II 

109TH CONGRESS 

2D SESSION S. 2280 

To stop transactions which operate to promote fraud, risk, and underdevelopment, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 14, 2006 

Mr. OBAMA (for himself, Mr. DURBIN, and Mr. MENENDEZ) introduced the 

following bill; which was read twice and referred to the Committee on 

Banking, Housing, and Urban Affairs 

A BILL 

To stop transactions which operate to promote fraud, risk, 

and under-development, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Stopping Transactions 

5 which Operate to Promote Fraud, Risk, and Under6 development Act’’ or the ‘‘STOP FRAUD Act’’. 

7 SEC. 2. MORTGAGE FRAUD. 

8 (a) IN GENERAL.—Chapter 63 of title 18, United 

9 States Code, is amended by adding at the end the fol10 lowing: 
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1 ‘‘§ 1351. Mortgage fraud 

2 ‘‘(a) IN GENERAL.—It shall be unlawful for any 

3 mortgage professional to knowingly execute, or attempt to 

4 execute, a scheme or artifice— 

5 ‘‘(1) to defraud any natural person or financial 

6 institution in connection with the offer or extension 

7 of consumer credit (as such term is defined in sub8 sections (e) and (h) under section 103 of the Truth 

9 in Lending Act (15 U.S.C. 1602(e) and (h))), which 

10 credit is, or is to be, secured by an interest— 

11 ‘‘(A) in real property; or 

12 ‘‘(B) in personal property used or expected 

13 to be used as the principal dwelling (as such 

14 term is defined under section 103(v) of the 

15 Truth in Lending Act (15 U.S.C. 1602(v))) of 

16 the natural person to whom such consumer 

17 credit is offered or extended; or 

18 ‘‘(2) to obtain, by means of false or fraudulent 

19 pretenses, representations, or promises, any money 

20 or property, including without limitation in the form 

21 of fees or charges, from a natural person in connec22 tion with an extension of consumer credit secured by 

23 an interest— 

24 ‘‘(A) in real property; or 
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1 ‘‘(B) in personal property used or expected 

2 to be used as the principal dwelling of such nat3 ural person; 

4 ‘‘(b) PENALTY.—Any person who violates paragraph 

5 (1) shall be fined not more than $5,000,000, or impris6 oned not more than 35 years, or both. 

7 ‘‘(c) PRIVATE RIGHT OF ACTION BY PERSONS AG8 GRIEVED.—Any person aggrieved by a violation of this 

9 section, or any regulation under this section may, but shall 

10 not be required to, file suit in any district court of the 

11 United States having jurisdiction of the parties to such 

12 suit— 

13 ‘‘(1) without respect to the amount in con14 troversy; 

15 ‘‘(2) without regard to the citizenship of the 

16 parties; and 

17 ‘‘(3) without regard to exhaustion of any ad18 ministrative remedies. 

19 ‘‘(d) RULE OF CONSTRUCTION.—Nothing in this sec20 tion shall be construed to modify, lessen, or otherwise af21 fect any other provision of this title relating to the rights 

22 afforded to financial institutions. 

23 ‘‘(e) DEFINITION.—As used in this section, the term 

24 ‘mortgage professional’ includes real estate appraisers, 

25 real estate accountants, real estate attorneys, real estate 
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1 brokers, mortgage brokers, mortgage underwriters, mort2 gage processors, mortgage settlement companies, mort3 gage title companies, mortgage loan originators, and any 

4 other provider of professional services engaged in the 

5 mortgage process.’’. 

6 (b) TABLE OF SECTIONS.—The table of sections for 

7 chapter 63 of title 18, United States Code, is amended 

8 by inserting after the item relating to section 1350 the 

9 following: 

‘‘1351. Mortgage fraud.’’. 

10 (c) CONFORMING AMENDMENT.—Section 3293(2) of 

11 title 18, United States Code, is amended by striking ‘‘or 

12 1343’’ and inserting ‘‘, 1343, or 1351’’. 

13 SEC. 3. MANDATORY REPORTING REQUIREMENTS. 

14 (a) DEFINITION OF FINANCIAL INSTITUTION.—Sec15 tion 5312(a)(2)(U) of title 31, United States Code, is 

16 amended by— 

17 (1) inserting ‘‘and companies’’ after ‘‘persons’’; 

18 (2) inserting ‘‘, transactions,’’ after ‘‘closings’’; 

19 and 

20 (3) inserting after ‘‘settlements’’ the following: 

21 ‘‘, including the Federal National Mortgage Associa22 tion, the Government National Mortgage Associa23 tion, the Federal Home Loan Mortgage Corporation, 

24 mortgage appraisers, real estate accountants, real 

25 estate attorneys, real estate brokers, mortgage un-
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1 derwriters, mortgage processors, mortgage settle2 ment and title companies, mortgage brokers, mort3 gage loan originators, and any other mortgage pro4 fessional engaged in the mortgage industry’’. 

5 (b) REGULATIONS.— 

6 (1) IN GENERAL.—Not later than 1 year after 

7 the date of enactment of this Act, the Secretary of 

8 the Treasury shall issue regulations to implement 

9 the amendments made in subsection (a). 

10 (2) CONTENT OF REGULATION.—A regulation 

11 required under paragraph (1) shall include a re12 quirement that any suspicious activity by an indi13 vidual or entity described in section 5312(a)(2)(U) 

14 be reported to the Secretary of the Treasury. 

15 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

16 are authorized to be appropriated such sums as are nec17 essary to implement the regulations issued under sub18 section (b). 

