Proposed Federal 'Fiduciary Duty' Bill

[Secret!]

What do you all think about this pending Federal legislation whereby you'll be forced to have a 'fiduciary duty' to your borrower/customer and it will make everybody comply with 'good faith and fair dealing' standards?

Several States have this kind of a standard, but it looks like it will finally be a nationwide requirement -- what do you think about that?

[florida man]

Secret. I am all for it, as I am as straight up as they come.

It has to be for LENDERS as well as brokers. No loophole for lenders who use 17 year old phone monkeys who dont need to be licenced. Everyone has to obey the same rule.

[Secret!]

Originally Posted by florida man

Secret. I am all for it, as I am as straight up as they come.

It has to be for LENDERS as well as brokers. No loophole for lenders who use 17 year old phone monkeys who dont need to be licenced. Everyone has to obey the same rule.

From what I read, the only exception is for direct employees of commercial FDIC insured BANKS (not trick wanna-be federal savings bank 'thrifts' who merely use that license to get around State mortgage licensing laws PERIOD, oh yeah and the ego trip of saying they are a "Bank") - I mean BANK with brick & mortar, a big vault, tellers, on the street corner.

Not law yet floridaDude - plenty of time to get amended to death to give an upper hand to those special interest groups that BUY their way into the Halls of Congress and lobby voting members ... hopefully it will come out the other end in tact - our industry NEEDS this sort of thing (especially right now).

[Mac]

I heartily suggest that every broker get E&O insurance the minute this bill passes. And a lot of it too.

For those folks that have always disclosed their profit to their clientele and ensured there was a true tangible net benefit, this bill shouldn't change your business ways very much at all.

It WILL however, open the flood gates of blood sucking lawyers looking to sink their fangs into YOUR pockets and it's going to cost you to defend yourself even when you have done everything legitimately.

Remember that the client must AGREE to every bit of your fees and income and not just accept the fact that you get them.

Hypothetically, what happens if, during recission they "disagree" with the single point you charged them? By being the fiduciary, you are bound to put their interests first and give them the loan. Personally, I'd hate working for free. (did too much of it in the past and still do today, don't we all?) But I'd certainly have issues with loans closing on a regular basis that I didn't get paid on.

Don't think the word won't get around the "consumer mill" either. I think it will spread like wildfire.

Just some food for thought on this early Monday morning.

[Erik]

I bet a new contract-type form will evolve that locks in fees at the point of application. That is how Realtors manage to not give up their fees while maintaining a fiduciary responsibility to their clients.

Perhaps a non-compete type of thing will also become standard, like Realtors use, which entitles a (mortgage) broker to their fees when a borrower closes on a mortgage during the period of the signed contract, regardless of whether they used said broker or not.

Fiduciary duty is fine, but it's not a one-way street since it basically establishes agency between borrower and broker because the broker is now fundamentally making conscious decisions on behalf of the borrower.

[Secret!]

I too agree when this becomes national law, there will be a lot of adjustments that will need to be made by a great number of people - a standard of good faith and fair dealing (as we have here in CA), with the 'fiduciary duty' responsibility to put the customers need first, no E&O Policy of Insurance will ever cover ... this is an Ethical issue pure and simple.

[anthonyt2325]

From what I read, the only exception is for direct employees of commercial FDIC insured BANKS

Would be all for it if it were not for the above. The Bill should encompass anyone who originated mortgages regardless if they are FDIC insured or not.

[Erik]

The lines of ethics become blurry when people do what comes naturally to them... doing what is best for them. Sometimes what is best for one person is not best for the other, which to me is a situation where an understanding should be reached between parties. Simply saying that one party's interests trump the other party's is not how life works or should work, imho.

[florida man]

No judge is ever going to look me in the eye with a straight face if I charge 2 points on a 100k loan 30 year fixed and the borrower was fully disclosed and signed the app. Whether the borrower says 'i didnt know ' later is ridiculous as the fees are REASONABLE.

There would have to be something exculpatory vis a vis neg am, default due to stated or no doc income or a host of legitmate follies. 'hidden 3pts yield of a 500k loan amount etc........

Lets not turn this into a fearmongering 'everyone is out to 'git' mortgage brokers specifically...........whether they are honest or not!!! horse CRAP.