WASHINGTON, May 20 (Reuters) - President Barack Obama signed a tough new law on Wednesday aimed at cracking down on the kinds of mortgage fraud and predatory lending that helped trigger the current financial crisis.
Speaking at a White House signing ceremony, Obama said the Treasury Department had received some 62,000 reports of mortgage fraud last year and the Fraud Enforcement and Recovery Act would give prosecutors new tools to enable them to investigate the complaints.
The law expands the Justice Department’s authority to investigate lenders not covered by current bank fraud statutes, firms that issued as many as half of the subprime mortgages four years ago, the president said.
The law gives the department the resources it needs to “pursue these criminals, bring them to justice and protect hardworking Americans most affected by these crimes,” Obama told a crowd that included lawmakers.
It “gives prosecutors and regulators new tools to crack down on what helped cause this crisis in the first place, and that’s the twin scourges of mortgage fraud and predatory lending,” he said.
The financial crisis began when home buyers who purchased houses with low-cost adjustable rate mortgages began to default because of rising interest rates. Financial institutions heavily invested in mortgage backed securities teetered on the verge of collapse, prompting the government to step in.
Obama expressed optimism the country would return to prosperity.
“The job market has taken a beating and won’t be back immediately. The housing market still has a long way to go but I’m confident we will get there,” he said.
Editing by Sandra Maler