IBM subsidiary scammed nearly $13 million from Fannie Mae – whistleblower

by Ryan Smith09 Aug 2016
A whistleblower is alleging that IBM and its loan servicing subsidiary defrauded the government out of nearly $13 million, according to a Law360 report.

Seterus business controls analyst William Lawrence has filed a False Claims Act lawsuit that claims IBM and its subsidiary, Seterus, cheated Fannie Mae by collecting bonuses for incomplete work on defaulting mortgage-holders’ pre-foreclosure documents, Law360 reported. The complaint was filed in 2012, but was ordered unsealed just last week.

“Defendants have used their position as loan servicing companies to defraud the United States through a systemic pattern and practice of reporting inappropriate expenses for reimbursement and through overstating their performance … in order to obtain unearned performance bonuses and to avoid compensatory fees,” the lawsuit claims.

Borrowers who default on their mortgage payment are required to compleat a pre-foreclosure package that includes several standard forms. When a majority of borrowers complete the package, Fannie Mae pays Seterus a bonus. However, the company is fined when borrowers don’t turn in completed paperwork, Law360 reported.

Lawrence alleges the company submitted “an enormous number of expense claims” to Fannie Mae between 2011 and 2012 to hide fraudulent expense reports. A business analyst contracted to work for IBM also found that Seterus had submitted pre-foreclosure packages to Fannie Mae as complete when they were actually “incomplete or missing entirely,” Law360 reported.

Seterus submitted more than 25,000 claims for completed foreclosure packages that qualified for bonus payments, according to Law360. However, the lawsuit alleges that only 42% of those were actually completed. The company received up to a $500 bonus for each completed submission – adding up to as much as $12,954,500 in fraudulent bonuses, according to Law360.

“Defendants were representing to Fannie Mae that they had successfully collected a grossly inflated amount of (foreclosure packages) as compared to what had actually been obtained from the borrowers,” the suit alleges.


Should CFPB have more supervision over credit agencies?