s alert are several recommendations your clients may use to avoid or mitigate the effects of wire transfer fraud, including:
- use non-electronic alternatives like cashier’s checks during the course of a transaction;
- obtain a receipt for the transaction;
- obtain contact information and account numbers from all parties at the beginning of the transaction;
- confirm any changes to wiring instructions with a known party to the transaction; and
- avoid sending personal information such as bank account or credit card numbers over text or email.
Should a client of yours fall victim to wire transfer fraud, advise them to file a report with the FBI here.
Fraud doesn’t end at wire transactions
While this report focuses on the issue of wire transfers, brokers, agents and mortgage lenders would do well to focus on other types of fraud targeting both them and their clients. For example, the DRE has also released publications relating to timeshare fraud and fraud specifically aimed at senior citizens.
In particular, mortgage fraud is on the rise. While the level of fraud in no way approaches pre-Great Recession numbers (largely thanks to the influence of the Dodd-Frank Wall Street Reform and Consumer Protection Act), the risk is growing.
Borrowers caught committing mortgage fraud are flagged in Suspicious Activity Reports (SARs), which prevent the listed individual from obtaining new mortgages or refinancing existing ones, regardless of their legitimacy — and, in the event of fraud, a mortgage holder may call the mortgage and demand immediate repayment of the balance.
Often, mortgage lenders turn a blind eye to (or outright encourage) fraud, seeing it as more profitable to originate a mortgage than conduct business with integrity. Greater earnings make an enticing promise — which continues to lure lenders and MLOs into risky situations. After all, lenders need to originate more mortgages to increase profits.
In light of this trend, it is doubly important to be on the lookout for signs of fraud, and to know how to steer yourself and your clients in the right direction.