Fannie Mae warns of growing fake-employer scam

A growing number of fictitious employers are showing up on loan applications, according to a fraud alert issued by Fannie Mae.

In 2018, the GSE issued three fraud alerts warning lenders of apparently nonexistent companies showing up on loan applications in California. There were 30 apparently fictitious companies on the initial list. Now, Fannie Mae warned, that number has grown to 65. The latest list is available here.

“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. “Verify that the borrower’s place of employment actually exists and obtain supporting documentation.”

Fannie Mae warned that if a borrower names one of the listed companies as their employer, the lender should carefully review the entire loan file.

“Lenders must exercise caution in these situations and take appropriate steps to prevent the institution from being the victim of fraud,” Fannie Mae said.

Fannie Mae warned lenders to be on the lookout for the following “red flags”, a combination of which could indicate a fraudulent application:

• TPO/broker loans
• Originated 2015-present
• Borrower’s occupation does not sensibly coincide with their age or experience
• The fraudulent companies are all allegedly located in California
• Borrower on current job for short period of time
• Starting salary appears high
• Purported employer does not exist
• Employer’s purported location cannot be ascertained
• Paystub templates are similar for different employers across other involved loan files
• Paystubs lack typical withholdings such as health, medical, 401(k), etc.
• Gift letters are substantial and cannot be supported through re-verification

The GSE encouraged lenders to take common-sense steps to detect and prevent fraud:

• Know their third-party originators/brokers
• Educate staff on fraud
• Establish a zero-tolerance fraud policy
• Share information
• Report suspicious activity
• If a loan doesn’t make sense, don’t do it