Mortgage Fraud 2009 Legislation

Last Updated: March 18, 2010

NCSL Staff Contact: Heather Morton, Denver, (303) 364-7700

This page addresses residential mortgage fraud issues. The legislation tracked under this category relates to creating a specific crime for mortgage fraud. In 2009, 17 states introduced legislation address residential mortgage fraud issues. Alabama, California, Connecticut, Illinois, Indiana, Kentucky, Louisiana, Maryland, New York, Texas, Utah and Washington enacted legislation in 2009.

AL | CA | CT | FL | GA | IL | IN | KY | LA | MD | MA | MN | NY | TX | UT | VA | WA
STATES
TITLE
Alabama
Indefinitely postponed 5/7/09
Establishes the Alabama Residential Mortgage Fraud Act. This bill defines the offense of residential mortgage fraud and makes it a Class C felony. This bill gives district attorneys and the attorney general the authority to conduct investigations. This bill subjects all property both real and personal used in the course of this crime to forfeiture.
 
Signed by governor 5/22/09, Act 752
Establishes the Alabama Residential Mortgage Fraud Act, defines the offense; gives district attorneys and the attorney general the authority to investigate.
Alaska
none
Arizona
none
Arkansas
none
California
Signed by governor 10/11/09, Chapter 174
Existing law provides that a person, other than the loan applicant, who makes false financial statements in connection with an application for a loan to be secured by real property is guilty of a misdemeanor, punishable by a fine not exceeding $10,000, by imprisonment in a county jail not exceeding one year, or by both the fine and imprisonment; and by restitution to the victim, as specified. This bill deletes this provision and provides instead for the offense of mortgage fraud, as defined, a violation of which would be a public offense punishable by imprisonment in the state prison or in a county jail for not more than one year. The bill provides that mortgage fraud may only be prosecuted when the value of the alleged fraud meets the threshold for grand theft, as specified.
Colorado
none
Connecticut
Failed Joint Favorable deadline 3/12/09
Prohibits specific acts or patterns of residential mortgage fraud and provides criminal penalties for violations of such provisions; amends the definition of "nonprime home loan" to make it consistent with the definition of "higher priced loans" in Federal Reserve Regulation Z; and provides additional protections for borrowers.
 
Signed by governor 7/7/09, Public Act 09-207
Creates the crime of residential mortgage fraud. It provides that a person who commits a single act of residential mortgage fraud is guilty of a class D felony, while a person who commits two or more acts is guilty of a class C felony. The act also: modifies the interest rate that makes a home loan “nonprime”; extends, by one year, the banking commissioner's authority to adjust interest rate parameters for nonprime loans; allows the commissioner, under certain conditions, to deem mortgage professional license applications abandoned and keep the application fee; applies a prohibition against increasing the interest rate after default in certain loans to all, rather than just high cost, residential mortgage loans; and makes minor and technical changes.
Delaware
none
District of Columbia
none
Florida
Died in committee 5/2/09
Creates Statewide Mortgage Fraud Task Force Trust Fund within the Department of Legal Affairs. Provides for the establishment of regional mortgage fraud task forces. Requires that the Department of Legal Affairs provide staff for the regional task forces.
 
Died in committee 5/2/09
Died in committee 5/2/09
Creates Statewide Mortgage Fraud Task Force Trust Fund within the Department of Legal Affairs. Provides for the administration of the trust fund and use of moneys therein. Requires that balances of funds in the trust fund at the end of a fiscal year remain in the trust fund. Provides for future review and termination or re-creation of the trust fund.
 
Died in committee 5/2/09
Creates Statewide Mortgage Fraud Task Force Trust Fund within the Department of Legal Affairs. Provides for the establishment of regional mortgage fraud task forces. Requires that the Department of Legal Affairs provide staff for the regional task forces.
Georgia
Relates to residential mortgage fraud, so as to modify certain provisions relating to the offense of residential mortgage fraud; provides for legislative intent; provides for definitions; includes in the criminal offense of residential mortgage fraud an act of fraud committed upon homeowners during or threatened with foreclosure.
Guam
none
Hawaii
none
Idaho
none
Illinois
Amends the Criminal Code of 1961. Provides that theft of property exceeding $1,000,000 in value is a Class X felony. In the Illinois Financial Crime Law, deletes provision that a financial crime which is loan fraud in connection with a loan secured by residential real estate is a Class 4 felony.
Indiana
Signed by governor 4/14/09, Public Law 16
Creates the Mortgage Lending and Fraud Prevention Task Force to (1) coordinate the state's efforts to: (A) regulate the various participants involved in originating, issuing, and closing home loans; (B) enforce state laws and rules concerning mortgage lending practices and mortgage fraud; and (C) prevent fraudulent practices in the home loan industry; and (2) share information and resources necessary for the efficient administration of the tasks set forth in subdivision (1), unless prohibited by law.
Iowa
none
Kansas
none
Kentucky
Signed by governor 3/27/09, Chapter 104
Amends KRS 286.8-220 to make it unlawful to obtain property by fraud or misrepresentations, to fail to make required disclosures or to fail to comply with state and federal laws applicable to transacting business in Kentucky, and to comply with the provisions of Subtitle 8 of KRS Chapter 286, unless specifically exempted; amends KRS 286.8-225 to establish the "Mortgage Fraud Prosecution Fund" as a trust and revolving fund in the State Treasury and establishes the sources of and uses for the Fund.
Louisiana
Signed by governor 6/30/09, Act 197
Relates to mortgage fraud; provides for elements of the crime; provides for penalties.
Maine
none
Maryland
Signed by governor 4/14/09, Chapter 126
Expands the scope of the Maryland Mortgage Fraud Protection Act to prohibit the creation or production of a document that contains a deliberate misstatement, misrepresentation, or omission with the intent that the document be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process.
Massachusetts
Creates crime of residential mortgage fraud.
 
