Mortgage Payoff Fraud

Important Message to Our Customers, from Gilbert M. Hoffman, Chief Title Counsel:

Beginning in early April, title companies began receiving alerts from various governmental entities about a large increase in mortgage payoff fraud. We are now informed by both the FBI and the Secret Service that mortgage payoff fraud continues its sharp rise, resulting in large losses.

Consequently, extra diligence with mortgage payoffs is required. Beware of fictitious or altered payoff statements, from someone impersonating the mortgage Lender, mortgage Broker, or a seller’s or borrower’s representative. The impersonators will claim that the original payoff letter is erroneous because of additional payments received, an adjustment in interest, changes in escrow for taxes or insurance, etc., and will then send a revised payoff letter by Email, Fax, eFax or Courier, with false bank information, wire instructions, and payoff amounts.

Some suggested protective measures to avoid diversion of payoff funds include: 

• Obtain payoff statements as early in the transaction as possible, to allow sufficient time to carefully review and verify prior to disbursement.
• Verbally verify banking information and payoff amount directly with the payee, using known, trusted numbers rather than information from the payoff.
• If prior payoffs have been made to the same payee, compare prior and current payoff information to confirm that current banking information matches what was previously used.
• When verbal verification from a known, trusted number can not be obtained, consider other payment options, such as overnighting a check to the payee.

My thanks to Scott Spinner, Esq. of Fidelity National Financial, for his valuable input.

Gil Hoffman