HELOC Fraud: The Latest Nightmare in Identity Theft

Once a home is purchased and several years of consistent mortgage payments and rising market value have generated sizable equity, many people believe the biggest pitfalls when vying for victorious home ownership are behind them. No more having to research too-good-to-be-true real estate leads, no more nervousness about the long term successes of owning a home, and the building equity tops it off with peace of mind.

But a recent resurgence of what was once considered a flash-in-the-pan identity theft scam has many in the industry wondering if this isn’t the sign of the next big con artist moneymaker.

Back in 2003 the Wall Street Journal first reported on home equity scams wherein people were able to convince financial institutions they were the home owner and remotely arrange the selling of homes, even declaring the legitimate home owner to be a squatter.

It sounded pretty scary but measures were taken and most institutions learned the right lessons and beefed up their security.

What was already a very difficult con to pull off – literally selling someone’s home from right underneath them – was made just about impossible.

However, flash forward to today. The scam has altered.

Identity thieves have accepted that something as grandiose as trying to pretend to be a home’s owner is something better fit for the movies.

That doesn’t mean using home ownership and the value therein has been ruled out among the more elaborate schemers.

These days there is an increase in the amount of people whose home equity lines of credit have been hijacked.

The tactics are shockingly still the same, and are in some ways as simple as stealing someone’s credit card.

Once enough personal information has been collected, thieves will begin rearranging the HELOC account specifics in order to allow a transfer to be made to the holder’s savings account.

Then, the money is ultimately sent outward to a third party bank account that’s immediately closed once the transaction is entirely complete.

Amounts approaching $100,000 have been successfully withdrawn through individual transactions of no more than $10,000 a piece.

This kind of thievery is a sign of severe security flaws in a financial institution.

If you find out your mortgage lender was the victim of similar fraud at some point, do everything you can to raise hell with them.

Get the point across that they need to make sure it doesn’t happen again.

Don’t let a decade’s worth of equity go down the drain.

Jess Miller is a guest poster on Identity Theft Secrets and finds that it’s rewarding to catch the bad guys being bad.