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WASHINGTON – The Office of Federal Housing Enterprise Oversight has proposed a regulation to require Fannie Mae and Freddie Mac to report mortgage fraud or possible fraud to OFHEO in “a timely fashion,” an OFHEO release reads. The regulation would also require the two housing Government Sponsored Enterprises to establish internal controls, procedures and training programs to detect and report mortgage fraud. The rule, which is open for public comment, states that an Enterprise must notify OFHEO if the Enterprise is requiring the repurchase of a mortgage backed security or other instrument, or if it is declining to purchase an instrument because of suspected fraud. According to the proposed regulation, failure to comply with the requirements of the regulation could subject the GSE or its Board members, officers or employees, to supervisory actions by OFHEO including the issuance of cease-and-desist proceedings and civil money penalties. OFHEO Director Armando Falcon Jr. said the regulation will ensure that Fannie Mae and Freddie Mac do their part to help combat mortgage fraud. The Enterprises will now have a clear obligation to report fraud and help prevent a repeat cases like the First Beneficial matter, he stated, referring to allegations of mortgage fraud involving First Beneficial Mortgage Corp.

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