19 SEC. 4. LAW ENFORCEMENT AND INDUSTRY COMMUNICA20 TION. 

21 (a) IN GENERAL.—Not later than 18 months after 

22 the date of enactment of this Act, the Attorney General, 

23 in consultation with the Secretary of the Treasury, shall 

24 establish a system by which mortgage brokers, lenders, 

25 and other authorized mortgage professionals may register 
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1 and receive updates from Federal law enforcement agen2 cies on— 

3 (1) suspicious activity trends in the mortgage 

4 industry; and 

5 (2) mortgage fraud-related convictions. 

6 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

7 are authorized to be appropriated such sums as are nec8 essary to establish and maintain the system required 

9 under subsection (a). 

10 SEC. 5. DEBARRED OR CENSURED MORTGAGE PROFES11 SIONAL DATABASE. 

12 (a) ESTABLISHMENT.— 

13 (1) IN GENERAL.—Not later than 18 months 

14 after the date of enactment of this Act, the Attorney 

15 General shall establish a Debarred or Censured 

16 Mortgage Professional Database that may be 

17 accessed by authorized banks and mortgage profes18 sionals to determine the Federal and State bar sta19 tus of mortgage professionals regulated by any Fed20 eral or State agency. 

21 (2) PRIVATE CERTIFICATION BOARDS.—Any 

22 widely accepted private certification board shall have 

23 authority to access, maintain, and update the 

24 Debarred or Censured Mortgage Professional Data25 base established in paragraph (1) for purposes of 
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1 adding or removing the information of any mortgage 

2 professional contained in such Database. 

3 (3) DEFINITION OF WIDELY ACCEPTED PRI4 VATE CERTIFICATION BOARD.—Not later than 18 

5 months after the date of enactment of this Act, the 

6 Attorney General, in consultation with the Secretary 

7 of the Treasury, shall determine the definition of the 

8 term ‘‘widely accepted private certification board’’. 

9 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated such sums as are nec11 essary to establish and maintain the database required 

12 under subsection (a). 

13 SEC. 6. HOUSING COUNSELING. 

14 Section 106 of the Housing and Urban Development 

15 Act of 1968 (12 U.S.C. 1701x), is amended by adding 

16 at the end the following: 

17 ‘‘(g) COUNSELING FOR MORTGAGE FRAUD.— 

18 ‘‘(1) IN GENERAL.—The Secretary is authorized 

19 to provide, or contract with public or private organi20 zations to provide, information, advice, counseling, 

21 and technical assistance to tenants, homeowners, 

22 and other consumers with respect to mortgage 

23 fraud, as such activity is described in section 1351 

24 of title 18, United States Code. 
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1 ‘‘(2) PREFERENCE FOR STATES WITH HIGHER

2 INCIDENTS OF MORTGAGE FRAUD.—In distributing 

3 any funds authorized under paragraph (3), the Sec4 retary shall give preference to those States with the 

5 highest rates of mortgage fraud, as such rates are 

6 determined by— 

7 ‘‘(A) the Director of the Federal Bureau of 

8 Investigation; and 

9 ‘‘(B) mortgage industry statistics. 

10 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.— 

11 There are authorized to be appropriated 

12 $10,000,000, to implement the provisions of this 

13 subsection.’’. 

14 SEC. 7. STATE APPRAISAL DEMONSTRATION PROJECTS. 

15 (a) IN GENERAL.—Not later than 18 months after 

16 the date of enactment of this Act, the Secretary of Hous17 ing and Urban Development shall provide grants to State 

18 appraisal agencies to improve the monitoring and enforce19 ment of housing appraisal regulations in that State. 

20 (b) APPLICATION.—Each State appraisal agency 

21 seeking a grant under this section shall submit an applica22 tion to the Secretary of Housing and Urban Development 

23 at such time, in such manner, and containing such infor24 mation as the Secretary may require. 
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1 (c) PREFERENCE FOR STATES WITH HIGHER INCI2 DENTS OF MORTGAGE FRAUD.—In distributing any grant 

3 amounts authorized under this section, the Secretary of 

4 Housing and Urban Development shall give preference to 

5 those States with the highest rates of mortgage fraud, as 

6 such rates are determined by— 

7 (1) the Director of the Federal Bureau of In8 vestigation; and 

9 (2) mortgage industry statistics. 

10 (d) AUTHORIZATION OF APPROPRIATIONS.—There 

11 are authorized to be appropriated $10,000,000, to imple12 ment the provisions of this section. 

13 SEC. 8. LAW ENFORCEMENT GRANTS TO STATE AND LOCAL 

14 LAW ENFORCEMENT AGENCIES. 

15 (a) IN GENERAL.—Not later than 18 months after 

16 the date of enactment of this Act, the Attorney General 

17 shall provide grants to assist State and local law enforce18 ment agencies in— 

19 (1) establishing and improving mortgage fraud 

20 task forces; and 

21 (2) improving communications regarding mort22 gage fraud cases between such agencies and other 

23 Federal, State and local law enforcement agencies. 

24 (b) APPLICATION.—Each State or local law enforce25 ment agency seeking a grant under this section shall sub-
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1 mit an application to the Attorney General at such time, 

2 in such manner, and containing such information as the 

3 Attorney General may require. 

4 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

5 are authorized to be appropriated $40,000,000, to imple6 ment the provisions of this section. 

7 SEC. 9. ADDITIONAL DOJ FUNDING. 

8 In addition to any other amounts otherwise author9 ized to be appropriated under this Act, there are author10 ized to be appropriated to the Attorney General 

11 $5,000,000, to increase mortgage fraud investigation ef12 forts undertaken by the Department of Justice. 

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