Reporting mortgage fraud will become mandatory at Fannie Mae and Freddie Mac.
A finalized regulation proposed five months ago, demanding that the government sponsored-enterprises report mortgage fraud or possible fraud to the regulator in a timely fashion, will become effective 30 days from publication in the Federal Register, the Office of Federal Housing and Enterprise Oversight announced Monday.
The regulation will also reportedly require that the secondary lenders maintain adequate internal controls, procedures, and training programs to assure an effective system to detect actual fraud or suspicious activity.
OFHEO said it will review the information it receives to assist in assessing internal controls, security efforts, risk management and other enterprise factors. The agency will also develop a process for sharing relevant mortgage fraud information with other federal agencies.
“This oversight coupled with Enterprise efforts will send a clear message that fraud will be actively resisted by the companies and their regulator,” said OFHEO Acting Deputy Director Alfred Pollard in a written statement. “We believe the Enterprises are committed to this effort.”
OFHEO has additionally finalized a Policy Guidance detailing procedures for implementing the regulation.
The move by OFHEO was prompted by a massive mortgage fraud case where Fannie required First Beneficial Mortgage to buy back bogus loans it had sold Fannie. But Fannie turned a blind eye when the same loans were resold to Ginnie Mae. A judge ordered Fannie to forfeit $6.5 million as a result of its inaction.
