Utah Considers Making Mortgage Fraud into a Felony

As cases of mortgage fraud rise across the nation, at least one state is considering taking serious action against the crime.

It could soon become a second-degree felony in Utah, prosecutable under the state’s anti-racketeering statutes to allow the seizure of assets so they can be returned to victims.

Utah Rep. Paul Ray, R-Clearfield, who authored a similar bill that died in March, said he’s out to do something about the state’s rate of mortgage fraud - the second highest in the nation in 2005 on a per capita basis, according to a report by the Mortgage Asset Research Institute.

According to MARI, Utah has been among the top five states in per capita home mortgage fraud since 2001, despite having increased requirements for professional licensing and education and conducting more rigorous enforcement.

Ray said amendments to his previous mortgage fraud bill, HB 159, made it too broad and “bloated it down with fiscal costs” for the state. The latest version of the bill is more limited in scope, criminalizing mortgage fraud and creating a special prosecutor and two investigators at an annual cost of $275,000 a year.

He pointed to a unique feature of the bill is that it would make the state’s anti-racketeering statutes applicable to mortgage fraud, allowing authorities to seize fraudulently obtained property and restore it to victims.

The anti-racketeering statutes “just seemed to fit” the crime of mortgage fraud, Ray said, because “most of these guys are not just doing it one time, it’s a pattern” involving multiple properties.

Making mortgage loan fraud a felony would be the first step in addressing the problem, Ray said. Utah is one of 10 nondisclosure states in the U.S. - meaning information on real estate sales is not available to the public - “and that actually breeds a lot of the scams,” Ray said.

Three of 10 states listed by the Mortgage Asset Research Institute as having the highest rates of mortgage fraud - Utah, Texas and Missouri - are nondisclosure states.

Down the road, although not this term, Ray said he will consider introducing legislation that would make Utah a full-disclosure state.