Turning Up The Heat on Fraudsters
Recently, Freddie Mac broke up a “ring” of former industry professionals operating a “company” that falsified the income, employment, and assets of their clients to qualify them for mortgage relief they would not normally have been eligible for. Every file this company sent in had identical paystub templates and bank account statements that did not belong to their clients.
The case was referred to Freddie Mac"s fraud investigations unit by one of our lenders, underscoring the success of a two-year-old decision to make systematic mortgage fraud reporting a contractual obligation. This transformation was accomplished when we added a new anti-mortgage fraud chapter to our Seller/Servicer Guide.
That's important because Freddie Mac's Seller/Servicer Guide has the force of a binding legal contract on the lenders who buy and service mortgages owned or guaranteed by Freddie Mac. Specifically, the anti-mortgage fraud chapter (Chapter 7, "Mortgage Fraud Detection, Prevention and Reporting") requires lenders to:
- Proactively detect, report, and prevent fraud involving mortgages owned or guaranteed by Freddie Mac.
- Train their employees to spot mortgage files with signs that indicate probable fraud (like first payment defaults).
- Set up an internal process for escalating and investigating suspicious activities.
- Calibrate their in-house quality control programs to look for signs of fraud.
As lenders established more internal anti-fraud units, mortgage fraud reports to our investigators increased dramatically. In fact, we estimate we've received more than 3,300 additional reports of potential frauds since Chapter 7 took effect in January 2011. This is on top of the investigations triggered by the hundreds of reports we receive through our 1-800-4FRAUD-8 tip line and via email to firstname.lastname@example.org. This, in turn, has enabled us to launch hundreds of additional investigations to protect borrowers, lenders, taxpayers, and Freddie Mac from unnecessary losses.
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