In an editorial published April 9, the New York Times called for legislation that would help protect home buyers from what it called predatory mortgage brokers. Some mortgage brokers are able to get good deals for their clients, the newspaper said -- but many more exploited loopholes in the system to make a larger profit at the clients' expense. Lenders were only too happy to agree to larger loans, it said -- and both contributed to the current subprime mortgage crisis. In response, the editorial called for Congress to pass two pending bills to address the loopholes.
One of those bills would ban some or all of a class of payments called yield-spread premiums. A yield-spread premium is a payment to a loan originator (usually a mortgage broker or loan officer) based on the difference between the actual interest rate the borrower pays and the best one he or she qualified for. That is, loan originators make more money when they steer borrowers toward higher interest rates and more expensive loans. Some of them have done just that; a study by the Center for Responsible Lending showed that subprime borrowers who used mortgage brokers got much more expensive loans than those who went directly to banks. As our Cypress loan modification lawyers wrote recently, the House is considering a bill banning yield-spread premiums.
Another bill, sponsored by Minnesotan legislators, would address the other big issue surrounding mortgage brokers: their lack of legal accountability. Stockbrokers, lawyers, trustees and corporate leaders all have a fiduciary duty to their clients, which means they are under an obligation to act in the client's best interests. This obligation is intended to ensure that they don't exploit the people who trust them to do the right thing. If they do, they can be sued. That's not true for mortgage brokers, who can legally do whatever they like with their clients' money. The proposed law would fix that by giving mortgage brokers a fiduciary duty to find the best deal for their clients. It would also outlaw collusion between brokers and banks.
The Times supports both bills, and so do we. As Buena Park predatory lending attorneys, we work every day with homeowners who have been financially and personally devastated by the dishonesty of a lender, broker or other financial professional. Where there's a violation of the federal Truth in Lending Act, or another state or federal law against unfair lending practices, we can sue -- but because these predatory practices by brokers are currently legal, our hands are tied in cases where brokers steered our clients toward expensive loans. It would be good not just for our clients, but for our country, to prevent these practices -- and hold dishonest people responsible for their actions.
Based in Anaheim, Howard Law LLP represents homeowners and others in Southern California who were lied to, misled or otherwise exploited when they took out a home loan. If you believe you were deceived when you bought or refinanced your home and you're now at serious financial risk, we may be able to help. Our Garden Grove predatory lending lawyers can negotiate on your behalf for an end to expensive, unrealistic loan obligations -- and enforce your rights in a court of law, if necessary. To speak to us about your case and your legal rights, please contact us today through our Web site or by calling 1-800-872-5925.