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Freddie Mac: Four Questions to Get Back to Basics With Fraud Prevention

Investor Update
February 22, 2016

For borrowers and lenders, spring 2016 means a still-hot housing market and demand from home buyers who see a rise in inventory and want to purchase before interest rates go any higher.

But for fraudsters, spring means opportunity of another kind. The bad kind.

That’s why we’re encouraging our customers to get “back to basics” and boost your risk mitigation and fraud prevention efforts through intensified quality control and borrower education.

“Combatting fraud in the mortgage industry requires a thorough focus on collecting, assessing and verifying borrower information,” said Joan Ferenczy, Vice President, Financial Instrument Fraud and Anti-Money Laundering Compliance Officer who’s been with Freddie Mac since 1982. “Getting back to basics means protecting your organization from losses and educating your borrowers to avoid dangerous risks.”

Consequences for Fraud Are High

Despite the fact that big fraud schemes aren’t splashed across the front pages as they were a few years ago, don’t think mortgage fraud has vanished. Smaller, loan-level mortgage fraud cases continue to occur across the country and recent prosecutions related to fraud spotlight the consequences.

  • A recent HousingWire article reports that a former real estate sales associate faces 150 years for Florida mortgage fraud.
  • According to Loansafe.org, a New Jersey man admitted that he recruited straw buyers and submitted fraudulent loan applications in a multi-million dollar scam.
  • The U.S Attorney’s Office regularly spotlights new fraud cases, including one in which a Maryland real estate developer fraudulently obtained approximately $2.5 million from a lender who discovered the falsified loan documents after the loan closed.


Get Back to Basics by Answering Four Questions

So what can you and your organization do to prevent and detect fraud, which often starts in the loan processing and underwriting process? Start by giving yourself a quick test.

Can you answer a resounding YES to the following?

1. Are you and your organization familiar with our Single-Family mortgage fraud mitigation best practices document [pdf] – which calls out red flags for commons fraud types – and mortgage screening checklist [pdf]?
2. Do you have controls in place to prevent and detect fraud, from basic loan processor training to a comprehensive verification process to stop falsified information (e.g. employment, income, etc.) from slipping through the cracks? This includes training to spot a borrower who’s been taken by a fraud scam.
3. Do you know the immediate steps to take when you suspect fraud?
4. Are you prepared to educate borrowers so they know what to look out for and how to avoid potentially risky situations?

If you answered no to any of the four questions above, make necessary changes now so that you can answer YES as soon as possible.

“Back to Basics” Ways to Be More Informed and Vigilant

  • Read the Single-Family mortgage fraud mitigation best practices document [pdf] and mortgage screening checklist [pdf].
  • Visit the Freddie Mac fraud prevention Web page and share our updated resources with appropriate members within your organization.
  • Refer to Single-Family Seller/Servicer Guide Chapters 7, 57 and 2.24 for our complete requirements on fraud prevention, detection and reporting.
  • Contact us immediately if you suspect fraud related to any loans we’re working on together. Call (800) 4FRAUD8 or email Mortgage Fraud Reporting.


Boost Borrower Education With Our Three Videos

As part of your borrower education efforts, please share these three Freddie Mac videos:

The Financial Fraud Investigation Unit is committed to helping you fight fraud. As you get back to basics with fraud prevention, detection and reporting, thank you for your vigilance.

Source: Freddie Mac

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties