New Fannie, Freddie Loan-Level Identifiers Could Catch Fraud

New rules requiring Fannie Mae (FNM) and Freddie Mac (FRE) to buy only mortgage loans tagged with certain identifying data could help reduce fraud and predatory lending.

The mortgage finance giants will begin collecting "loan-level identifiers" for the loan officer and appraisers effective for all mortgage applications dated on or after Jan. 1, 2010, their regulator announced Thursday.

The new rules were mandated by a federal housing law enacted last summer that also created a national registry for mortgage brokers and appraisers that will generate the identifiers.

Under the new system, Fannie and Freddie will be able to track the performance of the mortgages it purchases by loan officer and the field and supervisory appraisers.

Patterns of shoddy underwriting or appraising could be more easily identified and stopped, proponents say. Fannie and Freddie can require lenders to repurchase loans that don't meet certain origination standards.

"If originators or appraisers have contributed to the incidences of mortgage fraud, these identifiers allow the enterprises to get to the root of the problem and address the issues," the mortgages finance companies' regulator, Federal Housing Finance Agency Director James B. Lockhart, said in a statement Thursday.

The regulator told the chief executives of Fannie and Freddie about the new requirement in October, the agency said.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; [e-mail]

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