Occupancy Fraud Appears to Be on the Rise, Panel Says

(Berg, left, and Sowards. Picture by Anneliese Mahoney)

WASHINGTON–Occupancy fraud looks to have increased over the past few years, representatives from CoreLogic and Fannie Mae warned at a panel titled “Trending – The Looming Threat of Occupancy Misrepresentation” at the Mortgage Bankers Association’s Compliance and Risk Management Conference.

CoreLogic’s Bridget Berg, Senior Leader, Product Management, said that looking at owner-operator loan applications through and after closing shows a strong upward trend from 2020-2023 for indications that occupancy was misrepresented.

“We do believe that it’s rising. Some of the reasons for that might be just the change from the pandemic, that it was maybe lower in the pandemic,” Berg said. She also pointed to a fall in large and institutional investors and a rise in smaller investors as a potential factor.

Sean Sowards, Director of Mortgage Fraud Investigations for Fannie Mae, said occupancy fraud has been the third most prevalent type of fraud found in his organization’s data over the past three years.

“While occupancy still remains the third most prevalent finding, its percentage of our findings has jumped significantly for origination year 2022,” Sowards said, although he was careful to note that the data is still incomplete due to the nature of reporting.

Berg and Sowards discussed some examples of potential red flags to be aware of in fraud detection, including in some cases factors such as appraisal waivers, cash-out refinances and remote closings.

“So stay vigilant. Look for these red flags and if you see it, please, please, please let us know,” Sowards said.