STATE LEGISLATION
Members of DFWAMB recently attended a committee hearing chaired by Sen. Royce West who has but forth a bill that basically pushes the broker into a fiduciary relationship with the borrower. It includes the responsibility of the loan originator to provide the borrower with a good faith estimate for every product the borrower qualifies for and any loan that might cost the borrower less. Failure to do so would result in the originator’s liability for damages, attorney fees, and court costs. It forbids the broker from providing any loan that has a prepayment penalty. or the potential for negative amortization. It lays out standards for “ability to repay” tests. If a broker or lender violates the proposed rules, the mortgage can be voided. It would impose additional restrictions if the loan falls under the definition of sub-prime. It is too early to tell the fate of this bill but Sen. West has a great deal of respect and influence in the Texas legislature.
During the testimony given by Martin Sisk and myself, Connie Hearn, Sen. West asked if we believed that the broker should have a fiduciary responsibility to the borrower. I responded that we did not believe that was the appropriate relationship, that no broker could guarantee that he had presented the borrower with all possible loan scenarios, or that they could guarantee they had the cheapest rate and price. The broker or loan officer could only offer the rates and terms of the lenders he was approved with and the market might offer products he did not have. It was still up to the borrower to shop and compare rates.
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