Governor Comes Around on Fraud

Florida Governor Charlie Crist appears to finally have gotten something done in relationship to mortgage fraud in the state. The governor signed a new law, but the new rules won’t go into effect until October.

Florida has historically had one of the highest mortgage fraud rates in the nation, most of it committed by mortgage brokers, many of whom are from out of state and willing borrowers who scam lenders and have caused the nation’s real estate markets to soften. They can now be thrown into prison for up to 15 years. The new governor has backed the upcoming ballot measure voters will decide in January to reduce homeowners property tax rates for homesteaded properties.

The new mortgage fraud law requires mortgage brokers and other lenders to provide borrowers disclosures, which are already covered by Federal laws. But under the state law borrowers must be told how much a lender is paying a mortgage broker for their services and it must be in writing.

A good faith estimate of closing costs must be disclosed to the borrower in writing, and signed by the borrower, including all fees that are being charged.

If a loan’s fees or terms change it must now be disclosed to the borrower at least three business days before the loan is scheduled to close. The mortgage licensee must be able to prove that the notice was provided and that the borrower accepted the new terms.

But the big news in this new law is that the state’s office of financial regulation may take enforcement actions against mortgage brokers and lenders, who violate RESPA, which stands for the Real Estate Settlement Procedures Act, also known as the federal truth in lending act.

Federal follow up or enforcement of RESPA has been relaxed for years. The new law is an attempt to further regulate the mortgage industry, which has never been fully regulated by the state or the federal government.

Florida has been behind the times on adopting the new law. The legislation is based on laws in Georgia and other states.