Selling REOs (bank-owned homes) can be a lucrative business line for real estate agents who land accounts with lenders. The big money involved can become a temptation for employees working inside banks’ REO departments, for some real estate agents and brokers and construction and repair crews.
A Denver real estate broker who was an REO broker has filed a counter-claim against the Federal National Mortgage Association (Fannie Mae) after the latter pre-emptively sued her, claiming that it was entitled to declaratory relief when it terminated its Master Listing Agreement (MLA) with her brokerage.
In her federal lawsuit, Karen Frisone and her brokerage K.O. Real Estate in Westminster, Colorado, allege that Fannie Mae employees repeatedly rebuffed her reporting of alleged fraud committed by other Fannie Mae REO brokers, threatened her with retaliation via the loss of future REO assignments and on one occasion, solicited a bribe. Frisone said she was required under the terms of her MLA to report suspected fraud and had investigated her suspicions before bringing what she believed to be fraudulent conduct on the part of other REO brokers to Fannie Mae.
Frisone’s story is not the first where a Fannie Mae REO broker has complained about corruption at the agency. A posting in the California Real Estate Fraud Report in March 2013 reported the indictment of Fannie Mae employee Armando Granillo, whose alleged solicitation of a bribe from a Tucson real estate agent was recorded by the feds.
In the original article in the Denver Business Journal, a paragraph reports that Frisone’s attorney, Karen Fitzgerald of Dallas-based Kleiman Lawrence Baskind Fitzgerald LLP, filed a response to the July 7 suit by Fannie Mae, and argued that Frisone was “engaged in activity protected under the False Claims Act” when she reported the alleged activity. The False Claims Act
This is a very complex case. Please see the attached documents if you are interested in learning more. Although I don’t get to write about REO fraud often (some of it is detailed in a section of my book “How to Commit Short Sale Fraud . . . and Get Away with It“), that doesn’t mean it’s not common.
Note: on February 4, the judge hearing this case denied Fannie Mae’s Motion to Dismiss and Motion to Stay Discovery. See the last attachment for the court’s ruling.