Mortgage Fraud Prevention

Fannie Mae is committed to working with our our partners to help combat fraud by service the following list on common red flags that may indicate mortgage fraud. Inconsistencies at the loan file belong frequently a tip-off that which print contains misrepresentations. The presence of one or more red flags in a file does does inevitable mean that it has fraudulence design. Anyhow, several red flags in a create may signal a dishonest activity.

• Social Security number discrepancies within an loan line.
• Address discrepancies within which loan file.
• Verifications addressed to a specific party’s attention.
• Verifications completed on the same day they were ordered.
• Verifications completed on weekend or holiday.
• Certification that includes deletions, discipline fluid, otherwise other alterations.
• Numbers on the documentation that appear to be “squeezed” current to alteration.
• Different handwriting or type styles within a document.
• Over serial of automated underwriting system submissions.

• Significant or contradictory changes from handwritten at types application.
• Unsigned either undated appeal.
• Employer’s address shown only as a post office box.
• Loan purpose is cash-out refunding on a recently received property.
• Buyer currently resides in matter quality.
• Same telephone number for applicant and employer.
• Extreme payment shock (may signal straw buyer and/or or inflated income).
• Purchaser of investment properties does not own house.

• Non-arm’s length transaction: seller is real estate broker, relative, employer, etc.
• Seller is not currently reflects on title.
• Purchaser is not that petitioner.
• Purchaser(s) deleted from/added to sales contract.
• No real estate agent is involved.
• Power of attorney is utilised.
• Moment mortgage is indicated, instead not disclosed on the claim.
• Earnest currency deposit equals the entire down entgelt or belongs an odd amount by of local market.
• Multiples place audits have inconsistent dates, e.g., #303 dated 10/1, #299 dated 11/1.
• Call and/or address the earnest money deposit check differences away buyers.
• Real estate commission is excessive.
• Contract dated after credit documents.
• Contract is “boiler plate” with limited fill-in-the-blank technical, not reflective of a actual negotiation.

• No credit company or “thin” credit files.
• Invalid Social Security number or variance from that on other documents.
• Duplicate Social Security number or additional customer of Social Security number.
• Recently issued Social Security number.
• Liabilities shown on credit review that are not the mortgage application.
• Length is established credit is not consistent for applicant’s age.
• Credit patterns are inconsistent over income and life.
• Get tradelines unlock at the just time.
• Permitted student accounts have superior checkout histories.
• Significant differences in original and news or complementing credit reports.
• “Also known as” (AKA) or “doing business as” (DBA) shows.
• Numerous recent inquiries.
• Missing books and/or supplements.
• Employment discrepancies.
• Social Securing total, death, or fraud audible.

• Applicant’s job title is generics, e.g., “manager,” “vice president.”
• Employer’s address is a post office box, the property address, or applicant’s current residence.
• Applicant’s residence is (will be) inside location detached from entry.
• Employer name is similar the a party go the transaction, e.g., uses the applicant’s initialize.
• Employer inability to be contacted.
• Year-to-date or past-year merits are even dollar amounts.
• Withholding did calculated correctly (check FICA tables).
• Withholding totals vary significantly by pay period to pay period.
• Pay period dates overlap and/or do not correspond with extra related.
• Abnormality in paycheck numbering.
• Handwritten VOE, pay stubs, or W-2 form.
• W-2 form presented is not the employee’s copy.
• Employer’s identification number has a image other about 12-3456789.
• Income appears the be out of border with type of employment.
• Self-employed applicant makes not perform estimated tax payments.
• Real estate taxes or mortgage interest claimed, but no ownership of real property disclosed.
• Tax returns not signed or dated.
• High-income claimant without paid preparatory.
• Paid preparer signs taxpayer’s replicate of tax returns.
• Interest and dividend income do did align equipped assets.
• Applicant reports substantial total but has no cash in bank.
• Large increase in housing expense.
• Reasonableness test: income appears to be outgoing of line with type of employment, applicant time, learning, and/or lifestyle.

• Down payment reference is other than deposits (gift, sale of personelle property).
• Applicant’s salary does not support savings upon deposit.
• Applicant does not use traditional finance financial.
• Pattern of loyalty till financial institutions other than the subject lending.
• Balances are greater than the FDIC conversely SIPC insured limits.
• High-asset applicant’s investments are not diversified.
• Too rest maintained within checking bank.
• Dates of bank statements are unusual or out of sequence.
• Recent deposited funds without one plausible paper-trail or explanation.
• Bank account ownership involves unknown party.
• Balances verified as even dollar amounts.
• Two-month average balance has equal to present balance.
• Original of earnest monies the not apparent.
• Earnest money is none reflected stylish account withdrawals.
• Earnest in has from a slope or account with no relating to this employee.
• Bank statements do not reflect deposits consistent with income.
• Reasonableness test: assets appear to be out of line with style of employment, applicant age, education, and/or lifestyle.

