Mortgage firms approved as seller-servicers with the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. who are found by a court of law to have committed fraud will now be reported the government. Employees of the firms are also impacted.
The new requirement applies when a lender or its employees are adjudicated to have engaged in fraud or other financial misconduct.
It was established to ensure that Fannie Mae and Freddie Mac are not exposed to unnecessary risk as a result of doing business with individuals or businesses with a demonstrated history of fraudulent conduct.
Also impacted by the initiative, the Suspended Counterparty Program, are the Federal Home Loan Banks, according to the Federal Housing Finance Agency — which regulates the government-sponsored enterprises.
FHFA will determine whether a company or individual should be suspended from doing business with the regulated entities. Information received from other government sources will also be considered in the determination.
But impacted parties will have an opportunity to show cause why they should not be suspended.
“In appropriate cases, FHFA will issue orders directing the regulated entities to stop doing business with the individual or company based on a history of fraud,” the notice stated.
The new initiative goes into effect on Aug. 15.
