The measure, which passed unanimously, defines residential mortgage fraud and distinguishes single instances from serial defrauders with more severe penalties for people who write five or more deceptive mortgage loans. Local prosecutors could bring charges against mortgage sellers who lie or intentionally leave out information, even if the buyers don't lose money.

Home buyers are signing mortgages where interest rates rise every six months, and lenders have been duped into providing financing for more than homes are worth.

"If you could see some of these products, you won't recognize them as mortgage loans," said Sen. Martin Nesbitt, an Asheville Democrat.

The bill now moves to the House for a final vote.

The proposed law would give local prosecutors charges that better fit the crimes alleged.

Currently, district attorneys who go after people for mortgage fraud charge them with obtaining property by false pretenses. The accused must have stolen property worth at least $100,000 to face a significant penalty.

"It made it more complicated," said Josh Stein, senior deputy attorney general for consumer protection. Some local district attorneys do prosecute loan originators, Stein said, but the proposed law would give them "more tools in their tool belt."

Mark Pearce, deputy state banking commissioner, said the bill is similar to a law Georgia passed in 2005 that is considered successful in tackling mortgage fraud. It addresses a problem that regulators have seen in mortgage sellers who make careers duping home buyers or lenders.

The mortgage fraud bill is one of several the legislature is considering this year to protect home buyers in a time of rising foreclosures connected to subprime lending.

A bill allowing homeowners to sue a lender in state court, no matter where the company is based, has passed the House. Originally, the bill also would have required the mortgage holder to list all fees due with foreclosure notices, but those provisions were deleted before the bill passed the House. Some of the bill's supporters said listing fees is important to consumer protection, and want the requirement restored.

A Senate bill would require companies that promise to buy homes and quickly resell them to buy the homes or assume the loans before offering them for rent or sale. That bill is sitting in a Senate committee.