True Lies

No One Benefits from Falsified Benefits

Benefits letters from federal government agencies and employers are often used to qualify a borrower’s eligibility for a home loan. That’s why we were particularly concerned when we recently discovered benefits letters in borrowers’ loan files that looked authentic ─ but were not.

One of our Seller/Servicers brought suspicious loans originated by a brokerage to the attention of Freddie Mac’s Single-Family Fraud Risk (SFFR) team. We took a closer look.

We reviewed the associated loan files and discovered a range of misrepresentations including falsified employer information, paystubs, child support payments, college transcripts and benefits letters.

The fabricated benefits letters were purportedly from the Veterans Administration (VA), various pension plan administrators the Social Security Administration.

Digging Deeper

To get insight into the scope of the misrepresentations, our investigator interviewed borrowers, who confirmed that the benefits letters were either not real or included incorrect information. For example, one borrower ─ who legitimately collects Social Security benefits ─ indicated that the amount stated on the benefits letter was inflated. Many other borrowers do not receive benefits from the entity that purportedly issued the benefits letter in their loan files.

Although the letters appeared to be on official letterhead, when our investigator contacted representatives of the VA, Social Security and pension plans, they confirmed that the letters were either not real or not accurate. The representatives quickly recognized aspects of the letters that were not real, such as incorrect reference or account numbers, invalid explanations of death and disability benefits and outdated logos on the letterhead.

Our investigator interviewed the mortgage broker and gained insight into who at the brokerage was intimately involved with fabricating the benefits letters and who merely lacked the perception to recognize when something seemed "off".

For example, one employee noticed a pattern of letters from the VA and Social Security in several of the files, but assumed it was normal and didn’t take the initiative to investigate further.

Like the that employee’s failure to bring this anomaly to someone’s attention, other employees failed to properly monitor loan origination activities. Controls were not in place or were ignored.

Scrutinize Benefits Letters

Our SFFR investigators recommend that underwriters closely review information in any benefits letters that may be included in a loan file to ensure the letters are real and the information is valid.

If you’re concerned about the veracity of a benefits letter, contact the organization that purportedly issued it and ask if the person receiving the benefits is really registered ─ and verify how much they receive each month. Even if the borrower legitimately collects benefits, the amount may be overstated.

Suspect fraudulent benefits letters, or any other falsified documentation? Let us know by contacting the Freddie Mac Fraud Hotline at 800-4 FRAUD 8.

Check out the 2019 “True Lies” series: