Last week, August 26, 2014, Fannie Mae announced an update to mortgage fraud prevention measures. The selling guide announcement SEL-2014-11 indicated the Agency has implemented the Suspended Counterparty Program (SCP) established by the FHFA.[1] Effective on the date of the announcement, lenders are prohibited from engaging any individual or entity that is listed on the Programs list to originate or service loans owned by the Agency. Before hiring or outsourcing an employee or entity to perform any functions that contribute to the selling or servicing of Fannie Mae related loans, a lender must confirm the person or entity is not listed in the SCP list.

OUTSOURCING TO MORTGAGE PROCESSING AND THIRD PARTY ORIGINATION [2]

When a lender outsources origination to a third party entity, it must confirm the hiring process of employees involved in the mortgage selling process, application through closing, includes checking the SCP list.

The SCP list is an additional list to check. Now, persons involved in the origination of mortgages, selling through closing, must not be listed on any of these lists:

• U.S. General Services Administration (GSA) Excluded Parties List (EPL): https://www.sam.gov/portal/SAM/##11

• HUD Limited Denial of Participation List (LDP List): https://www5.hud.gov/ecpcis/main/ECPCIS_List.jsp

• the Federal Housing Finance Agency (FHFA) Suspended Counterparty Program (SCP list): http://www.fhfa.gov/SupervisionRegulation/LegalDocuments/Pages/SuspendedCounterpartyProgram.aspx

PREVENTING, DETECTING, AND REPORTING MORTGAGE FRAUD [3]

Lender Fraud Prevention Measure: Lenders must check and confirm that a contractor, vendor, or individual who participates in any activity related to the origination or servicing of loans owned or to be sold to Fannie Mae is not listed on aEPL, LDP, nor SCP lists.

Lender Hiring Practices: A lender is required to document and implement as part of the hiring process checking the EPL, LDP, and SCP lists, and confirm that candidates who would be involved in the origination or servicing of mortgage loans owned by, or to be sold to, Fannie Mae are not part of these lists.

In short, a lender may not allow an employee who is part of any of these lists to be manage or perform origination functions on Fannie Mae related loans.

THE SUSPENDED COUNTERPARTY PROGRAM

The Federal Housing Finance Agency, FHFA, established Suspended Counterparty Program to reduce the risk of mortgage fraud for the GSEs. The FHFA may suspend individuals and entities with a history of fraud or other financial misconduct from doing business with any FHFA regulated entity. Lenders who do business with any of the FHFA regulated entities, must confirm potential employees, contractors, and vendors, are not included in this list.

Here you can access detail information about the SCP program: https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Suspended-Counterparty-Program-78-FR-63007.aspx

1) https://www.fanniemae.com/content/announcement/sel1411.pdf#page=3

2) https://www.fanniemae.com/content/guide/sel082614.pdf#page=131

2) https://www.fanniemae.com/content/guide/sel082614.pdf#page=165

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