A.G. Schneiderman Introduces Legislation To Protect New Yorkers From Foreclosure Fraud

“Foreclosure Fraud Prevention Act” Seeks To Protect New Yorkers Facing Foreclosure From “Robosigning” And Other Fraudulent Business Practices

Act Imposes Criminal Penalties And Jail Time For Those Who Engage In Foreclosure Fraud

ALBANY – Attorney General Eric T. Schneiderman today announced the introduction of his bill in the state Legislature that would protect New Yorkers from fraudulent business practices like "robosigning" in the foreclosure process. The Attorney General’s legislation, the Foreclosure Fraud Prevention Act of 2012, will define “residential mortgage foreclosure fraud,” and impose tough new criminal penalties that include jail time for those who intentionally engage in such conduct, including managers of residential mortgage businesses who knowingly tolerate fraudulent foreclosure practices committed by their employees and agents.

“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,” said Attorney General Schneiderman. “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. This legislation will ensure that employees involved in these fraudulent and abusive practices, and their supervisors who allow the misconduct to continue, will be held accountable for their crimes.”

Attorney General Schneiderman’s legislation, sponsored by Assemblymember Helene Weinstein (D-Brooklyn), makes it a Class A misdemeanor, punishable by up to a year in jail and a $1,000 fine, for an employee or agent of a residential mortgage business to knowingly authorize, prepare, execute or offer for filing false documents in a pending or prospective residential foreclosure action. The bill makes it a class E felony, punishable by up to four years in state prison, for such employees to engage in multiple acts of foreclosure fraud ("robosigning"), and also makes it a class E felony for a “high managerial agent” of a residential mortgage business to “recklessly tolerate” such fraudulent conduct by his or her agents or employees.

Assemblymember Weinsteinsaid, “The best way to prevent wrongful foreclosures is with accountability. I’m proud to sponsor Attorney General Schneiderman’s Foreclosure Fraud Prevention Act – it provides a real and necessary deterrent to prevent criminals from unlawfully preying on homeowners. Moving forward, fraud will no longer be tolerated in New York. This bill sends that message loud and clear:  if you break the law to take someone’s home, you will go to jail.”

The introduction of this bill is the latest effort by Attorney General Schneiderman to hold those responsible for the foreclosure crisis accountable. The current wave of foreclosures was precipitated by the bursting of the housing bubble, which cost American families over $7 trillion in household wealth; destroyed millions of jobs; and plunged the nation into the deepest and longest recession in 70 years. In 2011, a staggering 345,000 mortgages were either in default or delinquent in New York State.

In February, Attorney General Schneiderman announced a settlement of over $130 million for New York with the nation’s five largest mortgage servicers over foreclosure abuses, the fourth highest dollar amount nationwide as part of the federal-state settlement. The settlement, which imposes strong national standards for mortgage servicing, also fulfilled Attorney General Schneiderman’s demand that he retain the right to bring legal action over misconduct that had not yet been fully investigated, or where investigations were ongoing.

In March, the Attorney General announced that up to $15 million of the money he secured in the national mortgage servicing settlement will be used to extend funding for foreclosure prevention and other related services. Up to $9 million of the allocation will be used to support the state’s Foreclosure Prevention Services Program, which was set to expire on April 1 of this year. And up to $6 million will support housing and community renewal activities statewide through not-for-profit community-based housing organizations.

Foreclosure prevention advocates hailed Attorney General Schneiderman’s legislation.

Michael Wigutow, Senior Staff Attorney, Nassau/Suffolk Law Services Committee, said, “We need to have a multi-faceted strategy to prevent foreclosures and keep families in their homes. Many families need loan modifications or other assistance to avoid foreclosure, but in other cases, foreclosure filings are simply fraudulent. Attorney General Schneiderman’s Foreclosure Fraud Prevention Act will provide the strong criminal deterrent we need to root out robo-signing and other fraudulent foreclosure practices.”

Josh Zinner, Co-Director, Neighborhood Economic Development Advocacy Project (NEDAP),said, “This bill would be among the first in the country to hold lenders and their attorneys truly accountable for fraudulent foreclosure practices.”

Adam Cohen, Senior Staff Attorney, MFY Legal Services,said, "Knowingly filing fraudulent foreclosure documents, or overseeing such behavior, can ruin people's lives, and should be a criminal offense. This is about deterrence and making sure homeowners' lives are not destroyed by reckless misconduct in the foreclosure process. Under Attorney General Schneiderman's Foreclosure Fraud Prevention Act, those who engage in this kind of despicable behavior will face the justice they deserve."

Kirsten Keefe, Senior Attorney in the Albany office of Empire Justice Center, said, “Empire Justice Center applauds Attorney General Eric Schneiderman for his dedication to fighting the foreclosure crisis and for doing it from multiple angles. The Foreclosure Fraud Prevention Act of 2012, which would penalize lenders and their agents for intentionally filing misleading information with courts and other public officials, raises the bar substantially to help guard against faulty lawsuits in foreclosure.”

Rebecca Case Grammatico, Senior Attorney in the Rochester office of Empire Justice Center, said, "Rochester Families deserve to know that they can’t be thrown out of their homes by a servicer that can’t prove their right to foreclose. The Foreclosure Fraud Prevention Act, introduced by Attorney General Eric Schneiderman, creates a strong deterrent that will help end abusive foreclosure practices. Empire Justice Center is pleased to see the Attorney General’s continued dedication to protecting struggling homeowners here in New York.” said

Lauren Breen, Supervising Attorney, Western NY Legal Services,said, “It's indisputable that legal evidence of a lender’s right to foreclose is the most basic component to New York State's judicial foreclosure process. Under the proposed Foreclosure Fraud Prevention Act, those who cut corners, wrongfully forcing families out of their homes, would be held liable. It’s a great bill for homeowners.”

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