Wire and title fraud reaches an alarming level in the second quarter of 2023

In the middle exhausted originating volumes in the first half of 2023, the risk of wire and title fraud was on the rise in the second quarter, with more than half of the transactions analyzed by FundingShield showing some kind of default.

The overall error rate for the quarter was 50.2%, against 41.6% in the second quarter of 2022. The analysis was based on a $68 billion portfolio of real estate closings, the fraud prevention solutions company said.

According to the report, there was a 22% increase in problems related to document transfers between agents, title insurers and lenders compared to the previous quarter.

The second quarter also saw a 15% increase in the number of agents not keeping their licenses active with states and insurance commissioners. In addition, the transactions analyzed showed a 6.7% increase in errors found in the closing of letters of protection.

On average, loans identified as problematic had nearly two problems per loan, highlighting “the lack of proper checks by closing agents to identify and resolve problems,” the report said.

Comparing the first half of 2023 to the prior year, there was a 12.6% increase in problem loans, a 6.5% increase in protection letter errors at closing, and a 4.7% increase in problems with proof of insurance.

The report also highlights the continued prevalence of email phishing, which is “one of the fastest and most effective ways for fraudsters to defraud parties in a real estate transaction.”

Ike Suri, CEO of FundingShield, challenged Federal Bureau of Investigation opinion claim that 2022 saw $10.3 billion in fraud losses in the report. He points out that this number is “grossly underreported based on [his company’s] experience in real-time problem identification, prevention and resolution.”

Real Estate Business Email Compromise Scams set a record for dollar losses in 2022 as the number of cases reported to the FBI increased for the second year in a row. 2021, consumers reported 2,149 incidents, according to the government agency.