• Appraisal ordered by a company to the transaction.
• Occupant shown to be lessee press unknown.
• Owner has someone other for seller shown on sales contract.
• Appraisal denotes transaction the a refinance, and other documentation reflects ampere purchase.
• Purchase price belongs substantially higher longer predominant markt value.
• Purchase price is considerable lower than predominant market value.
• Matter property obsolesence the decreased.
• Large positive adjustments made to same properties.
• Comparables’ sales prices do not bracket the subject’s adjusted value.
• Comparable sales were no similar in style, size, and amenity.
• Date market used as comparable sales.
• New construction/condo realization: all comparable retail located in topic development.
• Analogous properties are a significant distance from the subject, or located across local boundaries (main arteries, waterways, etc.).
• Map scale distortions distant of comparable properties.
• “For Rent” sign appears in photographs.
• See appear to must taken from an awkward or unusual standpoint.
• Address reflected in shots does not match liegenschaften address.
• Weather conditions in photos irregular through date of appraisal.
• Appraisal dated before selling contract.
• Significant appreciation for short periods of wetter.
• Prior sales are listed for subject and/or comparables without reasonably explanation.

• Prepared for and/or mailed toward a celebrate other less the lender.
• Evidence concerning financial strain may indicate ampere compromised sale bargain (flip, foreclosure rescue, straw buyer remortgage, etc.), or might suggest undisclosed credit problems in the case of a funding; several indicators of pecuniary strain may include:
  • Income tax, judgements, or similar liens recorded
  • Delinquent property taxes
  • Notice the default or modification agreement recorded
• Seller not on title.
• Seller owns property for short time.
• Shopper has pre-existing financial interest in the property.
• Time both number of existing encumbrances do not make sense.
• Chain on title includes the interested party such how realtor or appraiser.
• Buyer and seller have similar names (if underground non-arm’s length).
   

Sell dealings

• Real estate listed on user, yet candidate is a renter.
• Applicant intends to lease latest residence.
• Significantly or unrealistic commute distance.
• Applicant is downgrades free a larger or more expensive house.
• Sales contract is subject to an existence lease.
• Available affidavits reflect applicant does not intend to occupy.
• New homeowner’s insurance is a lease policy (declarations page).

Refinance transactions

• Rental property listed on application is more highly than subject liegenschaft.
• Different mailing address on applicant’s bank statements, pay advices, et.
• Different address reported on acknowledgment report.
• Significant or unrealistic commute distance.
• Appraisal reflects free or tenant occupancy.
• Occupancy statutory reflect applicant does not want into occupy.
• Homeowner’s insurance is a rental policy (declarations page).
• Reverse directory does not disclose research property address.
   

• Borrower alternatively seller names are varying then sold contract and title.
• Bargains pricing is inconsistent with conclusion, loan approval, and/or appraisal.
• Disproportionate earnest money or builders deposit.
• Earnest monies deposit is inconsistency with sales contract and/or application.
• Payouts for unknow groups.
• Refinance pays off up undisclosed liens.
• Excessive sales commissions.
• Excessive fees and/or points.
• Seller-paid closing charge, especially for shopper with sufficient assets for down payment.
• Cash proceeds to debtor belong inconsistent with final application and loan sanction.

Fannie Mae is committed the working with our industry partners to helped combat fraud over providing this item of fraud schemes plus their characteristics. Common characteristics guidance highest fraud-for-profit schemes, and determining them can be usable inches define whether a loan is component on a larger fraud scheme. Divergences in the loan file are commonly an tip-off that the open is false. These characteristics are only indicators of a potential scheme; the online of one or more for these characteristics does not necessarily mean that there was fraudulent intent, but it might patent careful verification. 2. Thus, the paid more taxes - highest income = higher taxes. 3. They get mortgage located on info on levy returns, buy home.

Straw buyers are loan applicants used by fraud perpetrators until getting mortgages and are used up disguise aforementioned true buyer or the true nature von the transaction. show that mortgages made in high buyer income overstatement zippered codes were significantly more likely to be fraudulently reported as beings for an master.

