How secure is your business from scammers? On the front end, you're probably verifying the buyer's income and employment, and the value of the home they're buying. But what about the back end? Are you
Such a loss would be devastating to a buyer who's saved up that money over years. But as a lender, you'll pay a price too. If a loan closing is delayed (or permanently derailed) you'll lose an average of more than $8,000, according to the Mortgage Bankers Association, and you're likely on the hook to replace any lost funds.
By the numbers
Wire fraud is
In 2020, the FBI's Internet Crime Complaint Center (IC3) received 19,369 business email compromise/email account compromise complaints with adjusted losses of over $1.8 billion. And there are likely many more losses that go unreported due to embarrassment and concern over reputational damage.
This escalation recently caught the attention of Fannie Mae and the Consumer Financial Protection Bureau, both of which have encouraged lenders to use third-party solutions to help protect themselves and their borrowers from wire fraud.
Protecting your business
The good news is that plug-and-play technologies are readily available to help you verify in real time who's legitimate (and who's not) when you're transferring money. And with a software-as-a-service (SaaS) model, built by a trusted third party, you can access these technologies without in-house programming expertise and expense. Additionally, with a "pay as you go" business model, small and independent lenders have access to the same technologies as larger ones.
SaaS applications reside on a cloud network so they're accessible through the web or an application programming interface. Lenders can use these applications to initiate just-in-time verification of representations, business licenses, attorney licenses, corporate IDs, jurisdictions, blacklists and more — all essential to having a secure wire transfer at the closing of a loan. This kind of verification leverages an extensive database of live data to validate all stakeholders in real time to detect and deflect fraud, and find a legitimate alternative agent.
Think this sounds like sci-fi? It’s already happening in the securities industry where companies can verify transaction information and trade in seconds.
Protecting customers
Even better, you can leverage the same SaaS connection to real-time verification tools to protect your borrowers too. In this scenario, you would provide a link that looks like it's a tool on your website but actually lets the borrower utilize your cloud-based verification technology. Borrowers would use this link to safely initiate their wire transfer, rather than waiting to respond to emailed instructions that could have been sent by anyone.
With this secure connection, you're ensuring that their money will be delivered to the intended, licensed and real-time verified party as per regulatory compliance.
That's just good business.
Going the extra mile
The mortgage industry should be checking identities in real time with every transaction.
In fact, I foresee this becoming a business imperative. We're already moving in that direction with industry leaders urging additional consumer protections and investors seeking assurance that all the stakeholders involved in a close were verified in real time, thus ensuring the loan is protected from loss should misrepresentation be uncovered later.
So, think about it and run the numbers. How much can you afford to lose to scammers this month? Next month? For the rest of 2021? What about your reputation?
What's for certain is that the scammers are out there — and they're highly creative in probing for vulnerabilities. My recommendation, as a cybersecurity expert, is that you use the best technologies available to stay a step ahead.
