State and Federal Agencies Take Steps to Combat Mortgage Fraud

Article provided by Frank A. Rubino, Esq.

Like most of the country, Texas has been hit hard by the ongoing downturn in the housing market. This decline has had a wide range of consequences, leaving many homeowners with upside-down mortgages, cities with reduced revenues and consumers with little confidence in their financial affairs. Among other things though, the real estate downturn has made the prevalence of mortgage fraud more apparent, resulting in greater efforts to investigate and prosecute these crimes.

Texas Residential Mortgage Fraud Task Force

The Texas Residential Mortgage Fraud Task Force ("Task Force") was created in 2007 with the goal of reducing the amount of false or deceptive information provided on home financing applications. Specifically, according to Texas House Bill 716 (2007), which created the Task Force, its purpose is "to take a proactive stance towards tracking and prosecuting mortgage fraud and the perpetrators of mortgage fraud statewide."

Although this is not a new venture, the Task Force has become particularly important recently as a result of the increased visibility surrounding mortgage fraud.

The Task Force, overseen by the Attorney General's office, is a joint effort between law enforcement officials and several notable consumer credit, real estate and banking industry regulatory agencies. This collaborative approach strives to slow the influx of new mortgage fraud cases. In turn, the Task Force aims to help avoid further economic damage to lenders, affected homeowners, neighborhood property values and the financial markets as a whole.

Federal Efforts to Curb Mortgage Fraud

Recognizing the severity of the issue on a national level, the federal government has also take actions to prevent and prosecute mortgage fraud. In the interest of preventing future fraud, Congress passed the Secure and Fair Enforcement Mortgage Licensing Act, which established a system of nationwide mortgage licensing and registration procedures.,

From a prosecution standpoint, the efforts have been even more intense. According to Federal Bureau of Investigation (FBI) agency director Robert Mueller, mortgage fraud cases increased nearly 63 percent from fiscal year 2008 through July of fiscal year 2009.

Treasury Department secretary Tim Geithner recently announced increased collaboration between his department, the Department of Justice, the Federal Trade Commission, Housing and Urban Development and the Financial Crimes Enforcement Network to combat mortgage fraud. The federal government hopes that this multifaceted approach to investigating fraud will allow the government to increase enforcement actions and alert consumers to potentially fraudulent schemes,

Potential Penalties for Mortgage Fraud

Criminal penalties can be severe, including misdemeanor charges, felony charges, hefty fines and loss of business licensing, depending on the underlying offense. The collaborative efforts on both the state and federal level make communication between agencies much easier, thus increasing the chance for perpetrators to be caught.

Unfortunately, this increased level of communication also increases the chances that false allegations will be made. If you are concerned that your business is being unfairly accused of using fraudulent or deceptive lending practices, the advice of an attorney experienced in handling the defense of such matters can be extremely helpful.