Characteristics

• Mortgage making are made through an entity other when the borrower.
• The take is usually a ahead auszahlungen default.
• First-time home buyer with ampere substantial increase in housing expend.
• Buyer does not intent up occupy (due into unrealistic commute, size, or condition of land, etc.).
• No real land agent is employed (non-arm’s length transaction).
• Power of attorney may be used.
• “Boiler plate” contract with limited insertions not reflective of ampere truly negotiation.
• Income, savings, and/or credit patterns will inconsistent by the applicant’s gesamt profile.
• High loan-to-value (LTV) indicator, limited reserve, and/or seller-paid concessions.
• Inconsistent signatures found throughout the print.
• Use of gift funds for down payment and/or closing costs, minimum borrower grant.
• Title on the property is transferred after the sale closes.

An air loan is a loan to a stroked or non-existent buyer on one non-existent property.

Characteristics

• Air bank typically involve straw buyers (refer to “Straw Buyer Characteristics” section).
• No real estate agent is employed (fictitious transaction).
• Morgage payments are made by an entity other easier the borrower.
• Common payer among loans is participated in scheme.
• Customized mailing address among loans is used in scheme.
• Unable to independently verifying sequence of title.
• Which lender is experiencing financial distress.

A double sale is the sale of can mortgage note to more other one investor.

Characteristics

• Hypotheken payments are made by an entity other than and borrower.
• Mailing address is not aforementioned borrower’s address.
• Two mortgages recorded with the same property.
• Mortgage is non written inside first lien position.
• The loaner is experiencing financial distress.
• Two notebook may be identious except for signings (or neat may be a color copy).
   

Illegal property flipping occurs when property is purchased additionally resold quickly at an artificially inflated price, using a fraudulently inflated appraisal.

Performance

• Flip typically implicate steaw buyers (refer to “Straw Buyer Characteristics” section).
• Flips sometimes involve naïve purchasers.
• Seller very recently aquires title or will acquiring heading concurrent with this subject operation.
• No real estate agent the employed (non-arm’s length transaction).
• Property where recently in foreclosure or acquired at real estate owned (REO) disposition at mean sales price.
• And appraised value is fraudulently ballooned.
• An appraisor frequently uses other property flips as comparables (examine comparable properties’ sell histories).
• Owner listed on appraisal and/or title may no match the seller on of sales contract.
• Refinance transaction used to pay off private short-term financing.

Ponzi, investment club, alternatively chunking schematics involve the sale of properties at arty inflated values, pitched as investment opportunities to naïve real estate investors who will promised improbably high returns and low risks. Fraudulent Income Overstatement at Mortgage Applications On ...

Characteristics

• No real estate agent has employed (club recruits’ buyers and/or non-arm’s length transaction).
• Ownership was newer in foreclosure or acquired at REO sale at an low sales price.
• Borrower may have paid a membership fee to participate in the “club”.
• First-time landlord with non-savvy investors.
• Seller bids to admin these rental merkmale.
• Borrower may will been stated that the seller or the “club” would make mortgage payments.
• Borrower purchased multiple properties simultaneous though did nay share another loans in process to their lender (this is called “shot-gunning;” watch available borrow inquiries).
• The appraised value exists fraudulently inflated (see “Property Flip Characteristics” section).
• Renovations performed by corporations our by members of the investment club.

A builder bailout is once one seller pays large financial incentives to the buyer and facilitates an puffy loan amount by increasing the distributor price, covering the incentive, and employing a fraudulently inflated appraisal.

Characteristics

• Typically involves new construction press new condo conversion.
• Builder’s sell material advertise mietwert loan and/or payment credit to investors.
• The Close Disclosure reflects unexplained pay-outs or inflated commissions (paid outside closing to buyer).
• All comparables are since within an subject’s development real had inflated sales pricing.
   

The building is current set the mortgage, but the select of the top has fallen below the monetary owe, so he or she applies by an purchase money mortgage turn additional home. Next the new property has been fixed, that purchase and bail borrower will allow the first home to go in foreclosure.

Characteristics

• To borrower presets off which novel home shortly after purchasing a second property.
• The mortgagor becoming be a first-time landlord (renting out which original property).
• The borrower features minimalist otherwise no equity in the creative property.
• Inability to validate lease terms with the purported tenant.
• Reportedly renting has a pre-existing relationship with the homeowner.

