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Fraud Act Carries Tougher Penalties

Those who commit mortgage fraud, one of the fastest growing white collar crimes in the United States, will face tougher prosecution and penalties in North Carolina under the recently enacted Residential Mortgage Fraud Act, which becomes effective December 1.

Drafted initially by Real Estate Commission staff and based on a similar law in Georgia, the new law was supported by the Commission, the state’s Commissioner of Banks and the Attorney General. It passed unanimously in both the House and the Senate.

The Act makes mortgage fraud a separate and defined felony in this state.  Persons are guilty of residential mortgage fraud if they:

•     knowingly make or attempt to make any material misrepresentation or omission within the lending process with the intention that someone involved in the lending process relies on it;

•     use or facilitate the use of a misstatement in the lending process;

•     receive or attempt to receive any of the funds from the tainted loan, or

• conspire to violate the provisions of the Act.

The Act also is clear that it is not necessary for the prosecutor to show that anyone was harmed financially as a result of the mortgage fraud or that anyone actually relied on the misstatement, misrepresentation, or omission.

Penalties for violation of the Act are severe.  A first offense is punishable as a Class H felony with a maximum of 25 months in prison, but if a prosecutor can show a pattern of fraud involving five or more loans, it is a Class E felony punishable by up to 74 months in prison.

This article came from the October 2007-Vol38-2 edition of the bulletin.