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.


  • by angie | 8/9/2016 4:39:43 PM

    Seterus still has my mortgage title in someone elses name, since 2009 to now. I;ve told them about this and i sent them certified letters/notarized letters, and they still turned a blind eye to fixing the problem. They said as long as the mortgage gets paid, that's all that matters!! BULLCRAP. My whole life has been based around Seterus' error to commit fraud, by preventing me to move into a bigger house to care for my mother with cancer and my brother with mental illness. I hope this gets fixed asap!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • by my advice get a good attorney | 10/3/2016 4:20:44 AM

    I'm a current employee Seterus.they can't even get my pay correct.what makes you think that they're going to get your name on your mortgage advice get a good attorney

  • by Allan, Father Veteran, and Struggling Homeowner | 10/24/2016 3:21:00 PM

    A Band-Aid on a wound that required a tourniquet is not sufficient to fix the evolving and morphing "Housing Crisis" in America. There is no doubt in my mind that as a Nation we have completely undervalued how much intervention is needed to correct the corruption in our Country.

    1) The Housing Crisis is a direct result of greed which was not supervised by Regulators who were totally asleep at the wheel. Who the heck knew what a Credit Default Swap was until we saw "The Big Short", or "2 Big to Fail". The lack of vigilance was due to lack of knowledge.

    a. Banks and Mortgage Officers were qualifying consumers that truly were not able to purchase homes by giving them ARMS that skyrocketed in year 3 or year 5 while prices of homes also skyrocketed at alarming rates inflated home equity.

    b. That gave us all the open-door to take second mortgages, lines of credits, and an refinancing with document verification got the Nation drunk on easy money that no one could pay back. Bet you the consumer confidence index was super high back then.

    c. The everyday consumer's confidence in their jobs came tumbling down when the domino effect of the Housing Market took the Job Market down with it. Naturally, when the ARMS matured, and interest rates took off, who could pay back?

    d. The Banks knew about the potential collapse and they agreed to allow betting on it through Credit Default Swaps

    The Gov gives the Big Banks including the Auto Industry a Bail Out, CEOS still get paid big bonus checks while we are struggling and the American Family left to HAMP, HARP, Foreclosure, an array of save your home scams, parasitical attorney conduct, and the most wonderful of all, the Mortgage Servicing 3rd Party industry explosion.

    Seterus is just one of the formerly "Top Knotch" Mortgage Loan Servicing Firms previously mentioned in the top 5 of Fannie Mae's "STAR" report. How wonderful it is to know that there is more incentive for Mortgage Servicing Agents in forms of "Bonus" payment directly from Fannie Mae when that good old "Struggling Homewoner" happens to not meet the requirements to modify their home mortgage. Lose a paper here, don't post that timely Home Owner payment on time, force insurance, dual track, etc... There are over 140 Seterus employee comments on Glass Door, and endless complaints from consumers to Federal Agencies on the same topic and it takes years to get the ball to begin rolling. This should have been an Office of Inspector General investigation with Criminal Charges.

    How many people have lost their homes to fraudulent forms, misplacement of documents by Banks and Mortgage servicing agents which in actuality Plaintiff Attorneys washed their hands and closed their eyes as the "Poor Struggling Homeowners" begged a Judge to not foreclose. Then we wonder why people flocked to submit last minute bankruptcies in an effort to not land on the curb on the road.
    Meanwhile, where is our Congress on this? Where are our politicians? Where is the honesty in our Government?

    Struggling Home Owners, it is time we stand up and not take this anymore. We don't need one attorney, we need to start a movement that is loud and clear to those people that we elected to be stewards, overseers, of our overall interest to actually do their jobs.

    In my honest opinion, Rep. Honorable Elijah Cummings, Ranking Member of the Committee on Oversight & Government Reform and although he is human, and not infallible has shown the necessary gull to grill the crooks that undermine our everyday confidence in our Government. Heads up: I have no affiliation politically to this committee or the Honorable Representative, I base my recommendation to all who are fed up to reach out to this committee as it is their role to demand answers and ask the tough questions that many of us will never have a chance to due to lack of financial resources and simply due to being emotionally drained and worn out with the corruption implosion that we are facing.

    While we watch the news, I am afraid there is a second "housing bubble" forming by way of the Mortgage Servicing Industry who has only shown reluctance to follow even the latest guidelines and changes to Consumer Protection Laws.


Should CFPB have more supervision over credit agencies?