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Advisory Bulletin

Enterprise Fraud Reporting

Number: AB 2019-04
Pertains To: Fannie Mae & Freddie Mac
9/18/2019

ADVISORY BULLETIN

AB 2019-04:  ENTERPRISE FRAUD REPORTING

 

Purpose

This advisory bulletin communicates to Fannie Mae and Freddie Mac (the Enterprises) the Federal Housing Finance Agency's (FHFA) fraud reporting requirements pursuant to 12 CFR Part 1233 (FHFA Regulation).

This advisory bulletin rescinds and replaces FHFA's Advisory Bulletin AB 2015-02:  Enterprise Fraud Reporting, dated March 26, 2015.

Background

The Housing and Economic Recovery Act of 2008 (HERA) subjects the Enterprises to fraud reporting (12 U.S.C. Section 4642) and requires an Enterprise to submit to FHFA a “timely" report upon discovery that it has purchased or sold a fraudulent loan or financial instrument, or when it suspects a possible fraud related to the purchase or sale of any loan or financial instrument. 

The FHFA Regulation implements the timely reporting requirement of HERA (12 CFR Section 1233.3(a)(1)) and requires immediate notification to the Director of FHFA upon the discovery of any situation that would have a significant impact on an Enterprise (12 CFR Section 1233.3(a)(2)).  The FHFA Regulation grants the Director authority to determine procedures by which the Enterprises will submit such reports (12 CFR Section 1233.3(b)).

Guidance

The Enterprises should adhere to the guidelines in this advisory bulletin for reporting fraud or possible fraud to FHFA in compliance with the FHFA Regulation and for supervisory oversight purposes.   

Immediate Notification

To comply with the immediate notification requirement in the FHFA Regulation, an Enterprise should notify the Director's designee(s) electronically, through secure methods established by FHFA, within one calendar day from when an Enterprise becomes aware of fraud or possible fraud as defined in the FHFA Regulation that may have a significant impact on the Enterprise.  Fraud or possible fraud is considered to have a significant impact if it may create substantial financial or operational risk for the Enterprise, whether from a single event/incident or because it is systemic.  Fraud or possible fraud is also considered significant if it involves a member of the board of directors, officer, employee, or a contractor temporarily engaged to fill a position or perform a particular function at an Enterprise or other individual similarly engaged by an Enterprise. 

The Enterprise should provide periodic updates to its board of directors, or a committee thereof, of all fraud or possible fraud requiring immediate notification.

Timely Reporting

To comply with the timely reporting requirement in the FHFA Regulation, an Enterprise should adhere to the following two reporting requirements.

Monthly Fraud Status Report

The Enterprises should submit a monthly fraud status report to FHFA.  The monthly fraud status report shall contain requested information for each occurrence during the month in which the Enterprise has:

  1. Filed a suspicious activity report (SAR) with the U.S. Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) or
  2. Discovered that it has purchased or sold a fraudulent loan or financial instrument, or when it suspects a possible fraud related to the purchase or sale of any loan or financial instrument, and the Enterprise has not filed a SAR.
     

FHFA will provide a template that describes the format of the monthly fraud status report and defines the information to be included.

Each Enterprise should provide the Director's designee(s) with the monthly fraud status report within thirty (30) calendar days after the end of each month, regardless of whether the Enterprise has a reportable event during the period covered by the report.  The report should be sent electronically through secure methods established by FHFA. 

Quarterly Fraud Status Report

On a quarterly basis, the Enterprises should also report to FHFA summary information concerning their fraud risk management environments. 

FHFA will provide a template that describes the format of the quarterly fraud status report and defines the information to be included.

Each Enterprise should provide the Director's designee(s) with the quarterly fraud status report within thirty (30) calendar days ​after the end of each calendar quarter.  The report should be sent electronically through secure methods established by FHFA.  

Effective Date

This advisory bulletin becomes effective on January 1, 2020. ​​

​Related Guidance

Fraud Risk Management, Federal Housing Finance Agency Advisory Bulletin 2015-07, September 29, 2015.

FHFA has statutory responsibility to ensure the safe and sound operations of the regulated entities and the Office of Finance.  Advisory bulletins describe FHFA supervisory expectations for safe and sound operations in particular areas and are used in FHFA examinations of the regulated entities and the Office of Finance.  Questions about this advisory bulletin should be directed to: SupervisionPolicy@fhfa.gov.

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