Feds: ‘Work With Us’ on Risk, Fraud Issues

DALLAS–Representatives of key federal regulatory enforcement agencies said mortgage lenders and servicers need to work with them in identifying and detecting mortgage fraud issues and trends.  

Darrin Benhart, deputy comptroller for supervision risk management with the Office of the Comptroller of the Currency, said many of the same themes facing the housing industry pre-crisis still face the industry today, which raises concerns among federal regulators.  

“Risk management is both an art and science,” Benhart said here at the Mortgage Bankers Association’s Risk Management, Quality Assurance and Fraud Prevention Forum. “Some of the risks are inherently quantitative, others qualitative…we believe that we have offered an effective and innovative approach to risk management.”  

Benhart said that the OCC “holds itself to the same high standards that we expect of mortgage lenders.”   Rene Febles, deputy inspector general for investigations with the Federal Housing Finance Agency, said federal agencies must partner with lenders to ensure both cooperation and sharing of information.  

“Any federal agency that doesn’t partner with lenders is making a huge mistake,” Febles said. “I know in some cases there is a hesitancy to invite a federal agency into a company’s operations, but we welcome that cooperation. In many cases, the lender knows more about trends and key issues.”  

Febles said FHFA is bringing a number of mortgage fraud cases to an end, but noted new developments, such as condo fraud, mortgage “rescue” scams, contractor fraud and REO scams continue to proliferate.  

“We’ve sat in living rooms with people who lost their life savings and their mortgages because of these scams. It’s heartbreaking to hear,” Febles said. “We’re trying to focus our energies in being [more] active in preventing fraud before it happens.”  

Charles La Bella, deputy chief of the fraud section with the Department of Justice, noted that the prevalence of fraud, particularly in “epicenters” such as Las Vegas, remains elevated. He said in particular, loan modification scams persist.  

“We’ve seen many cases in which fraudsters visit the home and try to get the homeowner to sign over the deed, saying they are going to keep the people in their homes,” La Bella said. “But it doesn’t work that way. The homeowner loses the home and the scammer makes money by renting the home to others before pulling up stakes and moving on.  

La Bella urged lenders to cooperate with law enforcement agencies in combating fraud, cautioning that the nature of mortgage fraud is ever-evolving. “You have to think as much out of the box as the fraudsters,” he said. “One thing is for sure–the fraud of today is not going to look like the fraud of tomorrow.”