STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - April 25, 2007)
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By Mr. OBAMA (for himself and Mr. Durbin):
S. 1222. A bill to stop mortgage transactions which operate to promote fraud, risk, abuse, and under-development, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.
Mr. OBAMA. Mr. President, I rise today to reintroduce legislation to protect American consumers and homeowners from fraudulent and abusive mortgage lending practices. Mortgage fraud and abuse are growing problems in this country, problems that are depriving thousands of Americans of their dream of homeownership and often their hard-earned life savings. These problems are also costing the mortgage industry hundreds of millions of dollars each year and making the housing market, which is critical to our economy and the stability of our neighborhoods, more vulnerable.
Although the data in this area is limited, mortgage fraud, which takes a variety of forms from inflated appraisals to the use of straw buyers, is a growing problem. In September of 2002, the FBI had 436 mortgage fraud investigations. Currently, they have more than 1,036--an increase of 137 percent in less than 5 years. And of the 1,036 current cases, more than half have expected losses of more than $1 million. This is due largely to the housing boom which has driven up housing prices across the country. Nearly $2.37 trillion in mortgage loans were made during 2006, and the number may be even higher this year.
But mortgage fraud is not just about dollars and statistics; it's about real people, real homes, and real lives. I first introduced this legislation last year after my hometown Chicago Tribune featured a series of articles about mortgage fraud in Illinois, which, along with Georgia, South Carolina, Florida, Missouri, Michigan, California, Nevada, Colorado and Utah, is among the FBI's top-ten mortgage fraud ``hot spots.''
The Tribune stories highlighted the plight of the good folks on May Street in Chicago, who saw a block's worth of homes go boarded up in the span of a just few years, as swindlers racked up hundreds of thousands of dollars in bad loans. The shells of houses were left behind as sad reminders of broken dreams. The Tribune highlighted the plight of 75-year-old Ruth Williams, who had to spend her personal funds to clear the title to her home after fraudsters secured $400,000 in loans on three buildings they didn't own. A recent Tribune investigation turned up a 91-year-old woman defrauded into signing away her brick Chicago home, her sole asset, leaving her with nothing.
Law enforcement, consumer groups and many in the mortgage industry are working extremely hard to combat fraud and abusive lending practices. I applaud their good work. Now, Congress should come to the table and do its part, and I'm pleased to introduce legislation today with my good friend Senator Durbin to address this important issue.
The STOP FRAUD Act, which was first introduced in February 2006, is aimed at stopping mortgage transactions which operate to promote fraud, risk, abuse and underdevelopment. This year, the bill includes new provisions to protect the legal rights of borrowers with particularly risky subprime loans. The Act provides the first Federal definition of mortgage fraud and authorizes stiff criminal penalties against fraudulent actors. STOP FRAUD requires a wide range of mortgage professionals to report suspected fraudulent activity, and gives these same professionals safe harbor from liability when they report suspicious incidents. It also authorizes several grant programs to help State and local law enforcement fight fraud, provide the mortgage industry with updates on fraud trends, and further support the Departments of Treasury, Justice and Housing and Urban Development's fraud-fighting efforts.
At a time when many homeowners are concerned about losing their home to foreclosure, and policymakers are worried about fraudulent, deceptive, and even just plain confusing lending practices that are roiling communities across the country, STOP FRAUD provides $25 million for housing counseling. The Department of Housing and Urban Development will contract with public or private organization to provide information, advice, counseling, and technical assistance to tenants, homeowners, and other consumers with respect to mortgage fraud and other activities that are likely to increase the risk of foreclosure.
The Act also protects the legal rights of borrowers with risky, subprime loans. The greatest growth in the mortgage lending market is in subprime loans and some have estimated that more than 2 million homeowners with subprime mortgages are at risk of losing their homes. If a borrower receives a subprime mortgage with any one of several high-risk characteristics, the Act protects the rights of borrowers to challenge lending practices in foreclosure proceedings. The high-risk characteristics targeted by this Act include loans for which the borrower does not have the ability to repay at the maximum rate of interest, loans whose true long-term costs are not clearly disclosed to the borrower, stated-income and no-documentation loans, and loans with unreasonable prepayment penalties.
Many States are actively trying to prevent a wave of expected foreclosures as housing prices stop rising while adjustable rates on many risk loans start rising. STOP FRAUD instructs the Government Accountability Office to evaluate the various State initiatives and report to Congress on lending practices and regulations related to mortgage fraud and deception, predatory lending, and homeownership preservation efforts.
We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes. There is excellent work being done by the Banking Committees in the House and Senate to tackle some of the thorniest and most challenging problems affecting the mortgage industry today. I look forward to working with my colleagues on comprehensive legislation to protect consumers and strengthen the housing market. The STOP FRAUD Act is just the beginning of an important Federal response. It is a tough, cost-effective, and balanced way to address the serious problem of mortgage fraud in our country and to provide additional protections for vulnerable borrowers. I urge my colleagues to join me in this important effort.
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