Back on February 15, 2006, I posted a blog entry titled “Stop Fraud Act: U.S. Senate Tackles Real Estate Fraud,” detailing U.S. Senator Barack Obama’s 2006 proposal to fight real estate and mortgage fraud.

Thanks to a tip from Diana Golobay of HousingWire.com, I ran across the following from Obama’s campaign Web site:

Barack Obama and Joe Biden’s Plan

Protect Homeownership and Crack Down on Mortgage Fraud

Obama and Biden will crack down on fraudulent brokers and lenders. They will also make sure homebuyers have honest and complete information about their mortgage options, and they will give a tax credit to all middle-class homeowners.

Create a Universal Mortgage Credit: Obama and Biden will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.

Ensure More Accountability in the Subprime Mortgage Industry: Obama has been closely monitoring the subprime mortgage situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.

Mandate Accurate Loan Disclosure: Obama and Biden will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

Close Bankruptcy Loophole for Mortgage Companies: Obama and Biden will work to eliminate the provision that prevents bankruptcy courts from modifying an individual’s mortgage payments. They believe that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.

Does knowing that Senator Obama wrote and introduced real estate and mortgage fraud prevention legislation sway or impact your opinion of him in terms of who you might cast your vote for this November?

The recent Democratic takeover of Congress might place mortgage fraud and predatory lending near the top of the agenda for several Congressional committees, according to the Appraisal Institute. In the House of Representatives, the Financial Services Committee is set to be chaired by Rep. Barney Frank, D-Mass., a veteran of banking and real estate-related issues, says the Appraisal Institute’s Bill Garber. Frank has expressed concerns about predatory lending and mortgage fraud, both of which were heavily discussed and debated in the 109th Congress in the Financial Services Committee, but not resolved.

The second-ranking Democrat on the committee is Rep. Paul Kanjorski, D-Penn., prime sponsor of The Responsible Lending Act, H.R. 1295, which the Appraisal Institute has supported because it advances ideas to improve the way in which real estate appraisers are regulated at the federal and state levels. Rep. Kanjorski’s district has been besieged by mortgage fraud in recent years, some of which has involved appraisals.

In the Senate, the Senate Banking Committee is slated to be chaired by Sen. Christopher Dodd, D-Conn., who co-wrote Title XI of the Financial Institutions Reform, Recovery and Enforcement Act, which set forth state licensing and certification requirements for appraisers in 1989. According to Garber, Sen. Dodd is expected to address key credit card reform issues early in the 110th Congress, but like the House, the issues of predatory lending and mortgage fraud are likely to be elevated in the committee’s priorities. In addition, Sen. Jack Reed, D-RI, who is likely to chair the Senate Subcommittee on Housing and Transportation, is expected to be a key leader on appraisal issues. An attorney by trade, Sen. Reed has a long been a champion of homeownership issues and has a great deal of familiarity with real estate appraisal legislation, having been involved in a Title XI oversight hearing in 2004.

Another legislator likely to weigh in on this issue is Senator Barack Obama, D-Ill., who this past February introduced legislation to combat mortgage fraud and provide state appraisal regulators resources to conduct oversight over appraisers.

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.