Reporting Mortgage Fraud Plays a Key Role in Prevention Efforts
May 9, 2012
Within the servicing industry, mortgage fraud committed by borrowers or their third-party representatives in an attempt to obtain favorable loan workout terms continues to be a problem. Misrepresentation of income, employment, assets, and occupancy made to obtain a loan modification, short sale, or deed in lieu of foreclosure can be difficult to detect.
Implementing and maintaining your due diligence to detect and prevent these actions is critical, but there is one very important next step: reporting all fraud or possible fraud regarding Freddie Mac loans directly to us.
In Single-Family Seller/Servicer Guide (Guide) Chapter 7, Section 7.3, you will find guidance that will help you implement procedures to report mortgage fraud to Freddie Mac. Specifically, you must report any incident where there is reason to believe that fraudulent or possible fraudulent activity has taken place during the servicing of a mortgage within 30 days of discovery. Guide Section 7.3 also details certain types of fraud that must be reported immediately.
Fraudulent Mortgage Activity That Servicers Must Report to Freddie Mac
Some examples of the types of fraud or possible fraud that you must report to Freddie Mac include:
- Misrepresentations of borrower identification, employment, income, assets, indebtedness, and property occupancy found in a borrower’s loan workout package.
- Misrepresentations related to the loan or real estate transaction, such as misrepresentation of a transaction as arm’s length, or property value misrepresentations in a broker’s price opinion or appraisal.
- Instances where you discover theft of custodial funds or unremitted payoff funds.
Important: Mortgage insurance (MI) cancellations are yet another activity that must be reported to Freddie Mac. Every instance where a mortgage insurance policy is canceled, rescinded, or terminated for fraud or misrepresentation must be reported to Freddie Mac. You are required to report the following information:
- The reason why the MI claim was rejected
- All the parties involved in the MI claim transaction
How to Report Mortgage Fraud to Freddie Mac
As detailed on our Mortgage Fraud website, we have created a form for reporting servicing-related mortgage fraud or possible fraud to Freddie Mac. Complete and email the form to email@example.com. You may also submit the information required in the form via fax or regular mail.
- Fax: 571-382-4883
- Mail: Attn: Institutional Investigations
8200 Jones Branch Drive
McLean, VA 22102-3110
You can report suspicious activity as often as needed and include as many loans as you want on one form. Additionally, please remember that when reporting mortgage fraud to Freddie Mac, you are required to provide all loan party data.
However, for matters that require immediate notification, you must contact the Freddie Mac Fraud Hotline: 800- 4FRAUD8.
Once the mortgage fraud is reported to Freddie Mac, we will contact you for more information if needed. By adhering to our fraud-related Guide requirements, including reporting suspicious mortgage activity, we can work together to combat mortgage industry fraud.
For More Information
- Guide Chapter 7 for detailed information on fraud prevention, detection, and reporting
- Contact the Freddie Mac Fraud Hotline: 800- 4FRAUD8
- Mortgage Fraud website
- Fraud Prevention Resources Web page
- Quality Control and Fraud Prevention Resources Web page