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The Business Council opposes this legislation which would create criminal penalties for any person who, being an agent of a residential mortgage business, acting within the scope of his or her employment, intentionally engages in "residential mortgage foreclosure fraud" as defined in this legislation.
New misdemeanor and felony penalties would be imposed on agents who authorize, prepare or execute documents before a public office they know to contain false material or omissions.
The problem this bill presents is that the penalties are so sweeping and severe it is likely to discourage lenders to ever bring foreclosure actions against defaulting mortgagors. There is the potential for liability even for one violation for everyone in management from low level clerks to managers. This will, no doubt, ultimately hurt the recovery of New York's residential housing industry and our overall economy.
This bill also fails to properly define the meaning of pertinent terms. It is unclear how a high managerial agent could determine what would constitute "knowledge" that an underling was engaged in the vaguely defined "residential mortgage foreclosure fraud," or when he or she would be deemed to have failed to take "reasonable" measures to prevent it from continuing.
This legislation is also inequitable. While it proposes severe new penalties for employees and agents of mortgage providers who engage in activity prohibited by this bill, mortgagors and their representatives who engage in activity prohibited by this proposal, would not be deemed to be violating the law or be subject to its penalties. Nor apparently would employees or agents who were acting outside of the scope of their employment in committing residential mortgage fraud. Fraud is fraud regardless of which side is committing the act or in what capacity it's being committed and should apply to all violators.
In light of the vagueness and subjectivity of the proposal, its sweeping scope for potential liability for even one violation and the criminal penalties contained in this proposed law for alleged violations, it is clear that it would discourage mortgage providers from filing legitimate foreclosure actions. This will leave New York with a huge inventory of homes stuck in the foreclosure process, impeding the recovery to the real estate market and the economy.
For these reasons, the Business Council urges the legislature to disapprove A.7395/S.5251.