Walker & Dunlop disclosed that it might must repurchase hundreds of thousands of {dollars} of loans after Freddie Mac found debtors dedicated mortgage fraud.
The finance and advisory agency revealed in its most up-to-date earnings report and name with analysts that it has obtained requests from Freddie Mac to repurchase two mortgage portfolios with $100 million in unpaid stability due to fraudulent documentation submitted by the borrower.
The corporate has already entered into forbearance with Freddie Mac for one of many mortgage portfolios. It stated it expects to enter into forbearance on the second portfolio of loans, totaling $49.3 million. But when it fails to achieve an settlement, Walker & Dunlop could possibly be required to repurchase the loans.
The agency has employed an outdoor counsel to analyze suspect transactions through which debtors might have dedicated fraud, in line with sources accustomed to the matter. As a part of this course of, Walker & Dunlop has put a few of its originators who labored on the offers on depart because it seems into the matter, sources stated.
Walker & Dunlop didn’t return a request for remark.
The strikes are available in mild of the federal authorities’s continued investigation into industrial mortgage fraud. The Division of Justice and the Federal Housing Finance Company have found a wide range of schemes through which debtors had been capable of receive mortgages for excess of their properties had been value by means of inflated financials or buy costs.
Up to now, the lender’s function in these schemes has been much less scrutinized than debtors. The convenience with which debtors had been capable of receive loans has raised questions in regards to the lender’s due diligence and underwriting.
Walker & Dunlop ranked as the most important Fannie Mae multifamily lender in 2024 with $7 billion in quantity.
Company lenders equivalent to Walker & Dunlop originate loans and promote them to Fannie Mae or Freddie Mac. If a borrower commits fraud, the lender is often answerable for overlaying Fannie or Freddie’s authorized prices or has to repurchase the loans.
Walker & Dunlop stated it expects to make use of $20 million of its personal capital as collateral to indemnify Freddie. It expects to take credit score losses tied to the troubled loans within the fourth quarter, the agency’s CFO stated in its earnings name with analysts in November.
“Whereas our portfolio efficiency is outstanding, and we really feel extraordinarily good in regards to the credit score high quality of our ebook, we proceed to analyze, in collaboration with the GSEs (Authorities Sponsored Enterprises), particular incidences of borrower fraud that happened largely on account of modifications in trade practices within the aftermath of the pandemic,” stated Walker and Dunlop’s CFO, Greg Florkowski within the earnings name in November.
The agency’s fraudulent loans signify a small fraction of the agency’s total enterprise. Walker & Dunlop reported a complete transaction quantity of $15.5 billion within the third quarter.
Walker and Dunlop didn’t disclose the names of the debtors it alleges dedicated fraud.
The agency has made not less than three loans to embattled Mordechai Weiss or his spouse, Basya Weiss.
The Monsey-based Mordechai Weiss is a goal of the DOJ and FHFA’s investigation, in line with sources accustomed to the matter. Weiss can also be the topic of a lawsuit by a lender of a Houston house deal over a sham deal the place the lender alleges Weiss, alongside together with his title insurer, used a faux buy to acquire a $69 million mortgage.
Walker & Dunlop loans to Weiss’s properties have additionally led to litigation and foreclosures.
Fannie Mae is looking for to foreclose on a $12 million mortgage for a multifamily property in Rochester, New York. (Walker & Dunlop originated the mortgage, bought it to Fannie Mae after which repurchased it in December 2024, in line with court docket paperwork).
In Greenbelt, Maryland, Freddie Mac initiated a foreclosures on a $35 million Walker & Dunlop mortgage tied to Weiss’s 178-unit multifamily property. Fannie Mae has additionally sought to foreclose on a $13.5 million Walker & Dunlop mortgage on a rent-controlled multifamily property in East Orange, New Jersey, in line with court docket paperwork.
