True Lies

Falsified College Transcripts Flunk 13 Loans

When you graduated from college, it’s likely you couldn’t buy a home faster than you could frame your diploma.

That’s why it seemed suspicious to one of our Sellers when two mortgages originated by the same loan officer had almost identical borrower profiles. Both borrowers claimed to be recent college graduates, had limited work histories, had the same job with the same employer and had been qualified for a home loan in northern California. The Seller reported these concerns to Freddie Mac.

13 Suspicious Loans − One Originator

Once the Seller’s report came in, our fraud investigator began digging into the case.

She started by running an exposure check on the loan officer at the company that originated the loans. She ran a report to identify loans sold to Freddie Mac that were associated with the loan officer’s Nationwide Mortgage Licensing System (NMLS) identification number.

The investigator then looked for similarities and patterns across those loans, including in the loan applications and other documents. In addition to the two loans reported by the Seller, she discovered another 11 loans where the borrowers claimed to be recent college graduates. The same loan officer originated a total of 13 such loans. Each loan had different borrowers; some had one borrower and others had a borrower and co-borrower.

The borrowers’ employment documentation was limited to only a couple paystubs and did not include W-2s or tax returns, each claimed to work at one of just two companies and stated that they attended public colleges or universities in California or Washington. Our investigator contacted each institution to verify whether the borrowers had recently graduated. In every instance, the schools had no record of them.

Prior Conviction

Additionally, the investigator searched certain databases and learned that the loan processor’s California real estate license had been revoked years earlier due to a prior conviction for, among other things, wire fraud conspiracy. The loan processor was not licensed in California when the loans in this case were originated.

Lack of Controls

When our investigator visited the company that originated the loans, she discovered the office had been shuttered and the only remaining employee was the broker. “There were still flyers in the windows promoting properties for sale, but the office had clearly been closed for some time,” she says.

The broker stated that he wasn’t aware of any of the falsified documents in the loan files and didn’t know that the loan processor had a criminal record. While the broker claimed that the company had some controls in place to supervise loan origination, the proper controls ultimately weren’t in place to prevent the fraud from occurring.

Falsified College Transcripts on the Rise

Since she investigated this case, our investigator has seen several other cases involving falsified employment. In some of those cases, false college transcripts have also been a factor. “We’re seeing an increase in false claims of higher education,” says the investigator.

She adds that underwriters often don’t think they can contact a college or university to verify attendance and/or graduation dates. It’s a simple step toward confirming that a borrower truly graduated. If the institution has a policy against sharing this information, it will let you know. “The schools I contacted in this case were willing to verify attendance,” our investigator says.

“If a borrower is dishonest about their education on their loan documentation, that’s a big red flag,” adds our investigator.

Suspect Fraud?

Freddie Mac views matters of fraud very seriously, and takes appropriate protective measures that may include, without limitation, placing the names of individuals or entities on our Exclusionary List, or E List.

If you spot or suspect fraud, let us know by contacting the Freddie Mac Fraud Hotline at 800-4FRAUD8.