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The 189th General Court of the Commonwealth of Massachusetts

Section 35A: False material statements or omissions during or in connection with mortgage lending process; penalties; mitigating factors with respect to sentencing

Section 35A. (a) As used in this section, the following words shall have the following meanings, unless the context clearly otherwise requires:?

''Funds'', shall include, but not be limited to, a commission, fee, yield spread premium or compensation in any form.

''Material omission'', the omission or concealment of a material fact necessary to prevent a statement from being misleading, in the light of the circumstances under which the statement is made.

''Mortgage lending process'', the process through which a person seeks or obtains a residential mortgage loan including, but not limited to, solicitation, application, origination, negotiation of terms, third-party provider services, underwriting, signing and closing, and funding of the loan; provided, however, that documents involved in the mortgage lending process shall include, but not be limited to, uniform residential loan applications or other loan applications, appraisal reports, HUD?1 settlement statements, supporting personal documentation for loan applications such as W?2 forms, verification of income and employment, bank statements, tax returns and payroll stubs and any required disclosures.

''Pattern of residential mortgage fraud'', violation of subsection (b) in connection with 3 or more residential properties.

''Person'', a natural person, corporation, company, limited liability company, partnership, real estate trust, association or any other entity.

''Residential mortgage loan'', a loan or agreement to extend credit made to a person, which loan is secured by a mortgage, security interest, deed to secure debt, deed of trust, or other document representing a security interest or lien upon any interest in a 1 to 4 family residential property located in the commonwealth, including the renewal or refinancing of any such loan.

(b) Whoever intentionally: (1) makes or causes to be made any material statement that is false or any statement that contains a material omission, knowing the same to be false or to contain a material omission, during or in connection with the mortgage lending process, with the intent that such statement be relied upon by a mortgage lender, borrower or any other party to the mortgage lending process; (2) uses, or facilitates the use of, any material statement that is false or any statement that contains a material omission, knowing the same to be false or to contain a material omission, during or in connection with the mortgage lending process, with the intent that such statement be relied upon by a mortgage lender, borrower or any other party to the mortgage lending process; (3) receives any proceeds or any other funds in connection with a residential mortgage closing, knowing such proceeds or funds were obtained in violation of clause (1) or (2); or (4) files or causes to be filed with a registrar of deeds any document that contains a material statement that is false or a material omission, knowing such document to contain a material statement that is false or a material omission, shall be punished by imprisonment in the state prison for not more than 5 years or by imprisonment in the house of correction for not more than 2 and one-half years or by a fine of not more than $10,000 in the case of a natural person or not more than $100,000 in the case of any other person, or by both such fine and imprisonment.

Any person who engages in a pattern of residential mortgage fraud shall be punished by imprisonment in the state prison for not more than 15 years or by a fine of not more than $50,000, in the case of a natural person, or not more than $500,000 in the case of any other person, or by both such fine and imprisonment.

(c) If a defendant is convicted of a violation of this section as a result of conduct or an omission by an employee or agent of the defendant the court may consider the following mitigating factors with respect to sentencing:

(1) that the defendant had instituted and maintained at the time of the violation, and continues to have, a written policy including:

(i) a prohibition against conduct that violates this section by employees and agents of the defendant;

(ii) penalties or discipline for violation of the policy;

(iii) a process for educating employees and agents concerning the policy and consequences of a violation thereof; and

(iv) with respect to a defendant authorized to conduct criminal history checks for the employee's or agent's position, a requirement for a criminal history check before employing an employee or engaging an agent and a requirement that the defendant will not employ or engage an individual who has been convicted of a crime involving fraud;

(2) a demonstration that the defendant enforces the policy described in clause (1); and

(3) prior to the violation of this section the defendant provided a copy of the policy described in clause (1), including a description of the consequences for violating the policy, to the employee or agent who committed the violation.