Mortgage fraud risk fell at the start of 2026, but the highest-risk loan categories are the ones many agents already handle with extra care: investment and multifamily deals.
Cotality’s Q1 2026 mortgage fraud data found indications of fraud in about 1 in 129 mortgage applications overall. The rate was higher for investment-property applications, at about 1 in 44, and multifamily applications, at about 1 in 29.
Federal mortgage fraud referrals involving FHFA Director Bill Pulte are now putting more attention on one of the same pressure points in those files: how borrowers classify a property when they apply for a loan. Intended use can affect loan type, pricing, down payment requirements, and documentation. If an application says principal residence or second home while the buyer plans to use the property as a rental, the mismatch can create legal and financing problems.
Where property-use claims create risk
The Federal Housing Finance Agency oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System. Its oversight reaches the loan programs many agents encounter through conventional financing.
The pressure point is occupancy: principal residence, second home, or investment property. Fannie Mae’s Selling Guide separates those categories. Second-home financing generally requires borrower use during the year, year-round habitability, borrower control of the property, and limits on rental or timeshare use. An investment property is owned but not occupied by the borrower.
Cotality also flagged rising occupancy alerts in Q1, including cases where a borrower claimed a second home within 25 miles of a current residence. For agents, that is a lender question before it becomes a closing problem.
The occupancy claims behind the referrals
Pulte has referred several public officials for alleged mortgage fraud, including New York Attorney General Letitia James, Sen. Adam Schiff, Federal Reserve Gov. Lisa Cook, and Rep. Eric Swalwell. The referrals have drawn attention because they involve alleged mortgage-application misstatements, including claims tied to occupancy.
The allegations remain contested. James, Schiff, Cook, and Swalwell have denied wrongdoing, and lawmakers have questioned how FHFA identified the cases and accessed mortgage records. Former FHFA officials described director-led referrals as unusual, saying mortgage fraud investigations typically run through the agency’s inspector general rather than the director’s office.
When a buyer’s stated plans do not match the loan category, agents should send the issue to the lender before the file moves forward.
When to bring in the lender
Property-use questions should go to the lender before a loan application locks in the wrong category. If a buyer plans to rent the home, use it seasonally, occupy one unit in a 2-to-4-unit property, or switch between personal use and short-term rentals, the financing needs to match that plan.
Agents can ask how the buyer expects to use the property, but they should not interpret loan rules or suggest a category. A second-home claim deserves lender review if the buyer also describes the property as a rental, if the home is close to the buyer’s current residence, or if the buyer’s work and family situation do not support the stated use.
A brief follow-up note can document what the buyer said and when the lender was looped in. The cleanest handoff is simple: state the buyer’s intended use, send it to the lender, and let underwriting determine the loan classification.
What could shift for investor deals
DOJ action, an FHFA response, or released congressional records could show whether the referrals remain a set of high-profile cases or point to broader scrutiny of occupancy claims.
Investor and second-home deals should already be handled with clean property-use notes and early lender review. When the buyer’s stated use and loan category do not line up, the file should go back to the lender before the transaction moves forward.