Two Mortgage Fraud Bills Introduced in Senate

Two mortgage fraud bills have been introduced in the Senate this month. On February 3, Sen. Bill Nelson, D-Fla., sponsored S. 365 (Nationwide Mortgage Fraud Task Force Act of 2009), which would establish the Nationwide Mortgage Fraud Task Force to address mortgage fraud in the United States. Just two days later, Sens. Patrick Leahy, D-Vt., and Chuck Grassley, R-Iowa, introduced legislation to provide the federal government with more tools to investigate and prosecute financial fraud – a bill known as the Fraud Enforcement and Recovery Act of 2009.

Under the Nationwide Mortgage Fraud Task Force Act, a task force would be established in the Department of Justice to address mortgage fraud at all levels and to develop solutions that could be implemented to curb abuses within the mortgage lending industry. Included in the optional functions of the task force would be the ability to propose legislation to federal, state and local legislative bodies with respect to the elimination and prevention of mortgage fraud, including measures to address mortgage loan procedures and property appraiser practices that provide opportunities for mortgage fraud.

Under the Fraud Enforcement and Recovery Act, the funding available to the federal law enforcement agencies to combat mortgage fraud and predatory lending would be increased. In addition, the False Claims Act would be revised to ensure that the government can recover taxpayer dollars lost to fraud and abuse. The proposed bill also has a section relating to false statements and appraisals by mortgage brokers and agents in loan applications.

Currently, the crime of making “a materially false statement or to willfully overvalue a property in order to influence any action by a mortgage lending business” applies only to federal agencies, banks, and credit associations and does not extend to private mortgage lending businesses, even if they are handling federally regulated or federally insured mortgages, according to the bill’s language. The Fraud Enforcement and Recovery Act would expand the criminality to “ensure that private mortgage brokers and companies are held fully accountable under this federal fraud provision. This is a particularly important offense as it specifically relates to false appraisal fraud, which has been a particularly problematic type of mortgage fraud during the recent financial crisis.”

Click here for more information on the Nationwide Mortgage Fraud Task Force Act of 2009.

Click here to learn more about the Fraud Enforcement and Recovery Act of 2009.

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