Friday, February 12, 2010

Bill would deploy E-verify to mortgage application process

On February 5, Congressman Kenny Marchant (R-TX) introduced his new bill, H.R. 4586, the Mortgage E-Verify Act. The bill would require, as a condition for modification of a home mortgage loan held by Fannie Mae or Freddie Mac or insured by the Federal Housing Administration, that the mortgagor be verified under the E-verify program. Marchant believes his bill will potentially save millions by cutting down on fraudulent claims from illegal immigrants and protect taxpayers from subsidizing the restructuring or renegotiation of mortgages.

Marchant cites a major Nevada case where a mortgage company branch manager conspired to manufacture and submit false employment and income documentation for borrowers, most of whom were illegal immigrants. Fifty-eight of the 233 fraudulent FHA loans totaling $6.2 million have, not surprisingly, gone into default, costing HUD nearly $2 million. The branch manager was found guilty on 32 counts of submitting false information to HUD, and one count of conspiracy.

“E-verify is a fantastic program which I have supported making permanent for employers. Mandating its use as a condition for home mortgage loan modifications would help eliminate waste, fraud, and abuse in the system and bring integrity to the process. In fact, the Treasury Department’s Financial Crimes Enforcement division estimates that mortgage fraud increased 1,411 percent from 1997 to 2005. Furthermore, two-thirds of fraud reports in the last decade are due to falsified statements on loan documents. My bill would curb these abuses and protect the taxpayers,” said Marchant.

This proposed extention of E-verify comes on the heals of the Obama administration's mandate that federal contractors use the system for screening workers' legal status. Troubling to many is the system's penchant, real or perceived, to return inaccurate results. Though the program has been heavily criticized, the error rate, currently around 8 percent, is decreasing, as many of the errors come from changing last names after marriage, or not informing the government of citizenship status. We shall see what other crafty applications of the system our legislators can devise in the months ahead.

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