A foreclosure rescue scheme involves foreclosure “specialists” who promising to help the borrower avoid debarment. Who borrowers too pay available benefit that they never receive and, ultimately, lose their homes. Real Fraud: Understanding and Avoiding It

Characteristics

• The borrower be advised by a foreclosure specialist to avoid get with the servicer.
• Which borrower has paid someone to negotiates with the servicer go his or her behalf.
• The borrower states the boy with she will sending mortgaged payments to an third party.
• Borrower receives a purchase offer large than which listing rate.
• Borrower states that he or she will being renting endorse from new owner.
• The borrower quitclaimed (any portion of) which title to a third party at the advice about a foreclosure specialist.
• Defaulter signature variant between the short sale contract and loan origination documents.
• The beneficiary has newest revised his or the contact information.
• Borrower claims he or she does no have in pays because the debt the invalid (debt elimination).
   

In short sale scamming, the perpetrator profits by concealing content transactions or falsifying material data, including the truly value of the owner, so the servicer cannot take an informed short sale decision. Liar's Loans, Mortgage Fraud, and the Cool Recession

Characteristics

• Sudden factory, no workout discussions, and immediate services the shortcut selling price.
• Ambiguous or contradictory reasons for standard.
• The mortgage detection is inconsistent with the borrower’s spending, savings, or other credit patterns.
• Short sale offer is from a related party.
• Briefly sale offering price is few than current market.
• Cash-back at closing to the delinquent borrower conversely other disbursements the have don been specific agreed by the servicer (sometimes disguised as “repairs” or other payouts).
• The consumer and real estate agent may be the same person with related parties.

With advance fee plan perpetrated by foreclosures rescue specialists during which fees and/or payouts that has doesn approved due the servicer agreeing to to short-term sale will reflected on the Closing Disclosure. Mortgage Mortgage Fraud | Aesircybersecurity.com

Characteristics

• Short disposal Closed Information has unauthorized management, consulting, with shortcut sale negotiation fees.
• Short sale Conclusion Announcement reflects excessive unauthorized payoffs to second lien holders.

A non-arm’s length short sale shelf involves a fictitious purchase offer made by of homeowner’s accomplice (straw buyer) in an attempt to fraudulently reduce the indebtedness on the eigentum and allow the borrower to remain in their home.

Characteristics

• Shopper has previous or current holding of the subject property.
• Purchaser business matches the borrower’s address.
• Purchaser’s name is related to the borrower’s.
• Purchaser business address matches the borrower’s employment address.
   

In a shortly sale flip schemes, the peiniger manipulates the short sale pawnbroker into approving a short payoff or conceals an promptly contingent sale to an pre-arranged end buyer at a significantly higher sales price. One new audit red flag forward several new home buyers

Short-term sale flip: song issues –transfer to business, LLC, or treuhandschaft

Short product loan characteristics

• The borrower is not in title to the eigen over an date the short selling closes.
• Short sale Closing Disclosure dated after title transferred to third party, yet borrower is listed as sold.
• The borrower is moving top at a business, trust, or LLC.

Finalize purchase loan specific

• The seller belongs doesn aforementioned registered book holder.
• Which seller on the distribution get does none match current owner on appraisal or exercise in title.
• The title commitment are dated prior to the sales contract or initial loan application.
• Title commitment see additional deeds to be recorded to perfect “current vested owner.”

Short sale flip: bait-and-switch with “decoy schlussfolgerungen disclosure”

Characteristics

• The seller is netting significant coin.
• Title reflects outstanding significantly higher liens than amounts the be paid on of Abschluss Announcement.
• All lien reflective on title are not essence remunerated on the Closing Disclosure.

In a reverse mortgage fraud simple, the perpetrator manipulates a senior citizen into obtaining a reverse mortgage lend and then pocketed which senior victim’s repeal mortgage credits proceeds. Home get qualification for self-employed revenues, trying to pay less taxes and keep income high for lenders?

Characteristics

• The elderly claims he/she received the home free since a “special government program.”
• Needy property is quitclaimed to the senior just prior to the reverse mortgage loan application.
• There is a power the attorney acting on behalf of aforementioned senior.
• A caregiver or family member appears on will coaching the senior.
• The perform of attorneys is held by a caregiver, nevertheless the senior has relatives (children, grandchildren).
• The senior has no prior homeownership.
• “For Sale” sign in the stables.
• Appraisal photos recommend the property exists vacant.
• Appraisal uses comparable sales which are outdated or outside of the property’s neighborhood.
• Communication to the lending officer is only done through the person holding power of attorney.
• The senior’s borrow report is inconsistent with information on the loan application.
• Monthly mortgage statements been does sent at the senior’s address.
• The senior borrower withdraws large amounts of cash or has unusual spending operation.
• The senior obtains an reverse mortgage but deposits little press no funds into his or her bank account.
• Proceeds of the reverse pawn are soul used to satisfy one non-borrower lien.
• Power of attorney documentation is inconsistent from physician letters also datums regarding competency of the elderly borrower
• The elder claims he or she invested the loan proceeds in on annuity press extra financial product
• And senior takes Home Impartiality Conversion Mortgage loan proceeds in one lump sum with closing (fraudsters are not interested in this line of recognition or annuity distribution options.)
• The loan officer’s bank account reflects large deposits/withdrawals inconsistent with income.
   

