Split Closings: Vulnerable To Wire Fraud
Cybercriminals look for easy targets to make their move, and split closings or split settlements are a fantastic way for cybercriminals to steal wired transactions. According to the American Land Title Association, there has been an increase of wire fraud cases in split closings – and here’s why.
Traditional Closing vs. Split Closing
In a traditional closing settlement, the title company handles both parties, buyers and sellers, orders loan payoffs, and directly requests the seller’s wiring instructions. This scenario allows direct communication with the buyer, seller, and the loan’s payoffs.
During a split closing, the buyer’s title company has no direct communication with the seller nor direct communication with the payoff lenders, as directed by the seller’s title company. The buyer’s title company has to assume the seller’s title company is completing their portion of the transaction properly.
Hacking A Closing
The lack of communication in a split closing creates the perfect opportunity for a cybercriminal to take over a transaction. Cybercriminals look for emails that are not secure or encrypted. Once these criminals gain access to email correspondence, they learn the identities of all parties involved and when closings will occur. As the time approaches for funds to be wired, the cybercriminal pretends to be either the seller’s title company, payoff lender or the seller and sends a fraudulent email, providing instructions that funds need to be wired to a new account. After the funds are wired, the cybercriminal quickly empties and closes the account. The crime occurs so quickly that it is rare to track and recover the funds.
How Federal Title & Escrow Protect Its Clients
We require direct communication from the seller, not the seller’s title company, and we also order payoffs directly from lenders.
We have experience dealing with the challenges of split closings.
Something to Consider…
Why split a settlement to include two title service fees plus additional fees, more unknown parties, limited communication and an increased chance of a hacked transaction?