Lisa Mailhot | July 15, 2024
Buyers
Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency are joining forces with federal prosecutors to address a significant problem in the real estate sector: multifamily landlords submitting inflated financial statements to secure larger loans. This collaboration aims to curb fraudulent practices that have become more apparent with rising interest rates and default rates.
The core of this issue lies in the underwriting process for commercial mortgages. Lenders rely on the T-12 form, which details a building's annual income and expenses. However, inconsistencies in lender audits allow some landlords to inflate their finances by excluding one-time expenses or fabricating income figures.
The number of real estate fraud investigations isn't publicly available, but recent cases highlight the severity of this issue. For example, in 2023, Michigan-based landlord ROCO Real Estate was involved in a high-profile case where co-CEO Tyler Ross inflated his Tallahassee rental apartment complex's profits by 117 percent. This fraudulent information led to a $418 million purchase, which later defaulted.
To counteract such fraudulent activities, Fannie Mae and Freddie Mac have implemented stringent measures. These include banning brokers who falsify financial statements and requiring landlords to provide rent receipts. Lenders are also advised to inspect rental units to verify occupancy, helping identify and decline loans based on dubious financial information.
University of Texas McCombs School of Business professor John Griffin noted, “It’s a general trend throughout history that fraud occurs during boom times and is revealed during bust times.” This pattern underscores the importance of vigilant financial oversight, especially in fluctuating markets.
Mortgage fraud is a serious offense with wide-reaching consequences for both lenders and borrowers. The collaborative efforts of Fannie Mae, Freddie Mac, and federal prosecutors are crucial in maintaining integrity within the real estate market. If you’re looking to move to Orange County, let's connect!
Maximize your VA loan benefits in 2025's housing market. Expert guide for veterans buying homes in Orange County with zero down payment and no PMI required.
Learn why smart Orange County sellers use pre-listing home inspections to avoid deal-breakers, control repairs, and close faster. Get the insider advantage.
Pending home sales barely budged in recent months. Learn what this market shift means for buyers, sellers, and real estate strategies in today's housing landscape.
New construction homes declining, builder incentives rising
Discover the best neighborhoods to buy a home in Orange County in 2025. Expert insights on top areas, pricing trends, and investment opportunities.
Mortgage rates drop near a three-year low, improving affordability and boosting buyer power, but pending sales and demand remain sluggish as uncertainty tempers activi… Read more
A new CNBC Housing Market Survey reveals that most potential homebuyers expect mortgage rates to keep falling — and that’s why they’re waiting to buy. With affordabili… Read more
Homebuyers across the U.S.—and right here in Orange County—are scoring the biggest fall discounts since 2019. With homes spending more time on the market and sellers g… Read more
Homebuilder confidence is ticking upward as the Federal Reserve’s recent rate cuts offer a glimmer of hope for the housing market. Despite lingering challenges like ma… Read more
Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most