Fannie Mae partners with Palantir to detect, prevent mortgage fraud

Now, Pulte and Almodovar are enlisting the company to detect and prevent fraud before a mortgage package reaches Fannie Mae.

To test Palantir’s detection capabilities, Almodovar said that Fannie Mae gave Palantir’s technology four real loan files.

“It was a mortgage case, a fraud case where someone had docked the financial statements,” she explained. “It took our really talented investigators 60 days to detect fraud in two of these files. It took [Palantir’s] technology 10 seconds.

“We’re going to be able to identify fraud more proactively, as opposed to reactively. … We’re going to be able to see patterns quicker,” she added. “We’re going to be able to understand the fraud and stop it in its tracks. And I think, over time, this becomes a deterrent for bad actors, because we’re creating friction in the system when they do bad things.”

‘Fraud at scale’

“When you are managing assets of [Fannie Mae’s] size, it’s an obvious place for fraudsters to go to engage in what, for them, is a very serious business,” Karp said.

“What most people misunderstand about the nature of fraud terrorism is that most of the damage is done by the 1% or 2% that are professional actors, and they do actually have a way of modeling where they can commit fraud at scale. And it tends to be where the technology breaks.”

Karp added that Palantir can search for and detect fraud “in a way that also protects the underlying data and protects the privacy of the people submitting their forms.”

When asked how the mortgage fraud detection tools will work, Almodovar said that Palatir’s tech “will be trained on Fannie Mae data.” And Karp explained that Palantir will be using a large language model.

“One of the big civil liberties questions is, does the large language model interact with the underlying dataset? Which would mean exposing people’s data to a large language model provider,” he said.

“The products we supply prevent that, while allowing you to get the useful side of LMS into your enterprise. So the promise of technology is … not just finding the fraudster, it’s also augmenting what would be called security or civil liberties.”

Pulte said that the integration of Palantir came from a need for technology to find mortgage fraud on its own — a task that the GSE’s financial crimes division was unable to do. “The issue often is that the financial crimes division is only able to root out crime that it gets made aware of,” he explained.

“President (Donald) Trump is laser-focused on reducing housing costs in this country … and when people defraud the system, we have to account for the cost in mortgages for that,” Pulte added.

“And so, obviously, the goal being if we can get rid of fraud, not only do we stop bad actors and make sure that a 2008 (financial crisis) never happens again — which is my chief responsibility and will never happen under President Trump — but also to make sure that we reduce cost by getting rid of risk. And when we have fraudsters, and we can’t track fraudsters, we have to price in risk.”

Will Freddie Mac be included?

When asked by an audience member if Pulte planned on including Freddie Mae in the Palantir partnership, he said that he’s “looking at involving Freddie” if fraud detection works at Fannie Mae.

Going forward, Almodovar said that Fannie Mae is prioritizing fraud detection for multifamily properties, with Pulte claiming that occupancy fraud is “out of control.”

Another audience member asked whether enlisting Palantir’s technology is “a backward-looking effort to find fraud in existing mortgages, or forward-looking to prevent fraud in future Fannie Mae mortgages.” Almodovar said that it’s forward-looking.

“A slightly more technical reframe would be, is it predicate or not?” Karp said. “Predicate-based and predicate means you have an idea of where to look, and non-predicate means you don’t have an idea where to look.

“And the current state of our product and their institution is that you can do non-predicate, but civil-liberties conformant … meaning [that] you can look at a set of mortgages like we did before, without any clue of where the fraud is, and still find the fraud.”

Amid Trump’s comments on Tuesday evening that he plans to take Fannie and Freddie “public” with an implicit government guarantee, several audience members asked Pulte what the process will look like.

Pulte deferred to Trump, adding that “the president is essentially, in my view, in many ways, the conservator of Fannie and Freddie. He’s the leader.”