Freddie Mac announced new guidelines aimed at weeding out fraud as the agency continues to investigate or ban deals with investors, title insurers and brokers.
The updated rules will increase inspections at multifamily properties tied to Freddie Mac loans — a move to cut down on inflated rents reflected in the financials sent to lenders, months after price discrepancies pushed Fannie Mae to stop doing business with two title insurers.
The government-sponsored enterprise will also increase know-your-customer requirements, particularly around first-time borrowers or borrowers with limited experience. The agency will mandate more disclosures around the borrower’s liquidity.
Freddie Mac said it would further provide new processes to limit business with certain title insurance companies. In addition, there will be more requirements to “to safeguard the independence, objectivity and impartiality of appraisers.”
The guidelines come after Freddie Mac in November moved to require property owners to send loan documents directly to lenders, bypassing intermediaries like brokers.
The guidelines also come amid Freddie Mac and Fannie Mae’s investigation into the commercial brokerage Meridian Capital Group over certain loans. The agencies have essentially blacklisted Meridian while the investigation is ongoing.
Fannie Mae stopped doing business with two title insurance companies, Madison Title and Riverside Abstract, for their involvement in Brooklyn real estate investor Boruch Drillman’s deals.
Drillman pleaded guilty in December for his role in a $165 million fraud scheme. As part of the scheme, Drillman and his co-conspirators used fake closings with inflated sales prices to obtain larger loans than they would have otherwise received. Madison and Riverside closed two of Drillman’s deals.
Madison and Riverside have not been accused of any wrongdoing.
Freddie Mac’s role is to provide liquidity to the mortgage market. Historically, more than 90 percent of the rental units the agency funds are affordable to families with low-to moderate incomes. Freddie Mac purchases loans from lenders, securitizes the loans and sells them to private investors.
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