What's happening
This bill strengthens enforcement against unlicensed mortgage entities and broadens mortgage fraud laws to include all property types, not just residential.
Why it matters
Increases accountability for unlicensed mortgage actors. The bill requires the Department of Financial Services to refer suspected unlicensed mortgage operators to the Attorney General and other agencies for enforcement, with regular updates on enforcement actions, ensuring that unauthorized activity is more likely to be investigated and penalized.
Imposes stricter penalties for continued illegal activity. If an unlicensed or unregistered mortgage broker continues operating after a cease and desist notice, they face civil liability up to ten times the amount involved, a substantial increase meant to deter repeated violations.
Expands the scope of mortgage fraud enforcement. By removing the word "residential," the bill makes mortgage fraud laws applicable to all types of real property, not just homes, broadening the protection against fraudulent conduct to include commercial and other property transactions.
Mandates due diligence among licensed entities. Licensed mortgage bankers and brokers are now explicitly prohibited from knowingly doing business with unlicensed or unregistered individuals or entities, and must report such activities to regulators—creating shared responsibility and enhancing industry self-policing.
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Who cares
Headline styles
Crack Down on Mortgage Fraud
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to banks
- Delivered to assembly
- Passed senateVote 41–19
- Advanced to third reading
- 2nd report cal.
- 1st report cal.337
- Referred to banks
- Returned to senate
- Died in assembly
- Referred to banks
- Delivered to assembly
- Passed senateVote 44–18
Show 3 earlier actions
- Ordered to third reading cal.1129
- Committee discharged and committed to rules
- Referred to banks
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Crack Down on Mortgage Fraud
In Assembly Committee · Banks · Sponsor Clyde Vanel
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2088
2019-2020 Regular Sessions
IN SENATE
January 22, 2019
Introduced by Sen. SANDERS -- read twice and ordered printed, and when printed to be committed to the Committee on Banks
AN ACT to amend the banking law and the penal law, in relation to unauthorized entities, unregistered mortgage brokers and mortgage fraud
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The banking law is amended by adding a new section 78-a to read as follows:
§ 78-a. Unauthorized entities. The financial frauds and consumer protection unit of the department of financial services shall refer any instances of a person, partnership, association, corporation or other entity which is operating without being chartered, licensed or registered as required under this chapter to the attorney general and to any other federal, state or local agency or entity for appropriate enforcement action. At least every six months, the attorney general shall provide the unit with a written update of the status of any enforcement actions it has taken against such persons or entities.
§ 2. Paragraph (e) of subdivision 5 of section 590 of the banking law is relettered paragraph (f) and a new paragraph (e) is added to read as follows:
(e) No mortgage banker, mortgage broker or exempt organization shall conduct business with any person, partnership, association, corporation or other entity which it knows or should have known is acting as a mortgage banker or a mortgage broker without being licensed or registered as required by this article. A mortgage banker, mortgage broker or exempt organization shall promptly notify the department of any such unlicensed or unregistered operations.
§ 3. Subdivision 5 of section 598 of the banking law, as added by chapter 571 of the laws of 1986, is amended to read as follows:
5. Civil penalties assessable against unlicensed or unregistered persons or entities. If any non-exempt unlicensed or unregistered person
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD05331-01-9
S. 2088 2
or entity engages in activities encompassed by this article, he shall be liable to any person or entity affected by such activities for a sum of money of not less than the amount of money paid to an affected person or entity in connection with such activities, nor more than four times such sum; provided however that where a non-exempt unlicensed or unregistered person has continued to engage in such unauthorized activities after receiving a cease and desist notice from the superintendent, the maximum amount of liability shall be up to ten times such sum. Such sum may be sued for and recovered by any person or entity for his use and benefit in any court of competent jurisdiction.
§ 4. The article heading of article 187 of the penal law, as added by chapter 472 of the laws of 2008, is amended to read as follows:
[RESIDENTIAL] MORTGAGE FRAUD
§ 5. Section 187.00 of the penal law, as amended by chapter 507 of the laws of 2009, is amended to read as follows: § 187.00 Definitions.
