AG backs bill to crackdown on foreclosure fraud

Listen to this article

Proposed legislation backed by New York Attorney General Eric Schneiderman could impose stiffer penalties against those who engage in fraudulent foreclosure practices. The Foreclosure Fraud Prevention Act of 2012, which was introduced into the New York State Assembly on Wednesday, would define residential mortgage foreclosure fraud as a criminal offense carrying fines and jail time.

Rebecca Case-Grammatico, senior attorney at the Empire Justice Center’s Rochester office, believes that the legislation would significantly benefit New York homeowners as a whole. If criminal penalties are what is needed to curb abusive behavior, then so be it, she said.

“If that is what it takes, kudos for the AG’s office for thinking outside the box,” Case-Grammatico added.

Case-Grammatico did express concern as to what impact the legislation would have on homeowners already in the foreclosure process. If it is signed into law, banks and other mortgage servicers may need time to adjust to new requirements, lengthening the average wait time to resolve or settle individual cases. “Ultimately, I think this will be a positive, though it could cause some delays,” she said.

The legislation would make knowingly authorizing or filing false documents on a single foreclosure a misdemeanor punishable by up to a year in jail. It would make knowingly authorizing or filing multiple fraudulent foreclosure actions, such as through the practice of robosigning, a felony punishable by up to four years in prison.

Penalties could also extend to senior management who aid and abet such behavior. Managers who “recklessly tolerate” foreclosure fraud by their employees or agents could also be charged with a felony, if the legislation is approved by lawmakers.

“For many middle class New Yorkers, their life savings is in their home. To take away people’s homes under fraudulent circumstances is a crime deserving of jail time,” Schneiderman said in a statement. “By treating foreclosure fraud as the serious crime that it is, we can deter future abuse and spare untold numbers of families the trauma of wrongful foreclosure.”

Rampant foreclosures have been a problem in New York since the collapse of the housing bubble. In 2011, roughly 345,000 mortgages were either in default or delinquent in New York state, the AG’s office said.

The proposed legislation is the latest chapter in Schneiderman’s efforts to curb mortgage fraud abuse. In February, he announced a settlement of over $130 million for New York with the five largest mortgage servicers over foreclosure abuses.