HOUSINGWIRE.COM: Inside the scandal that could explode multifamily real estate
By Ben Lane
August 17, 2018
Everything is going swimmingly in multifamily real estate these days, right? Rents keep rising, construction is still chugging along, deals are being made, and delinquencies are still at historic lows. So everything’s good, right? Maybe not.
It appears there could be a deep, dark secret at the core of multifamily lending that could destroy the market. And in a truly sad bit of irony, the secret could be very similar to the one that crushed the single-family housing market 10 years ago.
Fake residents, fake incomes, and inflated mortgages. Sound familiar?
The details of all of this come courtesy of a blockbuster report released this week by the Wall Street Journal.
The report details how the Federal Bureau of Investigation, the Department of Justice, and the Office of the Inspector General for the Federal Housing Finance Agency are in the middle of an investigation that the WSJ calls “one of the biggest mortgage-fraud probes since the financial crisis.”
The whole WSJ article is definitely worth reading (if you have a subscription, that is), as the article extensively details some pretty brazen fraud allegations involving the loans backing approximately $1.5 billion in mortgage securities issued by Fannie Mae and Freddie Mac.
According to the article, the investigation has already led to an indictment against four individuals for allegedly conspiring to falsify loan information in order to obtain more than $167 million in multifamily loans.
The indictments, which were disclosed earlier this summer, allege that Frank Giacobbe, Patrick Ogiony, Kevin Morgan, and Todd Morgan conspired to defraud Fannie Mae, Freddie Mac, Arbor Commercial Mortgage, and Berkadia Commercial Mortgage by faking much of the information that the lenders and government-sponsored enterprises count on when issuing or buying the mortgages. Read more: