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Ensuring Effective Fraud Prevention and Detection within Multifamily Loans

October 7, 2011

As part of an ongoing fraud prevention effort, Freddie Mac recently added new requirements to the Multifamily Seller/Servicer Guide and the Delegated Underwriting for Targeted Affordable Housing Guide with regard to the Exclusionary List and fraud identification and reporting.

The new Exclusionary List requirements, found in Chapters 2 and 5, include:

  • An emphasis on your obligation to use the Exclusionary List to ensure that no individual or entity on the Exclusionary List is involved in the origination, sale or servicing of a Freddie Mac Mortgage
  • The addition of a specific obligation for you to use the Exclusionary List to ensure that neither the Borrower nor any Borrower Principal appear on the List
  • A new Seller/Servicer warranty to be made at the origination of the Mortgage warranting that neither the Borrower nor any Borrower Principals appears on the Exclusionary List
  • Clarifications of the warranty regarding the Exclusionary List with regard to other parties involved in the origination, sale and Servicing of a Freddie Mac Mortgage
  • The alignment of our provisions for indemnification with the changes made regarding the Exclusionary List

The new warranty regarding the Borrower and Borrower Principal will be effective for any Mortgage where the applicable underwriting package – the preliminary underwriting package for an Early Rate-Lock Application or the full underwriting package for a Letter of Commitment – is delivered after October 7, 2011. The remaining requirements for the Exclusionary List are effective October 7, 2011. Please review Guide Bulletin M2011-6 and Chapters 2 and 5 for all the details concerning our Exclusionary List requirements.

We have consolidated our requirements regarding fraud in Chapter 7, Fraud Prevention, Detection and Report. Although these requirements do not go into effect until January 1, 2012, we strongly encourage you to begin implementing them immediately. Some of the new identification and reporting requirements that you must meet by January 1, 2012 include:

  • Ensure that processes and procedures are in place (for employee hiring and training, third-party vendor, origination and servicing) to prevent, detect and report fraud and suspected fraud.
  • Report any fraud or suspected fraud information immediately to the Freddie Mac fraud hotline at (800) 4FRAUD8 - (800-437-2838).
  • Report the information regarding fraud in writing within 30 days using either the Mortgage Fraud Reporting Form – Origination or Mortgage Fraud Reporting Form – Servicing, as applicable, both accessible from a new Multifamily Fraud and Fraud Reporting Web page on FreddieMac.com.

We developed the new Mortgage Fraud and Fraud Reporting Web page on FreddieMac.com to help you meet these requirements. This page includes Freddie Mac's requirements for reporting fraud, links to the Fraud Reporting Forms, and contact information for our Fraud Investigation Unit (FIU). We have also revised the MultiSuite® home page to provide you with direct access to the Exclusionary, Restricted Vendor and Approved Counterparty lists.

Freddie Mac is committed to working with Seller/Servicers to prevent and detect fraud in the mortgage industry. FIU will work diligently with you on the prevention, detection, investigation and resolution of mortgage fraud.

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