Fannie Mae Earmarks $752M to Fight Multifamily Fraud

Fannie Mae (FNMA) set aside $752M for multifamily lending credit losses, citing fraud or suspected fraud as a contributing factor. The provision follows an industrywide crackdown on questionable loans, per Bloomberg.

Behind The Provision

In its annual report, Fannie Mae disclosed that fraudulent or potentially fraudulent transactions contributed to its decision to set aside $752M for credit losses in 2024.

The government-sponsored enterprise (GSE) acknowledged multiple cases of fraud in its multifamily lending transactions and warned that further investigations may reveal additional affected loans.

“We have discovered instances of multifamily lending transactions in which one or more of the parties involved engaged in mortgage fraud or possible mortgage fraud,” Fannie Mae stated in its report.

Weighing Down Multifamily

While fraud was a key factor, falling multifamily property values and rising loan delinquencies also contributed to the provision for credit losses.

Indeed, Fannie Mae reported $2.5B in net income from its multifamily business in 2024, down from $4.7B in net revenue.

The broader multifamily market has struggled with higher interest rates, rising insurance costs, and tightening credit conditions. Due to historically low rates, lending in the sector surged during the pandemic but slowed down significantly as borrowing costs climbed.

Cracking Down on Fraud

Fannie Mae and its sister organization, Freddie Mac (FMCC), have both previously flagged concerns about fraudulent multifamily loans.

Last year, Fannie Mae warned investors about an ongoing fraud investigation, while Freddie Mac temporarily banned one of its top broker partners as part of a wider industry crackdown.

Although Freddie Mac has since lifted those restrictions, fraud-related scrutiny in the multifamily sector remains high.

What’s Next

Fannie Mae’s single-family lending business remains its dominant segment, generating $14.4B in net income last year compared to $24.4B in net revenue.

However, its growing concerns over multifamily fraud and market conditions suggest increased caution in the sector moving forward.

With investigations ongoing, more fraudulent multifamily loans may be discovered, potentially leading to further financial provisions and stricter lending standards.