http://seattlepi.nwsource.com/national/1153ap_bankruptcy_foreclosures.html?source=mypi

So much for President Obama’s promise to limit the effect of lobbyists.

http://www.housingwire.com/2009/01/09/franks-tarp-makeover-could-include-foreclosure-mitigation/

Doctors have a different set of duties v. say, a lawyer. They are similar but different. We would say doctors have duties of informed consent. When a patient must undergo an invasive medical procedure, the patient must give his/her informed consent. This means the doctor must fully inform the patient of all the possible consequences, both positive and negative, of the procedure. The explanation happens verbally and also in writing.

Next, the doctor must make sure that the patient fully understands all the possible consequences.

Next, the doctor must make himself/herself available to answer questions about the procedure.

Compare that to folks who were not well served by their mortgage broker (since we’re on the subject of brokers, we’ll stick with brokers.)

Many say that the homeowner had a “personal responsibility” to make sure they understood the loan docs they were signing.

I assert that many laypeople do not really understand complex financial documents and many relied, *trusted* their broker making the mistake that the broker had higher duties to the consumer. Clearly many brokers flat out lied to the consumer. Ex: “This is a fixed rate loan” when in fact it was only fixed for a short period of time.

I assert that there is a power/knowledge imbalance between what a broker knows and what the average random consumer knows about mortgage lending. This is where the fiduciary duty places more of a burden on the broker to FULLY INFORM the homeowner of the POSSIBLE CONSEQUENCES of the loan.

And then the broker, in my perfect world, would also have a duty to make sure the consumer understands everything.

And then the broker, in my perfect world, would also have to make himself/herself available to the consumer to answer questions.

Think about all the times that we heard about when the consumer received bait and switch documents and at closing, they ended up in an ARM loan or they ended up paying a HUGE YSP yet the broker was nowhere to be found when the consumer called from the closing room.

Because of this, the professional assoc I founded, NAMF is actually nearing completion on an Informed Consent Process for brokers.

This is NOT a form or a checklist. It’s a process.

I’ll write a separate post today on the short sale/tax issue.

For the moment, it is true that the Department of Revenue has stated a position that it will collect excise tax on the purchase price paid by buyer and on the amount of any forgiven or released debt. While the Washington REALTORS and many escrow and title industry representatives believe this is an erroneous interpretation of state law, it is the law of the land, at least for now.
. . .

The Department has promised to reconsider its interpretation regarding this issue expeditiously. We are hopeful that a revised decision will be announced next week but there is absolutely no assurance of that.
In the meantime, this issue has a significant impact on short sales. Escrow companies will have no choice but to collect excise tax on the amount of any forgiven or released debt. Often, the amount of this debt is unknown to the escrow agent, especially since the amount of forgiven or released debt increases on a daily basis as interest and penalties increase on any defaulted loan. . . .

The Department has said that if it determines that its interpretation of the statute is in error, it will refund any excise tax wrongfully collected. That is encouraging but REALTOR members should not make any promises of refunds at the moment. “

There’s no need a fiduciary standard needs to be used. As I said, the legislature is just being lazy. They can define what you are or are not supposed to do.

The worst example is in the distressed property law, where a buyer of property can become a fiduciary of the seller. Absurd.

Fiduciary standards do not lend themselves to black and white regulatory standards. They are aspirational on the high end and fuzzy at best at the low end. In a culture that looks to meet minimum disclosure standards along the way toward earning the maximum possible on a transaction, there seems little hope for improvement. At best we will just see more required disclosures added to the pile to be signed a closing. That won’t help the borrower, it will just help keep us out of trouble with regulators.

The impact of fiduciary duty doesn’t need to wait – each of us in the industry has the power today to begin to assess what we do under a different light. Ask the question – do I have conflicts of interest that do or may influence my recommendations and actions in a manner that does not serve the borrower’s best interests? Can I eliminate those conflicts or reduce the extent to which they might influence me? How might I change my practices to better serve my borrower’s interests – whether he knows about it or not? We, each of us, need to review everything we do, even if we have been doing it since the day a respected mentor taught us to do it, looking for how we might change that practice to better serve our borrower’s interests. We will not all agree on what that means. But if we each make an honest effort to take our business in that direction, the borrower won’t have to wait for the courts to tell us how to behave.

Yeah, I know – get real Brad!

re: “If there are problems with a mortgage transaction and if the borrower had worked with a non fiduciary (a banker or lender under Washington law) the borrower is on his own.”

If the borrower works with a lender, they’re not entirely on their own–lenders are still under DFI as CLAs and DFI will take action when needed.

The impact of fiduciary duty with mortgage brokers won’t be really known until it’s tested by a law suit.

The debate over practice standards applicable to investment advisors has a lengthy history already. The debate over practice standards applicable to mortgage brokers has yet to begin.