Fannie Mae warns Northern CA mortgage lenders of child support income scheme

Fannie Mae has issued a mortgage fraud alert for lenders in northern California, warning of heightened instances of misrepresented child support income in “numerous loans” that have been originated in the region over the past few months.

The GSE highlighted four hallmarks of such a scheme. These include, “commonality of real estate agents involved in selling the subject properties; bank statements and canceled checks [which] are created to support falsified child support income; borrowers hav[ing] no other source of income; child and spousal support documentation provided in the loan files do not match public records regarding those same persons.”

The scheme also commonly features “altered court documentation with case numbers that begin with ‘HF,’” since the State of California’s court case numbers do not begin with “HF.”

Borrowers engaging in such a scheme would typically not qualify for a loan without including the misrepresented income, Fannie Mae said.

For lenders who suspect that they may have clients attempting to perpetrate the scheme, Fannie Mae recommends documenting all applicable details.

“Take special caution on any loans containing spousal or child support as the primary income for the borrower,” the GSE said. “Refer to public record data to determine the authenticity of supporting documents contained in the loan file.”

If a professional suspects fraud, Fannie Mae recommends following established policies and procedures from both their company and the Fannie Mae Selling Guide, as well as reporting instances of fraud through the GSE’s dedicated webpage designed for fraud reporting.

There are also a series of general steps that can be taken to spot instances of fraud, including having well-established relationships with third-party originators/brokers; educating staff about fraud-related issues; sharing information within a professional’s organization; and simply avoiding going through with the loan if it doesn’t appear to make sense.

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