discussed above, the actions and targets of mortgage fraud and predatory lending differ — and actions taken to remedy one rarely, if ever, will remedy the other. MBA urges that states not attempt to address both mortgage fraud and predatory lending with the same piece of legislation.
Generally, laws or bills addressing mortgage fraud and/or predatory lending can fall into three categories:
Laws that target mortgage fraud without confusing the term with predatory lending. This category addresses true cases of mortgage fraud without attempting to address actions that allegedly harm consumers.59 MBA urges that state law and policy makers, if they decide that the state’s mortgage lenders need additional protection, draft any proposal so that it addresses mortgage fraud and only mortgage fraud.
Laws that purport to address mortgage fraud but that also seek to address predatory lending. Laws that address true mortgage fraud, but that address other practices that allegedly harm consumers, would fall into this category.60 An example of such legislation on the federal level is S. 1222. As discussed above, due to the differences between mortgage fraud and predatory lending, one remedy is highly unlikely to address both appropriately. Laws providing for a private right of action for mortgage fraud may fall within this category.
3. Laws that use the term “mortgage fraud” but are aimed largel , if not exclusivel , at predatory lending. MBA suggests that laws aimed at predatory lending should be so described.61 The term “mortgage fraud” should not be used as a red herring in proposing or enacting predatory lending legislation.
MBA recommends that any new State legislation be evaluated based upon its effectiveness in actually preventing mortgage fraud.
As discussed above, current state law already gives state law enforcement officials all the authority they need to prosecute mortgage fraud. Nevertheless, if state legislatures decide to enact additional legislation targeted at mortgage fraud, MBA urges state legislatures to craft any such legislation consistent with the following principles:
Any State Mortgage Fraud Law Should Enhance the Resources Available to Law Enforcement Officials to Combat Mortgage Fraud. While state laws already authorize law enforcement officials to combat mortgage fraud, MBA believes the most beneficial thing new legislation could do is increase the funding and resources available to law enforcement to combat mortgage fraud. As recommended above in the context of federal legislation, state law enforcement could be more effective at prosecuting mortgage fraud if the state created a dedicated funding stream, a dedicated state law enforcement office focused directly on mortgage fraud and provided for cooperation with federal officials and officials from other states. MBA recommends the following:
State law could increase the funding available for mortgage fraud prosecution. One example of a method for increasing funding for mortgage fraud is the Washington Mortgage Lending Fraud Prosecution Account, which created a small surcharge imposed on the recording of a deed of trust.62 Fines collected in connection with such enforcement could be used to offset the costs of enforcement.
59 60 61
See, e.g., Arizona S.B. 1221; New York S.B. 2746; Utah H.B. 25. See, e.g., Colorado H.B. 1323. See, e.g., Michigan H.B. 6436; Ohio S.B. 185.
R.C.W.A. § 43.320.140.
Mortgage Bankers Association
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