A few months ago, Fannie Mae issued a warning to lenders, cautioning them of more than 30 employers that were showing up on borrowers’ mortgage documentation that appeared to be fake.
Those potentially fake companies were generally located in the Southern California and Los Angeles County areas, but it appears that the fake company problem is now moving north.
The government-sponsored enterprise issued a new warning this week, identifying 10 new purported employers that do not seem to actually exist.
According to Fannie Mae, each of the fake companies is located in Northern California, with some supposedly located in Silicon Valley.
Fannie Mae said that its mortgage fraud program identified 10 new companies after spotting commonalities with the loans that were the basis of its May alert.
The 10 companies in question were listed as the place of employment for an unknown number of borrowers, but Fannie Mae said that it cannot verify any of the companies’ existence.
Here, from Fannie Mae, are the 10 potentially fake companies:
- Collins Software Engineering, located on Redwood Highway in San Rafael, CA
- Modern RF Circuits, located on Oakland Road in San Jose, CA
- Periodic Network Systems, located on Scotts Valley Drive in Scotts Valley, CA
- Solo Welding and A/C Repair Co., located on W. Larch Road in Tracy, CA
- Wyntron Micro Systems, located on G Street, Suite E in Merced, CA
- Metroniks Wire Technologies, located on W. Olive Street, Suite 1 in Madera, CA
- Salam Imports Bay Area, located on Old Glory Street in Gilroy, CA
- Lucero Pro Systems, located on Hellyer Avenue in San Jose, CA
- Argo Physical Med Devices, located on Leveroni Court in Novato, CA
- Advanced Pacific Cardiology Systems, located on Lincoln Avenue in Calistoga, CA
According to Fannie Mae, there are a series of red flags that lenders should be aware of when it comes to loans that could include a fake employer or other potential mortgage fraud issues, including:
- TPO / broker loans
- Originated 2015–2018 (present)
- Employment (occupation) does not “sensibly” coincide with borrower’s profile (age or experience)
- Northern California (geographic common denominator)
- Borrower on current job for short period of time
- Prior borrower employment shows “Student”
- Starting salary appears high
- Purported employer does not exist
- Employer’s purported location cannot be ascertained
- Paystub templates are similar for various employers across other (involved) loan files
- Paystubs sometimes lack typical withholdings (health, medical, 401(k), etc.)
- Gift letters are substantial and are not (or cannot be) supported through re-verification
Beyond looking for those red flags, Fannie Mae said that lenders can take other steps to avoid being the victim of mortgage fraud.
“Prudent origination, processing, and underwriting practices should include looking for red flags in the loan documents that raise questions about the transaction,” Fannie Mae said in its notice to lenders.
Fannie Mae cautions lenders to verify that the borrower’s place of employment actually exists and obtain documentation to support that.
“If one of these entities is disclosed as the borrower’s place of employment, exercise due diligence in reviewing the entire loan file,” Fannie Mae said. “Lenders must exercise caution in these situations and take appropriate steps to prevent the institution from being the victim of fraud.”