Estate and mortgageBills Address Loan Fraud, Takings
Bills introduced earlier this month in Congress slipped quietly under the radar screens of most of the popular press. But that doesn"t diminish their importance.
In the Senate, legislation by Barack Obama (D-Ill) with Dick Durbin (D-Ill) and Robert Menendez (D-NJ) calls for a comprehensive set of reforms to combat mortgage fraud. And in the House, a measure offered by Reps. Steve Chabot (R-Ohio) and Bart Gordon (D-Tenn.) would strengthen the property rights protections afforded owners under the Fifth Amendment.
The Senate bill, entitled "Stopping Transactions which Operate to Promote Fraud, Risk and Underdevelopment Act" (the STOP Fraud Act for short), would boost funding for federal enforcement, create new criminal penalties for fraudulent activities in mortgage lending and brokering, establish reporting requirements and increase funding for counseling.
The bill also would establish a national database to act as a clearinghouse of information about mortgage professionals who have been disciplined by state or federal regulators.
Several provisions in the measure embrace actions long advocated by the lending community. For example, they have practically pleaded with the Department of Housing and Urban Development, which would get $10 million under the measure, to develop anti-fraud programs and step up its enforcement efforts.
It also would require the FBI to update lenders about fraudulent activity and individual criminals in an orderly fashion through the national data base. Currently, information is passed along on an irregular basis via industry websites that post whatever data they can find.
But the bill would also require lenders to report suspicious activity, a step that, for the most part, they have been loathe to take. However, the bill does grant whistle-blowers immunity from liability, so lenders are more likely to embrace the requirement.
In the House, meanwhile, the bill by Reps. Chabot and Gordon, "The Property Rights Implementation Act," would ensure that property owners get their day in federal court if they object to losing their homes or land under the doctrine of eminent domain. Significantly, the bill is cosponsored by House Judiciary Committee Chairman Jim Sensenbrenner (R-Wis.).
The Fifth Amendment provides that no person shall "be deprived of life, liberty or property without due process of law; nor shall private property be taken for public use without just compensation." But under the current system, owners must exhaust their legal rights in state courts before they can appeal to Uncle Sam.
That presents owners with a so-called "takings claim" with an "untenable paradox," says David Pressly, a home builder from Statesville, N.C., and the president of the National Association of Home Builders, because bringing the case to state court and having a takings claim heard -- even under state law -- often precludes the property owner from review by the federal courts.
"A property owner is, in effect, blocked from using the federal courts to enforce the Fifth Amendment"s just compensation guarantee," Pressly explains. "As a result, property owners throw up their hands and give up without ever getting a fair hearing in federal court."
Whereas all other civil rights cases can be brought directly to federal court, those raising a Fifth Amendment takings claim can not. For example, an adult book store owner who challenges a municipal land-use regulation based on the First Amendment"s free speech protection has direct access to federal court. But if he contests the same regulation raising the Fifth Amendment, he must take his claim to a state court.
"This bill would finally put the Fifth Amendment back on par with the rest of the Bill of Rights," says the housing industry leader. "Congress has passed laws to ensure that citizens alleging a violation of their constitutionally protected rights have access to federal courts. Fifth Amendment takings cases should be treated no differently."