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FundingShield, a provider of wire and title fraud prevention technology, reported a surge in fraudulent activity and compliance lapses across the mortgage and settlement services industry during the third quarter of 2025, marking one of the riskiest periods on record for loan transactions.
Nearly half (46.6%) of transactions in a $90 billion portfolio were flagged for potential fraud or compliance issues, according to the company’s latest Wire Fraud Analytics & Risk Report, released Thursday. Each flagged transaction showed an average of 3.1 issues, the report found.
“The mortgage and settlement services industry continues to face systemic vulnerabilities, with data integrity and closing controls remaining critical weak points,” FundingShield CEO Ike Suri said in the report.
FundingShield’s analysis saw “record high” levels of closing protection letter validation errors, which impacted 10.5% of transactions. These errors often involved discrepancies in borrower names, property details and title holder information, all of which contributed to a 12.7% quarter-over-quarter increase.
“This trend likely reflects heightened scrutiny following recent regulatory guidance and the emergence of more sophisticated fraud schemes exploiting gaps between lender and title systems,” Suri explained.
Wire-related errors appeared in 9.1% of transactions, which marked the eighth consecutive quarter above 8%. License-related issues jumped 23.1% from Q2 2025, with many title and closing agents operating under expired or improperly maintained licenses.
“The dramatic 23.11% spike in license-related problems is among the most concerning trends this quarter, signaling widespread compliance failures among closing agents and title companies,” Suri said. “Many are operating with expired or improperly maintained licenses, increasing liability exposure for lenders and likely triggering more enforcement actions by state regulators. Expect heightened regulatory scrutiny in Q4 2025.”
Suri noted that Fannie Mae’s Mortgage Origination Risk Assessment audits are increasingly targeting seller diligence around title and escrow providers, aligning with guidance from the Federal Housing Finance Agency‘s 2025 Scorecard, Dodd-Frank Act requirements and Consumer Financial Protection Bureau oversight.
The report linked the rise in fraud exposure to broader cybersecurity concerns. During Q3 2025, a massive data breach affecting Google and Salesforce exposed an estimated 2.5 billion records across 760 organizations, including major technology and financial firms.
Suri noted that breaches of that scale damage digital trust and complicate identity verification.
