Two Pennsylvania laws enacted in the wake of a $29 million mortgage fraud scheme will bar state-licensed mortgage brokers and loan originators from being the sole recipients of information from lenders, and penalize companies that retaliate against whistle-blowing employees.
The laws "represent a critical step forward in our strategy to combat mortgage lending fraud and abuse in Pennsylvania," Gov. Edward G. Rendell said in signing Senate Bill 170 and House Bill 985 Monday. Both laws take effect in 60 days.
Senate Bill 170 prohibits state-licensed mortgage brokers or originators from closing mortgage loans in their own name, servicing mortgage loans, entering into lock-in agreements or collecting lock-in fees, and from designating themselves as the exclusive recipient of notices or other communications sent from a lender or servicer to a consumer.
The law allows mortgage brokers to continue to provide a lender’s lock-in agreement to consumers on behalf of lenders, and to collect lock-in fees payable to lenders on the lender’s behalf.
House Bill 985 prohibits state-licensed companies from firing, threatening or otherwise retaliating against employees who report violations of the law to their employer or authorities.
Pennsylvania lawmakers passed the bills after the collapse of a nearly decade-long scheme in which a judge determined 819 victims were bilked out of more than $29 million. …CONTINUED
Prosecutors said that between 1988 and 2007 the alleged mastermind of the scheme, Wesley A. Snyder, took in more than $65.6 million in payments from customers of his "Wrap Around, Equity Slide Down Discount" mortgage program, but forwarded only $39.1 million to lenders.
The mortgage program — in which Snyder’s clients agreed to take the excess proceeds from purchase or refinance mortgages and invest them with his companies — was actually a pyramid scheme, prosecutors said (see story).
Snyder, who is now 73, was also accused of defrauding 31 investors in a separate "Mortgage Participation" program out of $3 million.
The six businesses Snyder used to run the schemes, including Personal Financial Management and Image Masters Inc., filed for Chapter 7 bankruptcy in September 2007. Snyder pleaded guilty to one count of mail fraud two months later and in July 2008 was sentenced to 12 years in prison and ordered to pay $29.2 million in restitution.
***
What’s your opinion? Leave your comments below or send a letter to the editor.
