MORIARTY/LOVE INTRODUCE BILL TO CRIMINALIZE RESIDENTIAL MORTGAGE

MORIARTY/LOVE INTRODUCE BILL TO CRIMINALIZE RESIDENTIAL MORTGAGE FRAUD

(Gloucester) - Assemblyman Paul Moriarty and Assemblywoman Sandra Love have introduced legislation to address the many incidents of fraud that helped fuel the recent national mortgage meltdown.

"The mortgage industry has been brought to its knees by some unscrupulous brokers who relied on fraud, lies and deceit," said Moriarty (D-Gloucester/Camden).  "Brokers pushed borrowers to mislead lenders who then duped consumers.  It's time we hold anyone who commits fraud in the mortgage industry accountable."

The bill (A-2679) would make residential mortgage fraud a third-degree crime punishable by up to five years in prison and fines of up to $15,000. 

"When the housing bubble finally burst, countless New Jersey homeowners needed rescuing from loans they couldn't afford but were pressured to sign on the dotted line for," said Love (Camden/Gloucester).  "Greedy brokers committed outright fraud and should be treated accordingly."

According to the Mortgage Asset Research Institute nearly 60 percent of income loans it examined were exaggerated by at least 50 percent.

Under the bill, it would be a crime for any person to intentionally defraud, make, or cause false, fictitious, fraudulent or misleading statements or omit a "material fact" from any oral record or written or electronic document during the lending process.

A "material fact" is any fact related to the value of the real property that provides the collateral to secure the repayment of a residential mortgage loan.  It also includes any fact related to the current or expected income, financial obligations, or employment relevant to the ability to repay when a person is seeking a residential mortgage loan. 

According to a trade industry publication, "Inside Mortgage Finance," in 2007 of all of the securitized alternative document loans which are based on credit because applicants lack a proof of income, 62 percent involved refinances and 38 percent were for home purchases.  In the subprime market, 64 percent were refinances and 36 were home purchases.

"The simple fact is that seasoned homeowners are not immune from becoming victims of mortgage fraud," said Moriarty.  "This initiative is not just about protecting first-time homebuyers who might not know better, but protecting all homeowners from potential financial ruin."  

The measure also would make a pattern of residential mortgage fraud a crime of the second degree; violators would face up to 10 years imprisonment and fines of up to $150,000.  In addition, each residential property transaction would constitute a separate offense.

"The entire mortgage industry is being viewed as riddled with fraud and abuse because of the irresponsibility and greed of a few lenders and borrowers," said Love.  "We must remodel how New Jersey's housing industry operates to ensure that those who commit mortgage fraud are held accountable for their criminal behavior." 

The bill now heads to the Assembly Financial Institutions and Insurance Committee for further consideration.

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