Fannie Mae Blacklist Expands After Fraud Investigation Snares 2 More Brokerages

Fannie Mae blacklisted two new real estate firms pending the outcome of an investigation, becoming the latest brokerages to face scrutiny as the mortgage behemoth works to uncover fraud on its books. 

Eastern Union Funding, which says it has closed on nearly $42B in loan volume since its founding in 2001, and Sevenstone Capital, a 4-year-old firm started by a former Eastern Union broker, have been temporarily suspended from doing business with Fannie Mae.

“It’s our opinion that this was not a correct decision by Fannie Mae, and we’re very confident that this is going to be cleared up,” Abraham Bergman, president at Eastern Union, said in an interview Monday morning.

The Promote first reported the blacklisting in a post on X. The issues leading to the suspensions stem from loans brokered by Sevenstone employees while they worked at Eastern Union, The Real Deal reported.

But Bergman said his firm first received notification that it had been blacklisted last Tuesday and that Fannie Mae didn’t disclose at the time the specifics of the investigation. Eastern Union has retained counsel to resolve the issue, but Bergman said he wasn’t aware of the specific allegations Monday morning. 

Fannie Mae didn’t respond to a request for comment. 

Sources told TRD that Fannie Mae is scrutinizing loans involving Jeff Seidenfeld, a loan consultant who worked at Eastern Union from 2007 to 2020 before leaving to establish Sevenstone, his LinkedIn profile indicates. 

Eastern Union and Sevenstone are the latest firms to be caught up in what has become a sprawling effort to root out fraud. The initiative began in earnest this year after New York-based Meridian Capital Group was blacklisted last November over potential underwriting fraud. 

Meridian’s ban was lifted nearly a year later, although it will face extra scrutiny from the government-backed lenders on future deals. Brokers now at Sevenstone were involved in deals with Moshe Silber of Rhodium Capital, sources told TRD, another developer caught up in Fannie Mae's investigation. 

Silber pleaded guilty in August to falsifying financial records to get $74M in Fannie Mae financing for a project in Cincinnati, a scheme that ultimately cost JLL, which had sold the loan to Fannie Mae, $18M. 

The Federal Housing Finance Agency, which has overseen Fannie Mae and Freddie Mac through a conservatorship that began during the Global Financial Crisis, has pushed the mortgage sponsors to increase due diligence as falling property values expose more properties with substandard underwriting.  

The mortgage lenders updated their standards for broker-involved loans last November in an attempt to ensure the accuracy of financial reporting, and new proposed rules would strengthen requirements for commercial lenders and brokers.

In its third-quarter reporting, Fannie Mae acknowledged for the first time that it is looking into potentially widespread wrongdoing in the secondary mortgage market and said financial losses from mortgage fraud were the biggest risk factor it faced. 

“We have discovered instances of multifamily lending transactions in which one or more of the parties involved engaged in mortgage fraud or possible mortgage fraud, and we continue to investigate additional multifamily lending transactions in which we suspect fraud may have occurred,” the agency said in its Q3 filing with the Securities and Exchange Commission.