Real Estate Law – The Changes to the Truth in Lending Act

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  As the as the financial train wreck from the housing crash keeps rumbling down the track across California, state lawmakers sent several bills that crack down on mortgage fraud to Gov. Arnold
Schwarzenegger’s desk which effectively kill the loan modification industry.

Recently California legislature jointly passed bills to ban loan modification companies from asking for upfront fees and make mortgage brokers put their customers’ financial needs ahead of their own
commissions. The Bills also propose to limit the size of pre-payment penalties and would add California to the list of states that allow prosecutors to file specific felony charges for those accused of mortgage fraud.

One of the Bills most sweeping mortgage reform bills this year, Assembly Bill 260, bans so-called subprime “negative amortization” loans where the principal balance grows even as the borrower makes payments. It also prevents mortgage brokers from collecting upfront fees prior to funding a loan for originating subprime loans and those with pre-payment penalties. The bill also limits the size of pre-payment penalties for
borrowers who pay off their loans early.

Lastly, it requires that mortgage brokers have a higher degree of duty to borrowers – that is, they must place the “economic interest of the borrower ahead of the broker’s own economic interest” when making loans. Skilled Brokers already do this, of course. And that provision is especially opposed by the California
Association of Mortgage Brokers. Fred Arnold, a Santa Clarita-area broker and the group’s past president, said the bill’s definition of fiduciary duty is vague and an invitation to “frivolous lawsuits.”

These bills were signed into law as California continues to ponder what to do in the wake of more than 410,000 foreclosures since the start of 2007, the aftermath of predatory lending practices and greedy brokers. It’s also a time of high unemployment in the state and a devastated real estate and lending economy.

During the housing boom, mortgage brokers could earn fees of $20,000 or more for making risky subprime adjustable-rate loans, often to unsuspecting A contrary view would be the borrowers knew what they were
doing and decided to roll the dice in a surging market. many unqualified buyers got into homes they knew they could not afford but decided to engage in speculation in hopes that the anticipated record appreciation
in value would continue.

The important Arizona law at issue is codified at A.R.S. Section 33-729(A), which provides that if a mortgage is given to pay the purchase price of the home, the lender may not pursue any action against a borrower – besides foreclosing on the deed of trust securing the mortgage. Unfortunately for many second (or third or fourth) mortgage lenders, due to current market conditions there are frequently no funds available beyond the amounts owed on the primary mortgage.

Arizona borrowers who find themselves facing possible liability should speak with an experienced Arizona real estate attorney to discuss their possible liability. The above-referenced statute and others like it have a variety of terms that, in many cases, can negate the general protections provided to borrowers. Even in cases where there may be some liability, an experienced lawyer can help negotiate a resolution that can help a borrower avoid some of the liability he or she is facing You can be published without charge. You can to republish this article in your website or blog. Please provide links Active. Real Estate Law

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