I’m not sure if it was David Jackson’s articles on mortgage fraud in his state’s largest newspaper, or pressure from somewhere else, but U.S. Senator Barack Obama did something yesterday that I applaud because it’s bound to change the way our Federal government moves on real estate-related fraud. Obama, a Democrat from the state of Illinois, has introduced a bill in the United States Senate (S.2280) aimed at putting a stop to real estate transactions that are clearly based on fraudulent activity and information. All told, if the Obama’s measure passes, the proposed legislation will provide much-needed Federal regulations and dollars–lots of dollars–to help in the fight against real estate fraud and the scammers who commit the crimes.
Unofficially titled the “Stopping Transactions which Operate to Promote Fraud, Risk, and Underdevelopment Act” or the “STOP FRAUD Act,” S.2280 is aimed at amending the U.S. Code so that it would essentially become a Federal crime for any “mortgage professional” to knowingly execute or attempt to execute a scheme that would defraud anyone, including financial institutions, in connection with an offer or extension of consumer credit secured by an interest in real property; or obtain, by means of false or fraudulent pretenses, representations or promises, or money or property, including fees or charges, in connection with the extension of such credit.
In plain English… if you commit mortgage fraud, you’ll face 35-years in prison and/or a $5,000,000 fine!
And in case you’re wondering, the STOP FRAUD Act defines “mortgage professionals” as:
– Real estate appraisers
– Real estate accountants
– Real estate attorneys
– Real estate brokers
– Mortgage brokers
– Mortgage underwriters
– Mortgage processors
– Mortgage settlement companies
– Mortgage title companies
– Mortgage loan originators
– Any other providers of professional services engaged in the mortgage process
If enacted, the STOP FRAUD Act would require all mortgage industry professionals–and yes, I said ALL mortgage industry professionals–to report any suspicious mortgage-related activities by either an individual or company to the United States Treasury. Other provisions of the Bill include:
– Within 18 months of enactment, the U.S. Attorney General, in consultation with the Secretary of the Treasury, will be required to establish a system by which mortgage brokers and other authorized mortgage professionals may register and receive updates from Federal law enforcement on suspicious activity trends in the mortgage industry, as well as mortgage fraud-related convictions.
– Also within 18 months of enactment of the Act, the U.S. Attorney General will be required to establish a Debarred or Censured Mortgage Professional Database that can be accessed by authorized banks and mortgage professionals to determine the Federal and State bar status of mortgage professionals regulated by any Federal or State agency.
– According to my own reading of the language in the proposed legislation, the Federal government would commit to spending Ten Million dollars ($10,000,000) on ‘counseling for mortgage fraud,’ which basically amounts to the Secretary of Housing and Urban Development (HUD) being authorized to extend contracts to private or public organizations that would provide information, advice, counseling, and technical assistance to consumers with respect to issues related to mortgage fraud.
– Another provision of the Act calls for HUD to provide another Ten Million dollars ($10,000,000) to state appraisal agencies to improve monitoring and enforcement of housing appraisal regulations in the states with the highest rates of mortgage fraud.
– Another of the Act’s provisions allows the U.S. Attorney General’s office to spend Forty Million dollars ($40,000,000) on grants to assist state and local law enforcement agencies in establishing and improving mortgage fraud task forces, and improving communications regarding mortgage fraud cases between such agencies and other Federal, state and local law enforcement entities.
– And finally, the Act calls for the U.S. Department of Justice to spend upwards of Five Million dollars ($5,000,000) to increase mortgage fraud investigation efforts.
All told, the STOP FRAUD Act authorizes Sixty-five Million dollars ($65,000,000) to combat mortgage fraud, and while anyone who knows me would tell that I’d be the first to go on record as saying that $65 million isn’t nearly enough (especially when you consider that just fifteen percent [15%] of that money is going towards education0, I’ll also be one of the first to say that it’s a start.