The reins have once again been tightened at Fannie Mae and Freddie Mac, this time with their regulator proposing that the two companies be required to report fraud.
The Office of Federal Housing Enterprise Oversight has proposed a regulation that would require the two government sponsored enterprises to report to the agency fraud or possible fraud in a timely fashion, according to an announcement Tuesday. It would also require that Fannie and Freddie establish internal controls, procedures and training programs to detect and report such activity.
“This rule will ensure that Fannie Mae and Freddie Mac do their part to help combat mortgage fraud,” said OFHEO director Armando Falcon Jr. in the announcement. “The Enterprises will now have a clear obligation to report fraud and help prevent a repeat of cases like the First Beneficial matter.”
The proposal states that the GSEs must inform the regulator if the company is requiring the repurchase of a mortgage backed security or other instrument, or if it is refusing to purchase an instrument because of suspected fraud, OFHEO said.
Cited within the proposed regulation are recent examples of fraud or alleged fraud involving First Beneficial Mortgage Corp., Olympia Mortgage Corp. and United Homes LLC.
In the case of First Beneficial, Fannie demanded that the North Carolina-based lender buy back fraudulent notes. Fannie then allegedly turned a blind eye when government-owned Ginnie Mae bought those same notes.
If the companies fail to comply with the proposed requirements, OFHEO said it would be able to impose supervisory actions against the entities, their board members, officers or employees — including the issuance of cease-and-desist proceedings and civl money penalties.
The public comment period on the proposed regulation is set at 30 days after publication in the Federal Register.
In a separate action that is effective immediately, the OFHEO issued a Director’s Advisory, which requires the GSEs to notify it of any investigations, legal proceedings, or civil or criminal actions by any governmental authority or private party.
Related:
Fannie Unloaded, Ginnie Bought Bogus Notes
A federal judge has ordered Fannie Mae to turn over $6.5 million it received as a result of selling fraudulent mortgages back to the originator who in turn sold them to the government.
