North Carolina Bills Could Help Curb A Leading Cause Of Bankruptcy: Foreclosure Fraud

North Carolina lawmakers are taking steps to curb a leading cause of bankruptcy: Foreclosure and mortgage fraud.

These bills respond to problems in the mortgage industry where professionals help arrange financing that they know they buyer can’t afford or where they know the home is over valued to provide adequate security for the loan. It has been very hard to prosecute mortgage brokers because it was difficult to track their actions and establish patterns of fraud.

One bill being considered recognizes that problems in the mortgage industry must be curbed. It holds mortgage brokers accountable for their actions by requiring their identification in public records. This will help track and, if necessary, prosecute brokers who are involved in mortgage fraud. The other bill establishes mortgage fraud as a crime, which will help prosecute individuals who are involved in mortgage schemes.

Many people file bankruptcy in an effort to keep their homes by reducing or eliminating other debts to free up money so they can afford their house payments. If people are behind in payments and facing foreclosure, Chapter 13 can stop foreclosure and allow people up to five years to catch up on missed payments. More bankruptcy attorneys are seeing clients who are seeking help because they have adjustable rate mortgage loans that have increased to a point that they can’t pay all their monthly obligations and pay their mortgages. Many people were advised by brokers to get the loans even when it was clear that the borrower wouldn’t be able to pay the increased rates. Many brokers told the borrowers that they could refinance the loan before the rates increased. When the time came to refinance, the borrowers couldn’t get the refinancing.

See Also:

Charlotte Observer (Thursday, June 21, 2007) Gains In Foreclosure Fight: 2 NC Bills Advance, Targeting Mortgage Malfeasance

Raleigh News and Observer (Wednesday, June 20, 2007) Senate Bill Takes Aim At Mortgage Fraud

Why Should There Be Greater Regulation of Subprime Lenders? Part 2 - What Are They Doing Wrong (Bankruptcy Law Network: Chip Parker June 21, 2007)

Mortgage Basics: What Is A Subprime Loan (Bankruptcy Law Network: Andy Miofsky June 15, 2007)