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Your Fraud Tips Can Protect Your Neighbors

VP Joan Ferenczy

Thanks to tips from the public and our employees, Freddie Mac launches more mortgage fraud investigations, solves more fraud cases, and protects borrowers by stopping offenders from doing future harm. Like the detectives on TV crime shows, our fraud investigators turn tips into a steady sequence of events that include tracking down leads, interviewing victims, gathering evidence, and working with law enforcement to nab the right suspects. But real-world fraud investigations take much longer than a TV episode. The sooner we receive a good tip, the faster we can “stop the bleeding,” as investigators say.

I cannot stress enough the importance of stopping the bleeding as quickly as possible. Not only can uncovering and ending a fraud scheme protect families and lenders from future harm, it can also help protect taxpayers, reduce our losses, and rebuild public confidence in the housing market.

We collect tips about frauds from Freddie Mac employees, who are watching for suspicious trends, as well as from borrowers, seller/servicers, and real estate professionals who call our hotline 1-800-4FRAUD8 (1-800-437-2838) or send e-mail to Mortgage Fraud Reporting. Our Financial Fraud Investigation Unit (FFIU) received more than 200 tips between January 2012 and September 2013.

Here are two sample cases that resulted in convictions after our investigators followed up on tips.

Fabricated Loan Applications in California. Between 2006 and 2009, a Newport Beach, California, family used forged and falsified documents to secure loans for straw buyers. The conspirators controlled the entire transaction by operating a real estate office, mortgage brokerage, escrow company, and investment company. They fabricated loan applications, inflated borrower incomes, altered bank statements, falsified employer information, fabricated Settlement Statements, altered sales contracts, and forged buyer names and signatures on various deeds and loan documents.

An observant underwriter who spotted two owner-occupied purchase transactions for one borrower closing within two months of each other tipped off the FFIU. Our investigators then identified the parties involved and launched an inquiry that ultimately led to the top conspirator’s arrest, conviction, and sentencing to eight years in jail. The other conspirators received similar sentences.

Wire Fraud in Maryland. A Baltimore man conspired with a former business partner, who had a mortgage brokerage company, to obtain fraudulent loans by using a fictitious outsourcing company to falsify his and other co-conspirators’ employment information, including inflating incomes. They also hid the actual purchase prices of the homes they were buying from the lenders making the loans. All of the loans went into foreclosure, resulting in total losses of nearly $1 million over a two-year period ending in 2008.

Freddie Mac’s HomeSteps REO sales unit referred a loan with an unusually high broker price opinion to our fraud team. They identified other loans for the same borrower in the same ZIP code, all closing within a few months of each other. The loans contained misrepresentations of income, undisclosed debts, and inflated property values. The loan parties were the same on all of the loans. A field investigation led Freddie Mac to put the conspirators on our Exclusionary List, which contains the names of companies and individuals with whom we won’t do business, directly or indirectly. We also sent our file to law enforcement to assist them in their investigation. The suspect was convicted, ordered to make restitution of more than $1 million, and sentenced to 18 months in prison followed by two years of supervised release. The former partner was indicted, but fled the country.

It’s up to everyone who cares about housing, their neighbors, and their communities to educate themselves about the red flags of mortgage fraud and report suspicious activities. If you see a flag indicating possible fraud, wave it high. Call Freddie Mac’s Fraud Hotline at 1-800-4FRAUD8 (1-800-437-2838) or send e-mail to Mortgage Fraud Reporting. Be assured: Freddie Mac keeps the names of tipsters absolutely confidential.


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