Fiduciary Duty for Mortgage Brokers

If Mortgage Brokers want to rise above the fray and become professionals along side Doctors, Lawyers, Accountants and other professions, then the bar to entry must be raised. Additionally Mortgage Brokers must embrace fiduciary responsibilities to their clients.

I like the following paragraph from an article from the Ethical Lending Foundation to more clearly define fiduciary responsibility:

The industry of mortgage lending is at a historical crossroads. It can either become a professional group with fiduciary standards or it can remain a retail establishment in which most of the burden of information is with consumers. Yet, they can no longer have it both ways. Yet, let us be clear that mortgage loan originators working at all types of lending institutions can owe fiduciary duties without representing to consumers that they are finding them the “best loan” or getting them the “best result.” A fiduciary standard simply would not put this burden on loan originators. By way of analogy let’s clarify. Medical doctors, lawyers, and Realtors do not have to promise that they will get their clients/patients the best surgical results, the best legal results, or the best deal on the house in order to discharge their clear fiduciary duties. Instead, they are promising to do the best job they can; to fully inform their clients of all relevant information and risks; and to carefully make sure that their clients have been provided with the necessary tools and understanding to make a fully-informed decision. Mortgage brokers, bankers, lenders, and consumer finance companies could easily adopt a fiduciary standard for their loan originators if they chose to, and it would be both practicable and fair.

It only makes sense to lead the way, and let the Mortgage Bankers and Lenders languish in the netherworld of non-disclosure similar to their hiding their fees and compensation.

Pointing Fingers

Interesting how no one wants to take responsibility. It's all "pass the buck" all the time. I read an article in the Post that Mayor Bloomberg laid some of the blame for the rise in New York foreclosures on the borrowers themselves for taking out loans they knew they could not pay. Housing and consumer advocates say the Mayor is wrong, that the lenders are to blame.

So if the disclosures are confusing to consumers, and they don't understand the Good Faith Estimate and the Truth-In-Lending Disclosure, is more of the same the answer? Wouldn't it be a better response to try to simplify a document that at more than one closing I've attended has been described by the borrower's attorney as "it's confusing, just sign it."

I guess it's one of the those cases of "it's going to get worse before it gets better."