Acts to stabilize neighborhoods; creates crime of residential mortgage fraud.
 
Acts to stabilize neighborhoods; creates crime of residential mortgage fraud.
 
Criminalizes mortgage fraud.
Michigan
none
Minnesota
Transfers mortgage fraud investigation responsibilities from the commissioner of Commerce to the commissioner of Public Safety.
Mississippi
none
Missouri
none
Montana
none
Nebraska
none
Nevada
none
New Hampshire
none
New Jersey
none
New Mexico
none
New York
Makes a scheme to defraud a person in obtaining a credit loan secured by an interest in real property a felony; applies to reverse redlining situations; provides for various felony grades depending on the amount of money involved.
 
Passed Assembly 6/22/09
Relates to home mortgage loans, the crime of mortgage fraud and the filing of transfers and assignments of mortgages.
 

A.B. 40007
Substituted 11/16/09
S.B. 66007
Signed by governor 12/15/09, Chapter 507
Relates to home mortgage loans, the crime of mortgage fraud, and appropriations to the NYS Housing Trust Fund Corporation.

 
Relates to unauthorized entities, unregistered mortgage brokers and mortgage fraud; establishes additional penalties against unlicensed or unregistered persons or entities engaging in activities after receiving a cease and desist notice; further establishes the crime of mortgage fraud in the first and second degree.
 
Relates to home mortgage loans, the crime of mortgage fraud and the filing of transfers and assignments of mortgages.
North Carolina
none
North Dakota
none
Ohio
none
Oklahoma
none
Oregon
none
Pennsylvania
none
Puerto Rico
none
Rhode Island
none
South Carolina
none
South Dakota
none
Tennessee
none
Texas
Signed by governor 6/19/09, Chapter 709
Amends the Government Code to add the Texas Department of Housing and Community Affairs (TDHCA) to the list of authorized governmental agencies to which a person is required to report information regarding fraudulent activity, to include TDHCA among those state agencies authorized to share information that is confidential or otherwise restricted by law and that relates to the possible commission of corporate fraud or mortgage fraud by a person licensed or otherwise regulated by any of those agencies, and to add a TDHCA representative to the residential mortgage fraud task force. The bill also amends the Penal Code to make it an offense to intentionally or knowingly make a materially false or misleading written statement in providing a property appraisal for compensation and to add TDHCA to the list of agencies required to assist a prosecuting attorney or law enforcement agency in the investigation of an offense involving a mortgage loan.
Utah
Signed by governor 3/24/09, Chapter 211
Modifies the penalties for communications fraud and mortgage fraud by removing the provision regarding obtaining or attempting to obtain something that does not have monetary value.
Vermont
none
Virginia
Makes it unlawful for a mortgage broker knowingly (i) to make or cause to be made any deliberate and material misstatement, misrepresentation, or omission during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process; (ii) to use or facilitate the use of any deliberate and material misstatement, misrepresentation, or omission, knowing the same to contain a material misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process; or (iii) to conspire to do either of such things. Violations are punishable as a Class 1 misdemeanor. Violators shall also be required to pay restitution. The measure prohibits mortgage brokers from providing or arranging for: (a) a subprime loan containing a provision requiring or permitting the imposition of a prepayment penalty; (b) a residential mortgage loan, other than a reverse mortgage, if the borrower's compliance with any repayment option will result in negative amortization during any six-month period; and (c) a mortgage loan that will pay off a special mortgage unless the borrower has obtained a written certification from an authorized independent loan counselor on the advisability of the loan transaction. A special mortgage is a residential mortgage loan originated, subsidized, or guaranteed by or through an agency of the Commonwealth, a locality, or a nonprofit organization that has one or more nonstandard payment terms that substantially benefit the borrower. The measure expressly gives borrowers a private right of action for violations of certain prohibited practices under the Mortgage Lender and Broker Act, in which action the borrower may seek recovery of actual damages, statutory damages equal to the amount of all lender fees included in the amount of the principal of the mortgage loan, punitive damages, costs, and reasonable attorney fees.
Washington

H.B. 2327
Signed by governor with line item veto 5/15/09, Chapter 518
Eliminates reports by the Department of Financial Institutions that review the number and type of consumer complaints from residential mortgage lending and review the activity of the mortgage lending fraud prosecution account.

West Virginia
none
Wisconsin
none
Wyoming
none