New York’s Proposed Foreclosure Fraud Prevention Act Would Criminalize “Robo-Signing”

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On June 22, the New York State Assembly passed the “Foreclosure Fraud Prevention Act of 2012,” which defines residential mortgage foreclosure fraud and criminalizes “robo-signing” and other “fraudulent or deceptive” practices by agents or managers in the residential mortgage business. While the state Senate did not act on the proposed legislation before adjourning its regular session — and as a result there is little chance the bill will be enacted this year — the bill represents the latest attempt by state governments to impose criminal liability on fraudulent foreclosure practices by mortgage servicers or their employees.

Under the proposed Act, a person who is an agent of a company engaged in the residential mortgage business would commit “residential mortgage foreclosure fraud” by intentionally engaging in “fraud or deception by authorizing, preparing, executing, offering or presenting for filing” documents which such person (i) knows contains a material false statement (or material omission) and (ii) knows or believes will be publicly filed in connection with a pending or prospective residential mortgage foreclosure action. It is worth noting that while the offense would require an intentional act, it does not include a separate intent element requiring that the proscribed conduct be done “with intent to defraud or deceive.”

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