Led by Vincent Howard, our Upland foreclosure defense attorneys have closely watched the foreclosure crisis and all of its coverage in the media. Though a lot of ink has been spilled on the issue of who was qualified to take out a loan, far less attention has been paid to the practice of guiding people into worse loans than the best loans they can qualify for. Mortgage brokers, in fact, used to get a bonus for doing this (called the yield-spread premium) until legislators made it illegal. In Ramsey v. Baxter Title Co., borrower Nancy Ramsey made similar allegations against the leader of a title company who helped her secure a loan. The Maine trial court dismissed it because the company's leader, James Lemieux, owed her no fiduciary duty, and the Maine Supreme Judicial Court affirmed.
In 2006, Ramsey was seeking to buy an apartment building for the rental income. She contacted Al Staples, a mortgage broker she had worked with before, who got her a loan with a high adjustable interest rate through Option One Mortgage Corp, secured by her own home. Staples assured her this was the best loan he could get for her, but did not disclose that Option One had an incentive program for mortgage brokers to guide borrowers into higher loans than they qualified for. Baxter Title, led by attorney James Lemieux, handled the closing. Ramsey later alleged that Lemieux provided only brief alleged summaries, failed to explain the broker's incentive program and failed to explain the transaction to Ramsey. In 2009, Ramsey sued Staples, Lemieux and Baxter, among others. Against Lemieux and Baxter, she alleged breach of fiduciary duty and duty of care. Baxter and Lemieux successfully moved to dismiss, arguing they owed no such duty.
Ramsey's appeal argued that her complaint establishes facts that do show a fiduciary relationship, but the Maine high court disagreed. Ramsey's complaint reiterated the elements of a fiduciary relationship--a great disparity between the parties' positions and influence, and the actual placing of trust and confidence by one party in the other. However, the court said, she never expressly alleged that she actually placed confidence in Baxter or Lemieux. Furthermore, Ramsey did not select Baxter as the title company and their entire relationship was their interaction at the closing. Her complaint did not allege that Lemieux and Baxter knew details of her personal and financial situations. Thus, the court found no evidence of "the kind of close, confidential relationship" required for a fiduciary duty. Similarly, the high court found no breach of a duty of care. Indeed, it said, disclosing the incentive program to Ramsey would arguably have breached Baxter's duty to the lender, its actual client. Thus, the Maine Supreme Judicial Court affirmed the dismissals.
Vincent Howard and our Tustin foreclosure defense lawyers appreciate that Ramsey feels taken advantage of--indeed, she may have a stronger argument that Staples did take advantage of her. We suspect this was a common story from the past decade, when the high number of home buyers and high interest rates helped create a situation for unscrupulous mortgage professionals to exploit. A ban on yield-spread premiums is now in effect through the Dodd-Frank financial reform law and separately through the Federal Reserve, but this is little help to people who took out bad loans during the housing bubble. Some of these people may be victims of predatory lending--for example, people guided into expensive loans based on their race rather than their income ("reverse redlining"). That's why the Corona foreclosure defense attorneys at Howard Law, P.C., review each new client's loan history for evidence of a less-than-aboveboard loan.
If you believe you were taken advantage of when you took out your home loan or refinanced, you should call Vincent Howard and the experienced attorneys at Howard Law, P.C., for help. You can reach us toll-free at 1-800-872-5925 or send us an email.