NPLA founder urges brokers to be vigilant of bad actors driving inflated property values
Just days before unveiling its new watch list, the National Private Lenders Association (NPLA) began alerting members to potential irregularities in the Philadelphia market.
The fraud patterns were identified in ZIP codes 19121, 19123 and 19133. According to a post on the NPLA’s LinkedIn Page, the scheme involved purchase mortgages, not cash-out refinances like originally suspected.
The post said, "in multiple cases, sellers appear to be knowingly signing off on inflated deed amounts, with the overage refunded. In a few instances, this is reportedly disclosed in MLS remarks. Based on rent fundamentals and direct market experience, there is strong skepticism that these loans can support performance at inflated valuations."
Jonathan Hornik (pictured top), a founding member and owner of the NPLA, said it immediately caught the organization’s attention.
“It's a red flag if something is purchased, and it's refinanced for a way higher value, and the borrower puts money in his pocket,” Hornik told Mortgage Professional America. “It’s a red flag. Those home runs are hard to come by. What we saw in Philadelphia, specifically, was bad actors who bought residences and then brought on a broker to raise the purchase price in the MLS system.
“It transacted with shill companies, and then they refinanced those shill companies at the higher price and put money in their pocket. It's been identified. It doesn't look like that scam is anywhere near the size of the Baltimore scam.”
Getting rid of bad actors
The timing of the Philadelphia issue was a perfect lead-in to the organization's new watch list, which it rolled out to members on December 1. The NPLA is also planning to roll out a broker certification course to help identify good originators in the private lending space.
“I think these things will continue to pop up,” Hornik said. “I think it's important for lenders to go in and keep their eyes open and raise their game, which is why the NPLA watch list is there and why we're doing this broker certification. We have eyes on what's going on. We know when something's a sketch. We know it, and we flag it.”
Hornik said that lenders and brokers may push forward in risky areas if they think there is a deal to be done. However, he wants them to do so carefully so it doesn’t come back to bite them later on.
“Now with lenders, there's always a loan to be made,” he said. “It's just the right loan on the right value. If there are lenders out there closing their eyes to values because they want to close a loan and they want to do business, fine, I get it. But you do that at risk, and so you need to go in eyes open. There's no way something's appreciating 75% in less than two years, because you cleaned up a bathroom, right? What are we doing?”
Despite concerns about fraud in the multifamily space, Hornik doesn’t believe the problem is nearly as large in scale as what the industry saw before the housing collapse in 2007 and 2008. Instead, he feels as if it is a handful of bad actors in a few locations.
“We see the pitfalls, and let's be clear, this isn’t rampant,” Hornik said. “This isn't a 2007 event with the housing market. These are pockets in specific areas with specific projects where some bad actors have figured out how to get more of a loan than they were supposed to get. We use the word fraud, but fraud is a legal term. But nothing’s been tried and no one charged, so it’s hard to use the word fraud. We like to say there are some bad actors.
“We've got to get rid of the bad actors, the cockroaches, because they hurt everybody. I’m convinced that business purpose lending is not going away. Wall Street wants it. Main Street wants it. The housing market wants it. But we're growing, and we're maturing. And these are all normal growth pains that you have when an industry moves from a bespoke, individual, family business to institutional, and that's what's happening.”
Thoughts on the Fed
Another issue on Hornik’s mind is Wednesday’s Federal Reserve rate decision and how it might impact the private lending market.
“There's an old saying, ‘Don't fight the Fed,’” he said. “And what the Fed is going to do on December 10 with respect to raising or lowering the interest rate, we think they're going to lower it. That doesn't necessarily affect our lending rates, which are more tied to the five-year, the 10-year and the 30-year, which, you know, have not dropped where we thought they would be.”
Sam Williamson of First American says the Fed is poised for a third straight 25 bps cut, driven by labor market softness, but warns of a “hawkish cut” signaling caution for 2026.https://t.co/U7yVBUnQVk
— Mortgage Professional America Magazine (@MPAMagazineUS) December 9, 2025
Hornik believes that the Fed will continue to lean toward the full employment mandate over the inflation mandate when deciding how to proceed, at least for now.
“Unemployment is going up, and it's going to force the Fed's hand to pick its lane,” he said. “They're worried about pricing, which is affordability, and they're worried about unemployment. We believe unemployment will continue to tick up. Pricing is going to hover where it is, and it will force the Fed's hand to lower interest rates to get that unemployment rate lower. And that will be good for us.”
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