Future of foreclosure fraud bill uncertain

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It seems those hoping to see criminal penalties enacted on lenders engaged in foreclosure fraud will have to wait a while longer. While a bill supported by New York Attorney General Eric Schneiderman passed the Assembly last month, it remained bottled up in the Senate until the close of the regular legislative session.

“It’s one of dozens of bills that fell off the table at the last minute,” said Scott Reif, a spokesman for Senate Majority Leader Dean Skelos.

It remains to be seen if the Foreclosure Fraud Prevention Act of 2012 will be revived in either a special session or the opening of the regular session this January.

“We’re hopeful that we’ll go back to session before the end of the year and we can take it up,” said Sen. Joe Addabbo, a Queens-based Democrat and supporter of the bill. “It would be a shame to have to have to take it up next year.”

Reif said Skelos has not yet taken a position on the bill.

The New York Banker’s Association, an industry trade group, has come out against the bill and is circulating a memo against it. In part, the association argues that the proposed legislation is too sweeping in its scope and subject to misinterpretation: “As such — and because the consequences of violating it are so severe — it is likely to chill the ability of lenders to exercise their lawful right to bring foreclosure actions against defaulting mortgagors,” the memo states.

The legislation, which passed the Assembly by a vote of 118 to 23, would define residential mortgage foreclosure fraud as a criminal offense and provides for fines and jail time for violators. It 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 participating in 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.

“Given the scale and scope of foreclosure fraud, to take away people’s homes under illegal circumstances is a crime deserving of jail time,” said Jennifer Givner, spokeswoman for Schneiderman. “By treating foreclosure fraud as the serious crime that it is, we can deter future abuse, prevent history from repeating itself and spare untold numbers of families the trauma of wrongful foreclosure.”

Givner added that she is hopeful the Senate will pass the bill next session, if not sooner.