If federal law makers choose to enact new mortgage fraud legislation, MBA urges them to recognize that there are important differences between mortgage fraud and so-called predatory lending. MBA urges that law makers not attempt to address both mortgage fraud and predatory lending with the same statutory framework.
SUGGESTIONS FOR STATE LEGISLATIVE ACTION THAT WOULD ASSIST IN PREVENTING AND PROSECUTING MORTGAGE FRAUD As with federal law, state law contains provisions allowing law enforcement to prosecute cases of mortgage fraud. Established state criminal laws, such as “theft by deception” and similar laws, authorize law enforcement to prosecute mortgage fraud.55 Many state civil statutes, such as state UDAP statutes, also authorize state authorities to bring actions against perpetrators of mortgage fraud.56 Additionally, state regulatory agencies have authority over and can take action against many participants in mortgage transactions, including mortgage lenders, mortgage brokers, appraisers and real estate agents.
Any additional state legislation, if desired, should reference or be closely patterned on well-established federal law.
As discussed above, new legislation carries with it the risk of unwanted or unintended consequences. In contrast, as explained above, numerous provisions of federal law authorize the prosecution of mortgage fraud. While state law enforcement and state regulators may not have authority to enforce federal law, if state law makers decide to enact new state laws to address mortgage fraud, MBA urges state legislatures to pattern any new law upon the existing federal precedent or to incorporate the language of federal law into a state statute.
State law already authorizes state law enforcement to punish man , if not all, instances of mortgage fraud.
model sTaTuTes While several federal laws apply to mortgage fraud, two statutes in particular — 18 U.S.C. §§ 1014 and 1344, which prohibit defrauding Section 20 financial institutions — are particularly well-suited to serve as a pattern for a state mortgage fraud statute. Basing any new state legislation on these two statutes has several significant benefits.
These two laws are broad enough to allow law enforcement officials to prosecute all instances of mortgage fraud, yet appropriately tailored so as not to extend beyond mortgage fraud. Thus, they address true mortgage fraud without attempting to reach the very different issues arising from “predatory” lending.
These statutes also are tried and tested and can be modified as appropriate for state law without losing the benefit of the precedent interpreting them.
The federal statutes already exist. Differences between state and federal law (and between the laws of different states) will make mortgage fraud statutory regimes less coherent and will hinder the ability of federal and state law enforcement officials working together to fight mortgage fraud. On the other hand, if any new state law mirrors federal law, mortgage fraud prevention regimes will be more coherent and intergovernmental cooperation will be facilitated.
If state law makers wish to enact state mortgage fraud legislation in addition to the laws already in place, MBA strongly urges that state legislatures consider the following model statutes:
Definitions. “Financial Institution” means any entity that originates, funds or purchases loans to individuals secured by residential real estate. “Financial Institutions” include, without limitation,
See, e.g., Ala. Code § 13A-8-2; Alaska Stat. § 11.46.180. See, e.g., Ala. Code § 8-19-10; Alaska Stat. § 21.36.150.
Mortgage Bankers Association
© Mortgage Bankers Association 2007. All Right Reserved.