Tuesday, May 27, 2014

FYI: US Sup Ct Holds Lenders' Restitution Under Mandatory Victims Restitution Act To Be Reduced by Amounts Actually Recovered, Not Value of Collateral

The U.S. Supreme Court recently held that, where property is returned to a lender by a borrower convicted of fraud, the terms of the Mandatory Victims Restitution Act require that the amount of the restitution be reduced by the amount of money actually received by the lender when selling the property, rather than the value of the property at the time the lender received it.  


A copy of the opinion is available at:  http://www.supremecourt.gov/opinions/13pdf/12-9012_3e04.pdf


A borrower was convicted of submitting fraudulent mortgage loan applications to two banks.  The lower court instructed the borrower to pay the difference between the amount lent to him, and the amount actually received by the banks when the relevant properties were sold.  The borrower argued that the lower court should have ordered that the amount he was to pay should have been reduced by the value of the real estate at the time the banks took title. 


The Seventh Circuit affirmed the lower court, and the borrower appealed. 


As you may recall, the Mandatory Victims Restitution Act of 1996 provides that property crime offenders must pay victims an "amount equal to...the value of the property" less "the value (as of the date the property is returned) of any part of the property that is returned."  Sec. 3663A(b)(1)(B) (the "Act"). 


The borrower contended that the properties he returned to the banks were worth more when the banks took title than when the banks sold the properties.  Accordingly, the borrower argued that the value "as of the date the property is returned" does not refer to the sale price, but rather the value of the properties at the time of transfer. 


The Supreme Court disagreed, finding that the phrase "any part of the property" refers to "the property the banks lost, namely, the money they lent to [the borrower], and not to the collateral the banks received, namely, the two houses." 


To reach that conclusion, the Supreme Court relied on the plain language of the statute, as well as administrative ease in enforcing the terms of the statute.  Specifically, the Supreme Court noted that "[v]aluing the money from the sale is easy.  But valuing other property as of the time it was received may provoke argument, requiring time, expense, and expert testimony to resolve." 


The borrower countered that the Supreme Court's holding would lead to unfair results, such as where the property had not been sold prior to sentencing.  The Supreme Court found this argument unpersuasive, however, noting that  sentencing court could simply postpone the determination of the restitution amount, to allow for the property to be sold.  


Accordingly, the Supreme Court upheld the judgment of the Seventh Circuit. 






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
(312) 551-9320
(312) 284-4751
(312) 493-0874


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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