Borrowers Fight Back Against Misleading Loans
n the wake of the housing bust, hundreds of lawsuits are being filed against real estate salespeople, mortgage brokers, lenders, and others who earned fees from large and complex mortgage deals.
The suits are on behalf of borrowers who legal advocates say were given high-cost, creative financing so they could buy homes that were way beyond their means.
In California — where one of the most publicized suits has been filed on behalf of nine families — the state affords home owners some protection not found in other states. The law says mortgage brokers must act in the fiduciary interest of their clients. Congress is considering similar legislation nationwide.
The mortgage industry argues that such laws would limit consumer choice and make loans more expensive and harder to obtain. It advocates creation of a national registry of brokers, more requirements on loan originators, and efforts to improve borrowers’ financial literacy.
Meanwhile, in California, some advocates for naïve buyers don’t think the law works. “The fiduciary duty requirement in California may be good at giving people a remedy,” says Kathleen Keest, senior policy counsel at the Center for Responsible Lending, an advocacy and research organization. “But maybe it’s not been so effective at changing the normative standards in the industry for the simple reason that it exploded too fast.”
Source: The New York Times, Noah Berger (09/25/07)
