True Lies

Past True Lies stories have explored how falsified documentation in loan files – such as paystubs, verifications of employment and other employment information − can help qualify a borrower for a home purchase for which they may not otherwise be eligible.

But in two recent cases we’ll examine in this story, we found fraud in an unsuspected place: child support documentation.

Escalating Suspicions

In the first of these cases, an astute underwriter noticed something unusual in several loan files. When he escalated his concern to his employer’s management, the lender opened its own investigation.

They found multiple loan officers altering or creating documentation related to borrowers’ employment. The falsified documentation affected about 30 loan files and included bank statements, income and assets information, sources of funds and indebtedness.

Freddie Mac’s Single-Family Fraud Risk (SFFR) stepped in and discovered that, of the 30 loans, Freddie Mac had exposure to one owner-occupied purchase loan for a married couple.

To support loan qualification, the borrower listed child support payments as a source of income. Our SFFR investigator took a closer look and learned that the case number on the court’s website associated with the child support order in the file listed someone other than the borrower as the petitioner.

Checking Child Support Validity

In a second case of falsified child support documentation, a lender provided Freddie Mac with a tip on 14 suspicious loans, all of which were originated by the same originator.

As in the first case in this story, our investigator searched public records and learned that each court case number was associated with someone other than the respective borrower.

The investigator’s review of online data showed that the originator used fabricated child support documentation to help borrowers qualify with income they didn’t actually have.

Verifying the validity of child support documentation in a loan file is easier than ever. Government websites have gotten more sophisticated in the last decade, so underwriters, processors and loan officers can more conveniently check public records to verify documentation, rather than just taking a borrower at their word.

Since not every loan file contains child support documentation as a source of income, it can be easily overlooked during underwriting as potentially fraudulent. But as this story’s first instance of fraud shows, a careful underwriter will be alert to anomalies.

Stopping Fraud in its Tracks

Checking online records for verification can easily reveal fraud. And while fraudsters may sometimes be careless in their ruse, that doesn’t mean they won’t make creative attempts to sneak it in.

When you detect something odd in a loan file or see unusual patterns, don’t shrug it off. Even if you occasionally hit a wall, a little extra legwork is always worth the effort to find fraud where it may not be expected.

If something seems amiss, SFFR is ready to take the steps that can reveal inappropriate activity. Suspect fraud? Help us stop it in its tracks:

  • Contact the Freddie Mac Fraud Hotline at 800-4 FRAUD 8.
  • Send us an email to [email protected].
  • Submit a question or report suspected fraud through our short feedback form.