Freddie Mac: Stay Vigilant About Fraud as the Housing Market Springs Forward
On April 30, Freddie Mac issued a release encouraging sellers and servicers to continue watching out for fraud within the mortgage industry.
Stay Vigilant About Fraud as the Housing Market Springs Forward
The housing market is heating up this spring, with good news about market demand, interest rates, and a mortgage industry ready to handle large numbers of buyers and sellers.
Freddie Mac’s Deputy Chief Economist Len Kiefer recently outlined the top three reasons [pdf] why he predicts the best year for home sales and new home construction since 2007. But don’t let the positive news and change of seasons change your approach to fraud. While known instances of fraud may be at historic lows, fraud remains a threat and a cost to the mortgage industry, and fraud programs need to be maintained and possibly strengthened.
Keeping the Focus on Fraud Prevention
The mortgage industry has spent the last several years focused on building itself back up and instituting best practices to fight fraud. It’s almost human nature to let down your guard and not focus on fraud prevention tactics when things are going well. But that’s precisely the time when you should keep your eyes out and ears open.
Instances of some types of fraud, such as appraisal fraud, appear to have decreased. But others, such as the number of falsified loan applications – now the most common type of mortgage fraud – have risen steadily for the last three years, according to The New York Times.
Loan-Level Fraud on the Rise
While no single fraud scheme is splashed across the news headlines right now, our industry is tested everyday by loan-level challenges. A borrower who’s unemployed at the time of closing obtains a loan because a lender skips verbal verification prior to closing. A lender misses a mortgage or other debt listed on a credit report, which was not disclosed on the loan application. A borrower misrepresents his assets and promises down payment money he doesn’t have in order to secure his loan. It’s worth noting that, as the industry evolves, so do fraud trends.
Loan by loan, the costs for loans that don’t perform well add up. Additionally, fraudsters use loan-level frauds to test our controls and as building blocks for larger, potentially more damaging fraud schemes.
Fraud Prevention Resources for You and Your Organization
What can you and your organization do to prevent and report fraud? One step is to refresh your knowledge of best practices by reading our comprehensive Single-Family mortgage fraud mitigation best practices document [pdf]. The Freddie Mac Financial Fraud Investigation Unit (FFIU) recently updated these fraud best practices 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.
Freddie Mac’s SVP and Head of Single-Family Sales & Relationship Management Christina Boyle recently wrote about The 4 Cs of Qualifying for a Mortgage, including capacity, capital, collateral, and credit. Your attentiveness helps ensure that there isn’t a 5th C – Crime.
Looking Forward to Continued Success
The FFIU 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 comprehensive Single-Family mortgage fraud mitigation best practices document [pdf] and mortgage screening checklist [pdf].
- Visit the Freddie Mac fraud prevention Web page and share these updated resources with appropriate members within your organization.
- Refer to Single-Family Seller/Servicer 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 release 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.