American Pacific Mortgage filed a lawsuit in federal court this week against Aspen Specialty Insurance Company, claiming that the insurance company is refusing to cover a claim filed after a hacker impersonated the mortgage company’s former CEO and stole more than $75,000 from the company.
Law360 has more details, but here’s the gist of the lawsuit from that same article:
A California-based mortgage company hit its insurer with a lawsuit in a New York federal court Tuesday seeking to recoup under a $3 million policy "substantial" losses incurred when an impostor duped the mortgage lender into wiring money for a nonexistent transaction.
American Pacific Mortgage Corp. asserts that Aspen Specialty Insurance Company must indemnify it for a cyberattack that resulted in an employee wiring more than $75,000 to a fictional company.
In a statement provide to HousingWire, American Pacific CEO Bill Lowman said that the incident took place two years ago and while the theft was the result of an “elaborate scheme,” the money stolen did not affect the company’s operations.
“In August 2015, American Pacific Mortgage was a victim of an elaborate scheme which involved an email hacker posing as the (company’s) CEO and duping an unsuspecting employee,” Lowman said in a statement.
“It is important to point out, at no time were our systems infiltrated or confidential data breached. While the event was significant enough to file an insurance claim, the amount in no way impacted the company’s operations, employees or the consumers we serve,” Lowman continued.
Lowman said that the company filed the breach of contract lawsuit now because the incident happened two years ago and the company is nearing the end of the statute of limitations.
“While we are not at liberty to speak about the specifics of the event, we feel it is our responsibility and welcome the opportunity to share our experience with others in the industry and make them aware of both the threat and the potential gaps in their insurance,” Lowman said.
“Since this unfortunate event, American Pacific Mortgage has invested significantly in fortifying our systems and protecting our company,” Lowman concluded. “We consider our company the safest independent mortgage bank in the industry.”
When reached for comment, a spokesperson from Aspen Specialty Insurance said that the company does not comment on matters of litigation.
While the circumstances of this incident are not exactly the same, it does share some similarities with a rise in cybercrime involving the real estate industry in recent years.
Last year, the Federal Trade Commission and the National Association of Realtors issued a warning to people interested in buying a home that scammers were posing as real estate agents, Realtors and title insurance companies to steal consumers’ closing costs.
And earlier this year, the FTC and NAR reissued that same warning because similar scams are still taking place.
In these scams, hackers take over the email accounts of homebuyers, real estate agents, or Realtors. Then, they obtain information about upcoming real estate transactions and send an email to the homebuyer, pretending to be the real estate agent or the title company that’s being used for the closing.
The email tells the buyer that there has been a last-minute change to the wiring instructions, and instructs the buyer to wire their closing costs to a different account – one controlled by the hacker.
Then, once the buyer sends the money to the scammer’s account, the money disappears.
The FTC and NAR weren’t the only ones to issue warnings about these types of scams.
Last year, the Contra Costa Association of Realtors warned Bay Area homebuyers that they could be targets of similar schemes, one of which cost a local buyer nearly $1 million.
And earlier this year, the American Land Title Association said that last year’s warning from the FTC and NAR didn’t do enough to protect consumers and the group wanted the Consumer Financial Protection Bureau to issue a warning of its own.
For tips on how to avoid falling victim to these types of scams, click here.