Fannie Mae is warning the housing industry that there are some questionable sources of income are appearing on mortgages.
The government-sponsored enterprise’s Mortgage Fraud Investigations unit issued an alert in October stating that it has uncovered some “borrower income concerns” on loans originated by third-party originators in Southern California.
Third-party originators are mortgage companies that originate mortgages on behalf of other companies, with the TPO not using any of its own money to fund the loan.
“We have observed misrepresented incomes in a compilation of loans that were originated by TPOs based in Southern California over the past several months,” Fannie Mae said in its October fraud alert.
According to Fannie Mae, there were several “specific hallmarks” on the loans in question, including:
- Borrowers are employed in service industries such as nail salons, small retail businesses, transportation/delivery businesses, and repair service businesses
- Borrowers have generic titles such as “manager”
- Large, often multiple, gifts are used toward the purchase
- Gift fund letters are noticeably altered (e.g., identical letters with only the amounts altered using correction fluid)
- The borrower’s income, while verified by the employer, does not appear reasonable given the industry, years of experience, and/or role
- Employer business revenue, per public-record sources, does not appear to support the purported borrower income
- Employment and income verifications are provided from private email accounts, such as Gmail or Hotmail, and telephone numbers for verifications are often personal phone numbers
As for what lenders and other housing industry participants can do to detect and prevent fraud, Fannie Mae listed the following steps:
- Know your TPOs
- Be “fraud smart” by educating your staff
- Establish a zero-tolerance fraud policy
- Share information within your organization
- If the loan doesn’t make sense, don’t do it!
- Report any suspicious activity through established channels