New Rules Could Make Multifamily Lenders Think Twice About Using Mortgage Brokers

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The government is cracking down on loan fraud, with Fannie Mae and Freddie Mac leading the effort. New regulations could reshape the lending industry and increase pressure on independent brokers. Meanwhile, New York City is set to become the first U.S. city to mandate EV chargers in parking garages. Plus, AI is driving new technologies that are streamlining real estate prospecting, though not always with positive results.

Now let’s dig in!

New Rules Could Make Multifamily Lenders Think Twice About Using Mortgage Brokers

The government is on the hunt for loan fraud. One strategy they are considering to combat this issue is changing the way government-backed entities, Fannie Mae and Freddie Mac, vet loans. The proposed changes, such as requiring lenders to independently verify financial information, could potentially slow down the loan generation process. These changes might also alter how lenders work with third-party independent brokers.

A recent Wall Street Journal article broke the news but offered few specifics about how these changes would be enforced. Fannie Mae and Freddie Mac have already started cracking down; both have stopped working with Meridian Capital while investigating reports of a broker falsifying documents. The threat of being banned from working with these entities is enough for most commercial lenders to implement any necessary changes.

Together, Fannie Mae and Freddie Mac own or guarantee around 40 percent of all multifamily lending. The increased scrutiny over lenders' roles in fraudulent loan transactions has already put some on the defensive. The WSJ article also reported that Berkadia had already pulled back on some of its business conducted through brokers.

New regulations around loan verifications will undoubtedly come with penalties for lenders who don’t follow protocol. These regulations could also make lenders liable for the actions of other parties involved in a transaction, such as brokers. Limiting this kind of liability is likely one of the reasons behind Berkadia’s decision. If the new rules are rolled out this year, lenders might begin re-evaluating the risk versus reward of using third-party brokers, which could be a significant blow to the large number of independent brokers currently working in the industry.

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