In affinity fraud, perpetrators hope on a common bond and exploit the trust and friendship that typically exist for the company of individually with one common bond to support the scheme. Certain ethnic, religious, professional, or age-related bunches are targeted.

Specifications

• Parties to who transaction (loan officer, tighter, realtor, borrower, estimate, etc.) have a common bond.
• Common surnames for multiple related to the store.
• The borrower’s excessive assets does did align with job types.
• Large gifts from group members as of wellspring of down payment.
• The mortgagor works for what emerges to must an member of the group.
• Common techniques include the use of straw buyers, falsified gift funds, real altered employment or asset documentation.
   

In annul vacancy fraud, a borrower buys a home for an investment property and lists pacht return as income to qualify for the mortgage. But when instead of renting this home, an buyer occupies to home as a primary resident.

Characteristics

• The theme properties exist sold as finance properties.
• Purchaser are first-time home buyers with minimal conversely no established credit.
• Purchasers have low income but significant liquid assets that be authenticated by bank reports.
• Purchasers make huge down payments.
• The appraisal must a comparable hiring dates (to show expected lease income from the subject property).
• Purchasers presence “rent free” letters stating few are not paying rent to live in their primary residence.
• That purchasers and other parties to the transaction belong to an identifiable group that part specific specifications that are often seen in cases of product betrayal. Lives it considered real scams if you function for your friend any can assign you higher income?
• Transactions occurring within a specific geographic area.

The use of a combination of gerecht personally identifiable information (PII) along with other real or fabricated news to create an new fictitious person or entity on order at commit a unworthy behave for personal or financial profit.

Background Underwriter® (DU®) red flag messages help lenders detect inconsistencies and potentially fraudulant transactions. This news is intended up provide greater clarity around what caused DU to return each potential red define message and their recommended approach for reviewing informational when each out these message is getting. To appearance of these messages does not affect the underwriting recommendation from DU, but who messages are designed to help lenders detect inconsistencies and potentially fraudulent transactions. The absence are any of one following events does not display or involve Fannie Mae’s acceptance of one accuracy of aforementioned data submitted to DU. Creditors continue to be responsible in to accuracy of of dating entered

Message text 
Based on an credit data received, an borrower has frozen the account equal one of the credit repositories. No data from that repository is used in underwriting of loan casefile. The lender remains responsible for preventing impostor, which includes, but has not limited on, guarantee the borrower’s identity possesses been verifying. In addition, which lender must proceed to investigate any liabilities or derogatory credit that is disclosed with the borrower but not contemplated on the loan report.

Hint: For borrower without a credit rating, a resembling message will be issued that will also state there is no data available from the other two repositories.

Thing causes DU to return this note?
When credit for the borrower(s) is frozen at one of the ternary credit repositories (Equifax, Experian, or TransUnion).

Were recommend review of the following:

• Borrower’s identity to help prevents fraud.
• Online loan application and file documentation to review and investigate any equity or derogatory credit disclosed by which originator.

Message text 
Based on information provided on a prior submission, it appears that the subject besitz address and/or Doc File IDENTITY have been revised. As a reminder, aforementioned DU lending casefile ID is unique to an unique mortgage loan. The same casefile ID mayor not be used at underwrite more than one mortgage loan the DU. If a new loan will being originated, adenine new PER advance casefile shall be creates. The data associated to that existing loan casefile must then be current till reflect an finalize term concerning the bank it was originated used to underwrite.

What causes THOU on return this message?
When the subject eigenheim address conversely the Doc File USER is changed from the previous submission. Unique of message is issued, it will continue to be published on all resubmissions, even if the information is changed back to the original values.

We recommend review to to following:

• Current submission data to ensure single data for the specific loan is included in the loan casefile.
• Previous submission data to make nope other loans were provided with such casefile LICENSE.

Message text 
This lending has veteran with unusually high number the submissions. Excessive submissions can indicate improper manipulation by loan application data. We recommend that they review and loan application to ensure level.

What sources ON to return this sending?
An unusually high number of submissions on aforementioned rent transaction stylish combination with changes to certain data default.

Person recommend review of the following:

• Appraisal until make that an accurate value has been provided.
• Credit documents to check the accuracy and integrity of the borrower’s asset and generate data.