Two Senate bills have been introduced into the state legislature this session.
The first bill, SB 6381 (link opens a 2 page PDF) will change the state’s Mortgage Broker Practices Act to require that mortgage brokers owe fiduciary duties to consumers. In order to make fiduciary duties meaningful, they must be extended to include the loan originators that work under a mortgage broker. The legislature should make that crystal clear. Many LOs work out of branch offices and are unsupervised on a day to day basis by their broker, who may be located in a different office or in a different state.
[photopress:capital.jpg,thumb,alignleft]I recommend that the state legislature also include not only mortgage brokers but businesses licensed under the state’s consumer loan act. We must not forget that the two largest predatory lending lawsuits in the United States were settled with companies that were NOT mortgage brokers but consumer loan lenders: Household Finance and Ameriquest. If we do not make this change, unscrupulous mortgage brokers may just change the way they’re licensed. This loophole should be closed now.
The second bill, SB 6452 (link opens an 11 page document) also changes the state’s MBPA in an interesting way. At the bottom of page 3, this bill would remove a mortgage broker’s ability to quote a Yield Spread Premium range. Recall that brokers can see the wholesale cost of mortgage money, and elect to quote a higher interest rate to the consumer and earn the difference as profit. Sometimes, when a borrower wants a “no cost loan