Thiele: Criminalize Fraudulent Mortgage-Foreclosure Practices

Assembly passes legislation making it a felony for banks/ lenders that commit residential mortgage fraud

Assemblyman Fred W. Thiele, Jr. (I, D, WF-Sag Harbor) announced that the Assembly has passed a bill which he supported that would protect struggling East End homeowners from deceitful business practices perpetrated by mortgage lenders in the home mortgage foreclosure process (A.7395).

The Foreclosure Fraud Prevention Act of 2013 imposes both misdemeanor and felony-level penalties on banks and lenders who knowingly engage in fraud, and upon certain supervisory employees of banks and lenders – referred to as “high managerial agents” – who know about fraudulent conduct by their employees and agents, but fail to take reasonable measures to stop the conduct.

“We’ve all heard the stories: lenders ‘robo-signing’ document after document in an assembly-line fashion and without adequate attorney supervision, claiming to have personal knowledge about mortgages and properties that they actually did not,” Assemblyman Thiele said. “That practice has led to improper foreclosure proceedings that are forcing innocent, hardworking New Yorkers out of their homes. This is fraud plain and simple. We have taken steps over the past few years to protect hardworking families from unseemly mortgage practices, but we have not specifically criminalized these fraudulent practices. This legislation will take that extra step.”

The legislation creates the crime of residential mortgage foreclosure fraud in the second degree, a class A misdemeanor, punishable by up to one year in jail and a $1,000 fine; this penalty is directed at employees or agents of residential mortgage companies who knowingly prepare and file false documents in a residential foreclosure action.

In addition, the bill would make residential mortgage foreclosure fraud in the first degree a class E felony, punishable by up to four years in state prison. This penalty is directed at agents who engage in five or more acts of residential mortgage foreclosure fraud and at those “high managerial agents” who know that one or more of their employees are engaged in residential mortgage foreclosure fraud and fail to take reasonable steps to stop it.

“Working families need to know that their homes are not going to be taken from them through fraud and deceit,” Thiele said. “This legislation is a necessary step to hold the mortgage industry accountable to the people.”

This legislation was proposed by Attorney General Eric Schneiderman.

Proving the legitimacy of a foreclosure upfront

Going a step further, Assemblyman Thiele helped pass a bill that would address the backlog known as the “shadow docket” by requiring foreclosure plaintiffs to file a certificate of merit in residential foreclosure actions (A.5582). The certificate of merit would be accompanied by copies of the legal documents which a lender must have in order to foreclose. Provisions in the bill would require counsel for lenders to certify that such action can be commenced.

“Because the foreclosure process has gotten so out of hand and difficult to navigate, homeowners have been taken advantage of,” Thiele said. “In fact, the average foreclosure can drag on for almost three years – it’s ridiculous. Requiring the plaintiffs to file a certificate of merit helps ensure that foreclosure proceedings are legitimate.”