Mortgage Fraud: Federal Criminal Provisions (CRS Report for Congress)
Premium Purchase PDF for $24.95 (22 pages)
add to cart or
subscribe for unlimited access
Pro Premium subscribers have free access to our full library of CRS reports.
Subscribe today, or
request a demo to learn more.
| Release Date |
May 11, 2009 |
| Report Number |
R40549 |
| Report Type |
Report |
| Authors |
Anna C. Henning, Legislative Attorney |
| Source Agency |
Congressional Research Service |
Summary:
Although criminal prosecutions will likely be only one part of a broader governmental response to the recent financial crisis, the perceived role of fraudulent activity in the downturn, and of mortgage fraud in particular, has spurred interest in the criminal provisions available to federal prosecutors. This report analyzes statutory sources of federal criminal liability for fraudulent actions taken in the primary mortgage market â i.e., fraud committed by borrowers, brokers, lenders, or others during the mortgage origination process. It also discusses some statutes implicated by fraudulent actions in the secondary mortgage market.
In general, federal regulation of financial institutions is handled by numerous regulatory agencies. However, criminal liability applies in instances involving criminal intent. Mortgage-related criminal schemes range from fraud committed by an individual borrower for the purpose of obtaining a loan to fraud-for-profit schemes that involve institutions or industry insiders. In general, federal criminal enforcement efforts have focused on schemes involving industry insiders.
Although there is no one federal crime of "mortgage fraud," many federal statutes may impose criminal liability for mortgage fraud and related schemes. Relevant federal provisions include, among others, those criminalizing mail and wire fraud, financial institutions fraud, and false statements, together with those that impose criminal penalties for violations of federal regulations. Money laundering, conspiracy, and racketeering provisions may provide additional bases for federal criminal liability. In addition, to a limited extent, securities fraud and corporate fraud provisions may apply to fraudulent actions taken in the secondary mortgage market.
Looking forward, a debate has emerged regarding the adequacy of existing federal criminal provisions. Some have suggested that existing statutory authorities are sufficiently broad and that regulatory reforms are the most appropriate response. Others have argued that several key federal criminal statutes need to be expanded because they do not cover all mortgage companies. The Fraud Enforcement and Recovery Act of 2009 (FERA, S. 386), versions of which have been passed by the Senate and House, would expand the scope of existing criminal provisions, for example by expanding the definition of "financial institution" under U.S. criminal law to include mortgage lending businesses.
