Mortgage Bankers Association • Mortgage Fraud
based on existing investigations, 80 percent of all reported fraud losses arise from fraud for profit schemes that involve industry insiders.14 Fraud for housing is fraud where a borrower perpetrates a fraud in order to acquire or maintain ownership of a house. “This type of fraud is typified by a borrower who makes misrepresentations regarding his income or employment history to qualify for a loan.”15
to mortgage fraud are tried and tested, have been interpreted and clarified by courts over the course of many years and are tools familiar to federal prosecutors. MBA recommends that new federal legislation, if any, be crafted so as to fit comfortably within the established framework of laws addressing mortgage fraud.
Mortgage fraud is different from “predatory lending.” Mortgage fraud is fraud that harms mortgage lenders or other members of the mortgage industry. While no accepted definition of “predatory lending” exists, the term generally is used to portray in a negative light practices that are likely to harm borrowers. Because mortgage fraud and predatory lending differ both in terms of the harmful activities and in terms of the parties harmed, steps taken to address mortgage fraud rarely, if ever, will be appropriate to address predatory lending (and vice versa). Indeed, the FBI has emphasized that “[t]he defrauding of mortgage lenders should not be compared to predatory lending practices which primarily affect borrowers.”16 MBA is committed to eradicating predatory lending and continues to support a balanced, strong, national anti-predatory lending standard that protects borrowers from unscrupulous actors without diminishing legitimate lending. MBA urges law and policy makers to recognize the important differences between mortgage fraud and predatory lending and to avoid conflating the two in actions intended to address either.
CURRENT FEDERAL LAWS ALREADY PROVIDE LAW ENFORCEMENT WITH AUTHORITY TO PROSECUTE ALL INSTANCES OF MORTGAGE FRAUD One of the approaches for addressing mortgage fraud that continues to receive consideration is the enactment of new federal legislation. Indeed, in addressing issues of nationwide concern, a federal solution can be effective. In the case of mortgage fraud, however, current federal law already provides law enforcement with substantial authority to prosecute all instances of mortgage fraud. These federal statutes applicable
Federal mail and wire fraud statutes apply to all instances of mortgage fraud.
Federal mail and wire fraud statutes are broadly fashioned and have been broadly interpreted. Indeed, the reach of these statutes is so broad that they apply to all instances of mortgage fraud.
The mail fraud statute17 makes it illegal to devise or intend to devise any “scheme or artifice to defraud” anyone and to place in the mail (or a private carrier), cause to be deposited in the mail, take or receive from the mail, or knowingly cause to be delivered any material for the purpose of carrying out the scheme or artifice to defraud. A violation is punishable by fine or up to 20 years imprisonment. Additionally, if the violation affects a federally chartered or federally insured financial institution, a violation is punishable by up to a $1 million fine and up to 30 years imprisonment.
The wire fraud statute18 similarly makes it illegal to devise or intend to devise any “scheme or artifice to defraud” anyone and to transmit or cause to transmit by wire, radio or television any materials for executing such scheme. Penalties for a violation of the wire fraud statute are the same as for a violation of the mail fraud statute.
The breadth of these statutes, both in terms of the statutory language and the interpretations by federal courts, make them applicable to any and all instances of mortgage fraud. An illustrative example is the case of United States v. Hitchens, in which the United States Court of Appeals for the Third Circuit upheld the conviction for mail and wire fraud of a real estate agent who participated in conveying false documentation to
14 15 16
See Federal Bureau of Investigations, Financial Crimes Report, supra, note 7, at 21.
18 U.S.C. § 1341
18 U.S.C. § 1343
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