Fannie Mae says it is seeing fewer cases of multifamily mortgage fraud following a years-long crackdown, a finding that surprised some market watchers who say misconduct may be shifting elsewhere rather than disappearing.
The government-supported mortgage giant reported that tips and investigations into multifamily fraud have fallen to 12-month lows, according to a partially redacted analysis published by its regulator, the Federal Housing Finance Agency.
The decline follows a sharp surge in reported activity just a year earlier. Fannie said it received a flood of tips related to multifamily mortgage fraud in 2024, prompting 193 investigations, up from 14 in 2022. The agency confirmed fraud in 87 cases last year, compared with just three two years earlier.
Fannie said those numbers are now trending down, noting it did not find any potential fraud in its sample of 44 high-risk loans between September 2024 and January 2025. As of July 2025, multifamily mortgage fraud tips and investigations at Fannie were at their lowest levels in a year.
The findings were part of an analysis by the FHFA, that examined Fannie’s allowance for loan losses, or the amount of money Fannie is setting aside to cover losses. Fannie, which does not originate loans but buys loans from private lenders, set aside $752 million in 2024 to cover loan losses, citing mortgage fraud as a key factor.
The conclusions landed amid significant upheaval at the housing finance agencies. In 2025, FHFA Director Bill Pulte named himself chairman of both Fannie Mae and Freddie Mac and removed 14 board members. Fannie’s CEO departed abruptly later that year, and several senior executives in its multifamily division have since exited, including a former deputy general counsel involved in overseeing fraud investigations.
Prior to the FHFA report, there had been few indications that multifamily mortgage fraud was easing. Apartment owners continued to struggle in 2025 as higher interest rates strained cash flows, and lenders including Walker & Dunlop and Merchants Bank of Indiana publicly disclosed fraud-related problems in earnings reports.
“The report makes it sound like multifamily fraud largely disappeared — and was mostly an early-2020s issue but I don’t think it simply went away,” said Joseph Kahn of VisionRE, a real estate advisory firm. “More likely, tighter agency scrutiny pushed much of it into CMBS, and we’re seeing the consequences as those loans sour.”
Others echoed the sentiment. Christopher Whalen, chairman of Whalen Global Advisors, which consults and analyzes financial institutions, said “Fraud is a continuing problem for both enterprises [Fannie and Freddie]. I suspect it will go up in 2025-26.”
Whalen said neither Fannie nor Freddie should be involved in the multifamily space.
“They don’t have the people or resources to underwrite the credit. Same goes for HUD. As multifamily assets sink further in quality, this becomes the new subprime asset class.”
After the Covid-19 pandemic, Fannie, Freddie Mac and the FHFA discovered an increasing amount of mortgage fraud where borrowers either inflated rent rolls or flipped properties to related parties. The goal was to secure loans larger than they otherwise would have received. The investigations have led to Fannie and Freddie blacklisting dozens of industry players, including title agencies, brokers, borrowers and attorneys along with guilty pleas and criminal charges.
The FHFA’s report also revealed the findings of one of Fannie’s first fraud investigations. In November 2023, Fannie suspended doing new business with an unnamed mortgage brokerage. Fannie reviewed 126 high-risk loans at the brokerage. It hired outside counsel and accountants and found seven loans with “confirmed signs of fraud,” according to the FHFA report.
While the brokerage was not identified, Meridian Capital was blacklisted by the agencies around the same time. Meridian was removed from the agency’s blacklist in 2025. Meridian did not return a request to comment.
From there, the agency received more tips about multifamily fraud, most submitted internally. Fannie said the majority of the tips led to investigations which were closed with “no fraud found.”
But Fannie reported a huge uptick in tips and investigations in 2024. The influx caused the agency to report the increase in mortgage fraud referrals as an emerging risk to Fannie Mae’s board of directors.
Fannie said, as of late, investigations into mortgage fraud started to decline.
Fraud was not listed as a major factor in its allowance for multifamily loan losses in Fannie’s most recent report with the Securities and Exchange Commission.
Fannie has made internal changes to prevent mortgage fraud. It said it increased requirements for appraisals and hired more staff to review appraisals and property conditions.
The agency has also taken further action against certain lenders where mortgage fraud was discovered.
Fannie required three lenders to repurchase five loans. Fannie has kicked eight lenders off its preferential delegation, which means they have to pass more hurdles to originate Fannie loans.
“Fannie Mae takes mortgage fraud very seriously and we hold accountable those who enable or participate in fraud schemes and other criminal activities,” said Fannie in a statement.
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