In its annual report, Fannie Mae announced that it had set aside $752 million for credit losses in its multifamily operations. This decision was largely due to a decline in property values, increasing delinquencies, and an ongoing investigation into lending transactions suspected of fraud.
The issue of fraud in multifamily lending has become a significant concern for regulators, including Fannie Mae and Freddie Mac. In August 2024, both organizations planned to implement stricter regulations for commercial property lenders and brokers in response to heightened scrutiny regarding CRE fraud. Freddie Mac began requiring additional documentation, such as rent receipts, while Fannie Mae focused on reviewing loans for potentially altered financial information.
Meanwhile, examples of fraud have been proliferating.
Recommended For You
In 2023, to cite one, Boruch Drillman admitted guilt in a conspiracy to fraudulently obtain over $165 million in loans and acquire multifamily and commercial properties. The Department of Justice identified Fannie Mae as one of the targets involved. Similarly, in June 2024, Aron Puretz pleaded guilty to a similar conspiracy involving more than $54.7 million in loans, with Freddie Mac also being targeted.
In its Q3 2024 filing with the Securities and Exchange Commission, Fannie Mae reported discovering instances of mortgage fraud or potential fraud in multifamily lending transactions and indicated that investigations into additional transactions were ongoing. Meanwhile, Freddie Mac's 2024 annual report highlighted financial losses from mortgage fraud, including institutional ones by counterparties, warning of possible future losses or reputational damage due to financial crimes.
The $752 million reported by Fannie Mae represents a reserve against expected or potential losses and is recorded on the balance sheet as an expense under the allowance for credit losses. This provision indicates an increase in the allowance for credit losses. Conversely, a benefit for credit losses reflects a decrease in this allowance and is treated as income.
At the end of 2022, Fannie Mae had a provision for credit losses of $5.029 billion for single-family homes and $1.248 billion for multifamily properties. In 2023, it recorded a $2.165 billion benefit for single-family credit losses alongside a $495 million provision for multifamily credit losses. In 2024, the figures shifted to a $938 million benefit for single-family homes and the aforementioned $752 million provision for multifamily operations.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
