Three years after scandalous abuses in the subprime mortgage market made national headlines, you will have a hard time finding local scammers breaking rocks in Massachusetts jails and prisons.

In a major oversight, Beacon Hill has spent the past few years sitting on legislation that would make mortgage fraud a criminal offense in the Bay State.

Soon, the Legislature may finally plug this inexplicable gap in our legal statutes. But the delay has left Attorney General Martha Coakley fighting a battle against all sorts of unsavory characters, with a reliance on civil fines and injunctions to get the job done.

“Massachusetts not having the statute has been unfortunate,” Coakley told me last week. “It has made it very difficult for us to basically take a look at some of the behavior we saw.”

If the bill finally passes, Massachusetts will join a growing number of states with similar laws. But why it has taken so long to get to this point, given all that has happened, is hard to explain.

On The Cutting Room Floor

In the fall of 2007, Coakley issued sweeping new regulations cracking down on shady practices in the mortgage industry, while state lawmakers passed a series of reforms as well.

But missing from the package was an already long-standing proposal to pass a state law criminalizing mortgage fraud. It apparently was left on the cutting room floor, after which it sank into a legislative black hole on Beacon Hill, a worthy idea that lawmakers somehow never got around to focusing on.

Whatever the reason, the delay has been devastating.

In February, a Quincy man was sentenced to more than three years in prison on a federal mortgage fraud case involving a Dorchester triple-decker. Mortgage fraud is a crime under federal law.

But this is the kind of run-of-the-mill case that state prosecutors should have been able to bring. The feds only got involved because, in a quirk, the straw buyer didn’t come from the nearest street corner, but from Pennsylvania, meaning the scheme crossed state lines.

So far, convictions at the state level have been “rare,” Coakley acknowledged, with prosecutors having had to rely on other laws.

Coakley raised the question of whether having a law in place years earlier might have helped stop some of mortgage scams before they ever got rolling. There was a certain pile-on effect, she noted, the most odious being a later wave of fraudsters who targeted struggling homeowners with foreclosure rescue schemes.

“Had we had a criminal statute in place earlier, some of this behavior might have been deterred,” the AG said.

To her credit, Coakley has been able to use civil anti-fraud penalties to put some well-deserved heat on both mortgage fraudsters and the shady lenders that fueled their schemes.

Coakley put the hammer to subprime mortgage factories like California-based Fremont. The company agreed to pay $10 million and halt foreclosures on suspect loans.

And the AG has also won numerous court injunctions to help shut down various shady operators.

But if the feds can get more than three years in jail for a low-level Quincy real estate speculator, certainly state prosecutors armed with the right laws, especially a veteran prosecutor like Coakley, could have bagged a few fraudsters of their own.

Fish In A Barrel

These schemes were often so brazen and easy to detect that prosecuting them should have been like shooting fish in a barrel.

A small-time real estate scammer would buy a rundown triple-decker at a rock bottom price. After some superficial work at best, the fraudster would dump all three condos in the triple-decker for $300,000 or more apiece in phony sales to straw buyers – basically those desperate enough to trade their signature on mortgage paperwork for a few thousand bucks.

Six to nine months later, like clockwork, the lender would buy back the property at foreclosure. Some were stranger than fiction, including one scheme in which the fraudsters stole the identity of a former nun in order to line up subprime mortgages for their phony sales.

It would almost be amusing if it wasn’t so maddening.

Fortunately, common sense appears to have finally found a champion on Beacon Hill in State Sen. Susan Tucker (D-Andover). Tucker is not afraid to rock the boat, having closed a loophole a few years ago allowing Lawrence develop into a major insurance fraud center. Now, Tucker is determined to close the mortgage fraud loophole as well, and is confident that a proposal to criminalize this activity in Massachusetts will finally pass.

“I think most people agree this is criminal behavior,” Tucker said. “For years everyone turned the other way because so many people were making money off of this. It’s only because of the serious consequences to our economy that people are now saying ‘how did this go on?’”

I guess we can always look at the bright side, such as it is. After all, finally closing the mortgage fraud loophole here in Massachusetts will be a great deterrent for the future, Coakley contends.

It’s a view endorsed as well by the Massachusetts Bankers Assoc., which has thrown its support behind the latest proposal to make mortgage fraud a criminal offense.

“I think the most important value now is in sending a clear message to the white collar community that this behavior, if engaged in the future, could be criminally prosecuted,” Coakley said.