As used in this article:
1. "Person" means any individual or entity.
2. ["Residential mortgage] "Mortgage loan" means a loan or agreement to extend credit, including the renewal, refinancing or modification of any such loan, made to a person or an entity, which loan is primarily secured by either a mortgage, deed of trust, or other lien upon any interest in [residential] real property or any certificate of stock or other evidence of ownership in, and a proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of [residential] real property.
3. ["Residential real property" means real property improved by a one-to-four family dwelling, or a residential unit in a building including units owned as condominiums or on a cooperative basis, used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons, but shall not refer to unimproved real property upon which such dwellings are to be constructed.
4. "Residential mortgage] "Mortgage fraud" is committed by a person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be used in soliciting an applicant for, applying for, underwriting or closing on a [residential] mortgage loan, or filing with a county clerk of any county in the state arising out of and related to the closing of a [residential] mortgage loan, any written statement which:
(a) contains materially false information concerning any fact material thereto; or
(b) conceals, for the purpose of misleading, information concerning any fact material thereto.
§ 6. Section 187.05 of the penal law, as added by chapter 472 of the laws of 2008, is amended to read as follows: § 187.05 [Residential mortgage] Mortgage fraud in the fifth degree.
A person is guilty of [residential] mortgage fraud in the fifth degree when he or she commits [residential] mortgage fraud.
[Residential mortgage] Mortgage fraud in the fifth degree is a class A misdemeanor.
§ 7. Section 187.10 of the penal law, as added by chapter 472 of the laws of 2008, is amended to read as follows: § 187.10 [Residential mortgage] Mortgage fraud in the fourth degree.
A person is guilty of [residential] mortgage fraud in the fourth degree when he or she commits [residential] mortgage fraud and thereby
S. 2088 3
receives proceeds or any other funds in the aggregate in excess of one thousand dollars.
[Residential mortgage] Mortgage fraud in the fourth degree is a class E felony.
§ 8. Section 187.15 of the penal law, as added by chapter 472 of the laws of 2008, is amended to read as follows: § 187.15 [Residential mortgage] Mortgage fraud in the third degree.
A person is guilty of [residential] mortgage fraud in the third degree when he or she commits [residential] mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of three thousand dollars.
[Residential mortgage] Mortgage fraud in the third degree is a class D felony.
§ 9. Section 187.20 of the penal law, as added by chapter 472 of the laws of 2008, is amended to read as follows: § 187.20 [Residential mortgage] Mortgage fraud in the second degree.
A person is guilty of [residential] mortgage fraud in the second degree when he or she commits [residential] mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of fifty thousand dollars.
[Residential mortgage] Mortgage fraud in the second degree is a class C felony.
§ 10. Section 187.25 of the penal law, as added by chapter 472 of the laws of 2008, is amended to read as follows: § 187.25 [Residential mortgage] Mortgage fraud in the first degree.
A person is guilty of [residential] mortgage fraud in the first degree when he or she commits [residential] mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of one million dollars.
[Residential mortgage] Mortgage fraud in the first degree is a class B felony.
§ 11. This act shall take effect on the thirtieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the banking law and the penal law, in relation to unauthorized entities, unregistered mortgage brokers and mortgage fraud
Purpose
The financial frauds and consumer protection unit of the department of financial services shall refer any instances of a person, partnership, association, corporation or other entity which is operating without being chartered, licensed or registered as required under this chapter to the attorney general and to any other federal, state or local agency or entity for appropriate enforcement action
Summary of provisions
Relates to unauthorized entities, unregistered mortgage brokers and mortgage fraud
Justification
No mortgage banker, mortgage broker or exempt organization shall conduct business with any person, partnership, association, corporation or other entity which it knows or should have known is acting as a mortgage bank- er or a mortgage broker without being licensed or registered as required by this article. A mortgage banker, mortgage broker or exempt organiza- tion shall promptly notify the department of any such unlicensed or unregistered operations
Legislative history
This is a new bill.
Fiscal implications
None
Local fiscal implications
None
Effective date
This act shall take effect immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.