Rhode Island Enacts Provisions Regarding Mortgage Fraud
The General Assembly of the state of Rhode Island has amended Chapter 11-18 of the General Laws, which relates to residential mortgage fraud. These new provisions are effective immediately.
The updated law provides five scenarios that constitute residential mortgage fraud. Each scenario requires intent to defraud; however actual financial harm is not required. The first scenario that constitutes residential mortgage fraud is where a person knowingly makes an omission of a material fact or a written misrepresentation or misstatement of a material fact with the intent that anyone involved in the transaction will rely on the absence of the material fact or the material misrepresentation or misstatement.
The second scenario is where a person knowingly uses or facilitates the use (or attempts to use or facilitate the use) of any omission of a material fact or written misrepresentation or misstatement of a material fact with the intent that anyone involved in the transaction will rely on the absence of the material fact or the material misrepresentation or misstatement.
The third scenario is where a person knowingly receives (or attempts to receive) proceeds or any other funds in connection with a residential mortgage transaction that resulted from a violation of the first two scenarios. And the fourth scenario is where a person conspires with or solicits another to engage in an act or acts that would be a violation of the first two scenarios.
The final scenario that constitutes residential mortgage fraud is where a person files (or causes to be filed) with a city or town clerk any document involved in the mortgage lending process that he or she knows includes an omission of a material fact or a written misrepresentation or misstatement of a material fact.
The updated provisions then set out the penalties for residential mortgage loan fraud in Rhode Island. The law states that violators shall be guilty of a felony and subject to imprisonment for not more than 10 years, a fine of not more than $10,000, or both. In addition, any person who engages or participates in a pattern of residential mortgage fraud (or conspires or endeavors to engage or participate in a pattern of residential mortgage fraud) shall be guilty of a felony and subject to imprisonment for not more than 20 years, a fine of not more than $100,000, or both. And furthermore, any person who commits an offense and knew that the victim was vulnerable due to age, disability, infirmity, reduced physical or mental capacity, or national origin shall be guilty of a felony and subject to imprisonment for not more than 15 years, a fine of not more than $15,000, or both.
The provisions also state that the court shall order restitution to any victim, and that in addition to any criminal penalties, any person found guilty of residential mortgage fraud shall forfeit anything of value received by him or her in the course of such violation, less any restitution paid.
Zachary Pearlstein, JD, is a Regulatory Compliance Director with CLA's Mortgage Advisory Division. He joined CLA on January 1, 2014, as part of its acquisition of Bankers Advisory, Inc. Zachary oversees Mortgage Advisory's regulatory compliance team, which focuses on federal and state compliance, fair lending, and the Home Mortgage Disclosure Act (HMDA). He is a graduate of Brandeis University and earned his juris doctor at Suffolk University Law School. He is admitted to the Massachusetts Bar.
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