Lawmakers pass bill adding penalties for mortgage fraud
Friday, May 2, 2008
JEFFERSON CITY, Mo. -- Missouri lawmakers gave final approval Thursday to legislation that creates the specific crime of mortgage fraud.
The legislation defines mortgage fraud as making false statements or failing to disclose material facts. It creates fines and allows for the licenses of real estate brokers, agents and appraisers to be revoked. It also bars attempts to influence real estate appraisals through extortion or bribery.
The bill, which had already cleared the Senate, was endorsed 141-5 by the House on Thursday and now goes to the governor.
But critics, and even some who voted for the bill, complained that it didn't go far enough.
House Democrats said the legislation should have included new regulations over the subprime mortgage industry with additional protections for those who face foreclosures and losing their homes.
Rep. David Pearce said there is a role for state government to regulate subprime loans, especially in cases where lenders have targeted specific demographics and neighborhoods. But he said his bill is a worthy start prompted by problems throughout the state.
"What we were really focusing on were people who were breaking the law," said Pearce, R-Warrensburg.
Pearce's bill allows for civil fines of up to $2,500 per violation for those who commit mortgage fraud.
It also makes mortgage fraud a felony punishable by up to seven years in prison.
State appraisers and real estate commissions and the state finance division also would get more power to investigate allegations of mortgage fraud and the ability to levy even higher fines -- up to $5,000 per violation.
Rep. Jeff Harris and Pearce had filed separate legislation that prohibits charging fees for early mortgage payments, directing consumers eligible for standard loans to subprime deals, and persuading borrowers to take out new loans unless there is a clear benefit.
That legislation also would require lenders to ensure consumers can afford monthly payments on variable rate mortgages when interest rates increase, create a legal responsibility to act in borrowers' best interests and allow lawsuits from consumers for violations.
Harris, D-Columbia, said the bill approved Thursday "doesn't do anywhere near what it should be doing" for lawmakers to claim that they have addressed problem mortgages.
The bill is HB2188.