Lender CEO discusses critical steps to push back against fraud in the commercial space
Mortgage fraud has been a hot topic in the industry in 2025, mainly due to the increased focus from the federal government, thanks to its partnership with Palantir to investigate fraud.
Most of that work is being done in the consumer space. But in the commercial and private lending space, fraud is also a topic at the top of everyone's mind, from mortgage brokers to company executives.
One executive noted that a direct line can be drawn between fraud in the commercial and multifamily space and mortgage delinquencies.
Marcia Kaufman (pictured top), CEO of Bayport Funding, said her company feels fortunate to be in a good spot with delinquencies, but knows others who haven’t fared as well.
“We've been very blessed right now with that in multifamily,” Kaufman told Mortgage Professional America. “We saw more of an uptick in the 1 to 4 in 2024, early on, and now it's all settled back down. Based on what I'm hearing among my colleagues, many of them were in multifamily, but they came out because they had a high rate of delinquency. That could have been because they gave up credit quality for volume.”
High level of fraud
It doesn’t take a big jump in logic to see where mortgage fraud would cause a surge in delinquencies. If loans shouldn’t have been approved in the first place, but were approved due to fraudulent documents, there is a chance that the borrower won’t be able to meet the loan's terms.
“Another big factor for that was the high level of fraud on all aspects of commercial lending,” Kaufman said. “That was really the bigger conversation. Obviously, that will lead to delinquencies. I'm sure you heard about the Baltimore portfolio, where a couple of big loans got hit very hard, and that was all 1 to 4, but they got hit very hard. That was a big fraudster. That's actually the biggest concern that all of us have in lending right now.”
It is one of the reasons that Kaufman applauds the efforts of the National Private Lenders Association (NPLA) to create a list of fraudsters so everyone in the industry can look out for them. She also notes that other organizations have fraud alerts, including Fannie Mae, Freddie Mac, and loans from the U.S. Department of Housing and Urban Development (HUD).
“I think what they're going to try is more of a watch list,” she said. “HUD has what's called a neighborhood watch list for lenders that have a high delinquency rate. Fannie and Freddie have a watch list for lenders that are delinquent or have maturity issues. I think they should try to figure out how to best put that forward. I think sharing that information with other lenders is imperative.”
Communication is key
Being able to share fraud and delinquency information between lenders is a crucial step in preventing other lenders from also being victimized. Kaufman noted that Bayport had recently investigated a potential loan with a customer whose file had some issues. Upon discussing with other lenders, they discovered problems.
“Bayport recently had a loan that went to committee, and it was a big borrower, and we saw that they had two loans that were in foreclosure,” she said. “One, they told us, was a maturity issue. And I'm like, ‘If they've been paying the whole time, they're maturing, I don't really consider that an issue.’ The other one, they said they had something going on with the city. They gave a rational excuse for a portfolio this size that we're looking at.
“However, when we ran the litigation search, it was not two. It was four of them. I recognized two of the lenders on the list, both from the NPLA. We were able to call each other and say, ‘What's the real issue?’ Both of those lenders were very clear that it was not a maturity issue. They took a principal loss on both their loans, and that was very helpful, because we would have been next.”
Max Chera of Express Capital Financing says fraud is a top concern holding back private lending. From inflated appraisals to unusual DSCR figures, he urges brokers and lenders to dig deeper into every deal.https://t.co/KusgB8R14i
— Mortgage Professional America Magazine (@MPAMagazineUS) September 30, 2025
Discovering that they could have been the next lender victimized made the sharing of information between lenders so important. All the information shared was public, so Bayport would have likely found it on its own, but it might have been after it closed the loan. It’s why Kaufman said NPLA’s watch list is so critical to reducing both fraud and delinquencies in the space.
“When you file a lawsuit, it's public information, so you're not having any privacy laws that are being violated,” Kaufman said. “But there has to be a better way in the commercial space to share that information, and that's what the industry is trying to focus on.”
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