Politics & MoneyMortgage

New York moves to criminalize foreclosure fraud

New York lawmakers introduced a bill that could mean jail time for mortgage servicer executives or their employees who commit foreclosure fraud.

New York AG Eric Schneiderman drafted The Foreclosure Fraud Prevention Act of 2012, which was sponsored by state Assemblymember Helene Weinstein, D-Brooklyn.

Servicers could face up to a year in jail and a $1,000 fine in the event they “authorize, prepare, execute or offer for filing false documents in a pending or prospective residential foreclosure action.” Multiple acts of “robo-signing” would be a class E felony with up to four years in prison.

“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.”

New York isn’t the first state to take such action in the wake of the robo-signing scandal and may experience further slowdown to an already stalled foreclosure system. The state has the slowest foreclosure process in the country at more than 1,000 days.

Nevada made foreclosure abuses a felony in October. As a result, filings dropped to zero and continue to remain stagnant.

Repossessions in Nevada are down 68% from last year, according to RealtyTrac.

The documentation issues and abuses were widespread. The largest banks eventually shut the foreclosure process down themselves in many states to correct and re-file affidavits. Under the consent orders, third-party consultants are combing through past filings for the banks to remediate borrowers for any harm done.

“The best way to prevent wrongful foreclosures is with accountability,” Weinstein said.



3d rendering of a row of luxury townhouses along a street

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