What do you Mean our Wire Transfer Was Rejected?
I was awakened by an email alert this morning that a wire transfer of closing funds by one of our clients was "rejected", apparently because someone at a Minneapolis area credit union screwed up the wire instructions.
To be fair, the system of wiring funds from one bank to another is outated and clumsy. Fees are also high and the quality of service is, well, not what it should be. We've encountered problems like this before, but nothing quite this bad has happened when a client tried to wire funds for a real estate purchase.
Here's the Byzantine road map our client encountered yesterday, and again today, in the process of wiring funds for a real estate purchase:
Step one - Funds are wired from client's Credit Union account in Minneapolis, MN
Step two - Funds arrive at "correspondent bank" (Bankers Bank of Madison, WI)
Step three - Funds are transferred to "beneficiary bank" (AbbyBank of Abbotsford, WI)
Step four - Funds are transferred to title company's Escrow account at a bank in Medford, WI
That's two ABA Routing Numbers required, plus the account number for the final destination bank. Two intermediary banks were involved. The funds theoretically bounced around from Minneapolis, Minnesota to Madison (WI) to Abbotsford (WI) to Medford (WI). Four different financial institutions, in two states, were involved in the process of moving these closing funds about 220 miles.
It's bad enough that banks have gone through several years of making it easy for fraudsters to engage in cybercrimes, hacking into the wire transfer system and emailing phony "updated wire instructions" to real estate consumers. Much of that mess was avoidable, but it has taken several years and huge financial losses for the banking industry to update their own security features for the protection of their customers.
Note that I'm not blaming my title company friends at all. They're victims of a poorly-regulated system that's made matters worse for consumers. Our title company exec told us that this situation will all presumably improve in October, when the Federal Reserve gets around to improving the wire funds system. Gee, the Fed really moves fast, don't they?