GRANDS RAPIDS — Increased incidents of fraud and cybercrime CertifID LLC to introduce a new service designed to protect loan repayments in real estate transactions.

CertifID, based in Grand Rapids and Austin, Texas, brought PayoffProtect to market at the request of customers who were asking for more protection when making loan repayments electronically. The service verifies the identity of mortgage lenders and other parties, authenticates repayment instructions, and ensures that information shared by parties to a transaction is accurate.


Tyler Adams, co-founder and CEO of CertifID.
COURTESY PHOTO

PayoffProtect builds on the service that CertifID launched four years ago to provide real-time protection and prevent fraud in wire transfers in real estate transactions.

“The first part of our journey, we really focused on trying to protect buyers and sellers,” said CertifID co-founder and CEO Tyler Adams. “CertifID as a platform was to ensure that the movement of money from a buyer to a securities company (and) from a securities company to a seller was absolutely secure and that we validated each of the parties involved in this transaction and we made sure that their money was transferred appropriately.What we learned in the first few years of launching this product was that there was a movement of money on which we had to spend time and focus, and that was the lender’s payoff.

The cybercrime that CertifID seeks to prevent with PayoffProtect occurs when cybercriminals impersonate a lender in a real estate transaction and are able to redirect funds meant to pay off an unpaid debt. This typically happens when a cybercriminal identifies a pending transaction and hacks into one of the parties’ email account, allowing them to send fake wire transfer instructions and intercept a payment, according to the National Association of Realtors. .

Scammers have learned that real estate transactions involve a “huge reserve of cash” that goes to pay off outstanding mortgages, Adams said. They targeted securities companies by emailing or faxing bogus instructions that direct money to a fraudulent account, he said.

Today’s cybercriminals are highly organized and sophisticated operators who have the ability to create fake email domains, signatures and web pages that look “almost completely like some small town mortgage lenders, to the point where society title can’t tell the difference between a real one and a fake one,” Adams said. “They are facing an organized crime network.”

Citing the need to better protect electronic transactions and the ever-increasing threat of cybercrime, Adams cites how CertifID’s Recovery Services team has recovered $50 million over the past 12-18 months for customers victimized by mortgage fraud. He noted a recent case where a title company was taken for $1.7 million, “and we hear stories like that every week.”

Adams formed CertifID in 2017 with business partners Thomas Cronkright II and Lawrence Duthler, who own and founded Grand Rapids-based Sun Title. The company fell victim to a social engineering scam in 2015 resulting in electronic fraud that cost it nearly $200,000.

CertifID launched PayoffProtect in early August with the backing of a $12.5 million Series A growth capital round with Minneapolis-based Arthur Ventures that closed last spring. The company first tested the new service in beta with three title companies and has so far provided protection for more than $750 million in mortgage repayments, Adams said.

While an annual FBI cybercrime report doesn’t break down incidents reported specifically for home loan repayments, it does show that scams involving compromise of work email and compromise of email accounts accounted for 2.39 billion in losses in 2021 in the United States through 19,954 reported incidents. This compares to $1.86 billion in 2020 involving 19,369 reported incidents.

Phishing scams that lead to compromised business emails are often the primary type of fraud that targets home mortgage settlements, where parties are often communicating for the first time and doing so electronically, Adams said. The FBI noted the nearly 324,000 complaints of phishing scams in 2021 that cost victims $44.2 million. The number of phishing scams has nearly tripled since 2019.

The real estate industry remains a prime target for phishing scams, Adams said. Once an email account is compromised, cybercriminals “just listen” and can wait, figure out who is involved in a transaction, then attack and redirect a wire transfer for a mortgage payment, he said. declared.

“These underground criminal networks have figured out that if they want to make a lot of money by targeting transactions, they go after real estate because it’s a lot of money and it’s completely open to not anyone from a public point of view. You can go online and find out who the real estate agent is on a multi-million dollar property in any city in Michigan,” Adams said. “It all became breeding ground for these fraudsters where they simply target anyone involved in a real estate transaction.”

The FBI’s Internet Crime Report also counted 11,578 incidents in 2021 involving loss of funds from a real estate investment or fraud involving a rental or timeshare that cost victims $350.3 million.