T
he commercial mortgage fraud crackdown is gaining momentum, with Fannie Mae confirming an ongoing investigation into a range of schemes that may be more widespread than initially thought. The agency has also identified financial losses from mortgage fraud as its top risk factor in its latest earnings report. In the filing, Fannie Mae revealed instances of multifamily lending transactions where parties involved engaged in or possibly committed mortgage fraud.

    Fannie Mae's efforts to weed out industry-wide corruption have been reported by various outlets, but the agency has remained tight-lipped about the investigation. Over the past year, the Department of Justice has targeted real estate investors for inflating property valuations and falsifying financial information to secure larger loans from private lenders, which were often sold to Fannie Mae or Freddie Mac.

    Some notable investors have already pleaded guilty to their roles in mortgage fraud schemes, with more indictments and guilty pleas expected. Fannie Mae has also stopped doing business with certain industry players, including title insurers Riverside Abstract and Madison Title, without charging them with wrongdoing. The agencies have tightened underwriting guidelines and increased inspections at multifamily properties.

    Fannie's latest earnings report highlights the agency's reliance on outside lenders to verify borrower information, leaving it vulnerable to potential fraud. Fannie Mae has acknowledged suffering losses from mortgage fraud, including institutional fraud perpetrated by counterparties, but did not disclose the size or scope of these losses. The agency also revealed that a $600 million portfolio of adjustable-rate loans became seriously delinquent in the third quarter.