SACRAMENTO — Alarmed that real estate fraud is contributing to California's mortgage foreclosure crisis, the state Senate voted Thursday to allow counties to increase fees for filing property purchase documents to beef up fraud investigation units.
The bill was supported by Los Angeles County Sheriff Lee Baca and Dist. Atty. Steve Cooley, who are seeing an explosion in the number of fraud cases tied to foreclosures.
"Real estate fraud, due to the nature of the market, increases in elder abuse and identify theft schemes, is definitely on the rise," Cooley said. "Our case load is at an all-time high."
Last year, L.A. County investigated and prosecuted 84 real estate fraud cases in which victims lost $13.4 million. Cases so far this year involve $18.4 million in losses, Sheriff's Sgt. Dana McCants said.
Real estate fraud in Los Angeles County is handled by special units with five sheriff's deputies, six deputy district attorneys and six district attorney's office investigators.
Most of the $5.8-million cost of that special effort is covered by a $2 recording fee imposed by Los Angeles County on real estate documents.
A law approved in 1995 allows each county board of supervisors, by resolution, to impose the $2 recording fee. The boards can raise the fee to $3 under the legislation approved Thursday by a 26-5 vote of the Senate and sent to the state Assembly for consideration.
The bill by Sen. Dave Cox (R-Fair Oaks) also expands the types of documents subject to the recording fee to also include a substitution of trustee, a notice of trustee sale and a notice of rescission of declaration of default.
Cox said the legislation was an important part of addressing the increase in foreclosures in California.
"Much of the problems with foreclosures and mortgage fraud that we see today is the result of criminal activity," Cox told his colleagues. "The real estate fraud units that this bill funds help combat that fraud."
A recent report presented to the Mortgage Bankers Assn. ranked California fourth out of the 50 states on an index measuring the incidence of mortgage fraud cases.