Published with Permission © COPYRIGHT 2017 NYE LAVALLE ALL RIGHTS RESERVED firstname.lastname@example.org
Association of Certified Fraud Examiners
Mortgage fraud continues to threaten the health of our nation’s financial markets and economy. Anti-fraud professionals are needed to combat this global problem. The Association of Certified Fraud Examiners (“ACFE”) is the world’s largest anti-fraud organization with nearly 80,000 members who are committed to reducing business fraud worldwide. The ACFE provides anti-fraud training and education to its members and businesses across the world. As part of their anti-fraud efforts in the mortgage markets, the ACFE provides training and exams in the area of mortgage fraud. One such training course was developed that is titled “Understanding the Basics of Mortgage Fraud.” In this course, ACFE members explore the history of the mortgage industry and its role in the global financial crisis and examine the life cycle of a mortgage loan to identify potential areas for fraud and learn techniques to recognize red flags of common mortgage fraud schemes and methods for prevention. One such scheme is the focus of this report that I have been writing and warning about for two decades. It’s called the “Double-Pledge” or “Double-Sale” loan and note scheme where a borrower’s promissory note and loan are sold, transferred, or pledged to more than one lender. In Understanding the Basics of Mortgage Fraud, the ACFE writes the following:
Fraud Trends Involving Lenders
A scheme used by lenders to raise capital is to the sell the same mortgage loan to more than one secondary-market investor; this scheme known as the double-sold loan. The original loan documentation is duplicated and sold more than once in the secondary market. To conceal the scheme, the lender remits the scheduled principal and interest payments to the servicer. Since all loans remain current, the borrower is not aware that his mortgage has been double-pledged unless one of the loans goes into foreclosure.
Red flags for this scheme include:
• Someone other than the borrower is making payments on the loan.
• The borrower receives late notices or tax invoices on more than one loan.
• The borrower notices more than one loan on his credit report.
• The lender fails to provide the note to the document custodian.