True Lies

We’ve talked in previous True Lies about income and employment misrepresentation in borrower loan files. But what if the person applying for a loan isn’t who they say they are?

This new twist on a more common type of misrepresentative fraud is demonstrated by a recent case that Freddie Mac’s Single-Family Fraud Risk (SFFR) team investigated.

While an initial tip to SFFR implied potentially fabricated income and employment information in two loan files involving one loan officer, we received a second tip shortly thereafter.

A Multi-Layered Scheme

This second tip came from a different lender that reported loans originated by multiple retail loan officers. These loan files contained fabricated income and employment information, including some of the same questionable employers included in the initial tip.

Through standard monitoring of the loan production process, the lender suspected the same person was calling into the lender’s call center and posing as borrowers when applying for their loan.

Both the lender and SFFR suspected that there were multiple layers to this scheme beyond just information misrepresentation.

Phantom Employers

When our investigator contacted the loan officer referenced in the first tip, he produced emails that indicated that borrowers sent his office their income documentation via email.

Our investigator believed that these email accounts merely gave the appearance that they belonged to the borrowers, but were actually created by a third party to facilitate this scheme.

In reviewing the employment information in the loan files, our investigator also discovered that, while many of the businesses had active websites or other online footprints, the businesses themselves couldn’t be located. Through his research and by conducting fieldwork, our investigator discovered the reason was that those businesses didn’t exist.

Borrower Roadblocks

SFFR interviewed several of the borrowers whose loans were tied to the second tip.

They acknowledged that their loan files contained false income and employment information and that the phone numbers listed on the application were not theirs.

However, the borrowers didn’t seem particularly surprised or alarmed – perhaps because they were aware of the discrepancies in the first place.

Additionally, the borrowers said they didn’t recognize the name of the loan officer listed on the application and were unable or unwilling to provide the name of the person who they worked with to get their loan.

If the borrowers interviewed were being cagey about whether they knew the loan officer’s identity, the investigation still confirmed that there was no evidence on the settlement statements or closing disclosures that they paid a third party to impersonate them to qualify them for their loans.

An additional layer of suspicion was revealed through a discussion with the servicer. They confirmed that, after closing, the borrowers’ contact information was updated to include different email addresses and phone numbers – ostensibly their actual contact information.

They’re Not Who They Say They Are

Making up income and employment information is one thing, but it’s a bold new twist on an old fraud scheme to impersonate an applicant when applying for a loan.

In pretending to be the borrowers when calling the lender’s call center and providing false contact information, a third party was trying to control the process from start to finish. And this impersonation violates a basic norm of loan origination and underwriting.

Through the investigation, it became evident that the borrowers would not have qualified for a loan without the third party fabricating their income and employment information and taking it a step further by misrepresenting their identities.

We’re On It

SFFR hasn’t resolved this nascent fraud scheme yet, but Federal law enforcement is aware of it – and Freddie Mac is keeping its eyes on it too.

If you suspect that a loan officer, or any other player in the loan origination process, isn’t who they say they are, report your suspicion to us. Any time something doesn’t look right when reviewing loan files, raise your questions. If you can’t get a straight answer, flag it.

As with any burgeoning fraud, we rely on tips from our clients. Suspicions generated from a single loan could yield a bigger scheme. To stop fraudsters before they get too far:

  • 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.