Freddie Mac: IRS Rejection Messages Are a Reminder to Look Out for Fraud Red Flags
On June 11, Freddie Mac released an update titled IRS Rejection Messages Are a Reminder to Look Out for Fraud Red Flags.
IRS Rejection Messages Are a Reminder to Look Out for Fraud Red Flags
We’ve heard from Freddie Mac customers that, in a few instances, requests submitted through IRS Form 4506-T, Request for Transcript of Tax Return, are being returned with a rejection code entitled “Limitations.” The IRS’ reasons for rejecting requests with this particular code are to combat identity fraud and prevent unauthorized access to taxpayer information.
IRS Form 4506-T anomalies may indicate red flags such as the accuracy of a borrower’s income and tax documentation and/or the Social Security number used to qualify for a loan. We’re reminding you to treat these red flags as seriously as you would any other fraud red flag.
Processing IRS Form 4506-T is an essential, proven way to combat mortgage fraud, and is required for post-funding quality control programs. For more information, review Single-Family Seller/Servicer Guide (Guide) Section 48.5.
What You Can Do Now
To ensure the quality of loans sold to Freddie Mac, Sellers and Servicers must:
- Take all appropriate steps to clear red flags typically found in fraud schemes focused on loan origination, so that you’re comfortable with the risk of lending money to the borrower, and;
- Report instances of fraud or suspected fraud to Freddie Mac, as detailed in Single-Family Seller/Servicer Guide Section 7.3, when you receive the IRS rejection message “Limitations” for loans already sold to Freddie Mac. Freddie Mac doesn’t require any alternative documentation for transcripts rejected with this particular code during the post-closing quality control process.
Please review our recently updated Single-Family mortgage fraud mitigation best practices document [pdf] to help you spot what to look for, how to report fraud or suspected fraud to Freddie Mac, and what steps you can take to help prevent fraud.
Looking Forward to Continued Success
The Financial Fraud Investigation Unit is at the forefront of our mortgage fraud mitigation efforts and is committed to helping the mortgage industry fight fraud. Your continued efforts toward fraud prevention, detection and reporting are critical in the fight against fraud. Thank you for your vigilance.
For More Information
- 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 Guide Chapters 7 and 57 for our complete requirements for fraud prevention, detection and reporting.
- Call us at (800) 4FRAUD8.
- Email us at Mortgage Fraud Reporting.
Please click here to view the update online.
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow. Website: www.safeguardproperties.com.