Capital News Service

of the Michigan State University School of Journalism

State may toughen penalties for mortgage fraud

By KATHLEEN LOFTUS
Capital News Service

LANSING – Legislation has been proposed to make residential mortgage fraud a distinct crime in Michigan.

The lead sponsor, Rep. John Walsh, R-Livonia, wants to add sentencing guidelines that would explicitly address mortgage fraud.

Rep. Rashida Tlaib, D-Detroit, a co-sponsor of the proposal, said the changes would make penalties more severe.

Michigan is among 10 states with the most incidents of mortgage fraud, Tlaib said, and current statutes aren’t aggressive enough to combat such fraud.

In the past, prosecutors were limited to using embezzlement and false pretenses laws in mortgage fraud cases, but those laws are not a strong enough deterrent, Tlaib said.

The proposal should provide tools needed to deter such fraud, she said.

Tlaib said in the past four to five years, prosecutors reported that mortgage fraud has become an epidemic and some violators have been charged for creating schemes targeting victims who lose their homes as a result.

Attorney General Bill Schuette announced that Joella Britton of Eagle and Nicole Otis of Lansing were charged with false pretenses, a felony that carries a maximum 10-year prison sentence.

The women provided false information to a lender when they bought a home from a couple struggling with mortgage payments, said Joy Yearout, director of communication for the attorney general.

Britton and Otis offered to buy the house and sell it back to the victims, claiming their credit was good enough to purchase a house. Instead, Otis stopped making mortgage payments, causing foreclosure, according to the charges.

Last year the Attorney General’s office filed 19 complaints and 69 charges against Michigan companies and individuals from Grand Rapids, Charlotte, Livonia and Howell among other places for illegally charging upfront fees to modify mortgages, Yearout said.

Other recent cases include homeowners getting property appraisals for far more than their property is worth to receive larger loans.

Mortgage fraud can also violate the federal law.

For example, in November Larry Rask and Terry Ann Rask of Kalamazoo were charged in federal court with laundering money relating to mortgage fraud, according to the U.S. Attorney’s Office in Grand Rapids.

The couple purchased 25 residences in Kalamazoo, overstated income to receive higher loans and borrowed $121,600 from a bank, prosecutors said.

Co-sponsors of the residential mortgage fraud bill include Reps. Wayne Schmidt, R-Traverse City; Brandon Dillon, D-Grand Rapids; Lesia Liss, D-Warren; and Jimmy Womack, D-Detroit.

The bill is in the House Judiciary Committee.

© 2011, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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