Protecting Your Home Equity Line of Credit from Fraudsters

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What Is HELOC Fraud?

Homeowners looking to borrow money without refinancing their mortgage often turn to a home equity line of credit (HELOC). This option is particularly appealing if you have a low-rate mortgage but want to access the equity you’ve built in your home. However, it’s crucial to be aware of fraudsters who may target your HELOC to steal money.

Understanding HELOC Fraud

HELOC fraud occurs when a criminal takes a fraudulent draw from someone else’s HELOC or opens a HELOC using a home they don’t own as collateral. Fraudsters employ various tactics, including:

• Creating or writing counterfeit HELOC checks
• Tricking your lender into changing your account information
• Stealing your account’s login information
• Moving money between your accounts before stealing it
• Creating an online profile to hide their tracks

Once the fraudster has the money, they can disappear, but they may also repeatedly target your HELOC account to steal more funds. While you may not be liable for stolen funds unless you were tricked into sending money directly to a scammer, HELOC fraud can still cause significant issues. If you discover fraudulent activity, your lender might freeze your account during the investigation.

How to Protect Yourself From HELOC Fraud

HELOC fraud can occur because your mortgage and HELOC may be part of public records, providing fraudsters with a starting point. Additionally, check verification can be challenging, and the application review process for HELOCs isn’t always as stringent as it is for mortgages. However, you can take steps to protect yourself:

Beware of Phishing

Phishing emails and texts (smishing) may appear to come from trusted sources but are attempts by fraudsters to earn your trust or scare you into responding. Clicking on a link might infect your device with malware, allowing the fraudster to steal your personal and login information.

Opt Out of HELOC Checks

Ask your lender if you can opt out of HELOC checks altogether. Instead, you can take draws by electronically transferring funds to your bank account or using a debit card linked to your HELOC.

Monitor Your HELOC With an Online Account

Create an online account with your lender to prevent someone else from setting up an account first. Regularly monitor your HELOC statements and sign up for alerts to receive notifications of draw requests or disbursements.

Use Unique Passwords

Creating unique passwords is essential for protecting your accounts from fraudsters who purchase stolen login information. Avoid reusing passwords and consider using a password manager to create and store them securely.

Enable Multifactor Authentication

Enable multifactor authentication (MFA) on your account. This security feature requires a second type of verification, such as a code sent to your email or phone, when logging in. MFA can help keep fraudsters out of your account even if they know your login information.

Monitor Your Credit

Use paid or free credit monitoring programs to keep an eye on your HELOC’s balance. Creditors generally update the credit bureaus monthly, but you could receive real-time alerts if someone tries to use your information to apply for a new account.

Add a Security Freeze to Your Credit Reports

Add a security freeze to your credit reports to limit others’ access to them. This can help prevent someone from opening a HELOC or other types of credit accounts in your name. Adding and removing freezes is free, but you need to freeze each of your credit reports separately.

What to Do if You’ve Already Been a Victim of HELOC Fraud

If you notice unusual activity in your HELOC account, such as changed contact information or an unexpected balance, contact your lender immediately. You might not be liable for debt resulting from fraudulent activity, but you still want to ensure the lender can stop the fraudster and that you’ll have access to your account when needed.

Additionally, consider taking the following steps to report the fraud and protect yourself:

• File a fraud report with the Federal Trade Commission (FTC)
• File a police report, especially if you suspect identity theft
• Run an antivirus scan on your devices
• Change your account’s password
• Add fraud alerts to your credit reports

Manage and Monitor Your Credit

Securing and regularly monitoring your HELOC account is the best way to stop and detect HELOC fraud. Monitoring your credit can also be crucial for detecting and stopping multiple types of credit fraud.

At O1ne Mortgage, we are committed to helping you protect your financial well-being. For any mortgage service needs, call us at 213-732-3074. Our team of experts is here to assist you every step of the way.

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