Court: No YSP Mandate for CA Fee Test

A California appeals court has ruled that the state's predatory-lending law does not require lenders to include yield-spread premiums in the points-and-fees test.In Wolski v. Freemont Investment & Loan, the appellate court said state legislators were aware of the mechanics of YSPs when they passed the predatory-lending law, but they did not include YSPs in the points-and-fees test. Daniel Wolski contended that the loan made by the Anaheim, Calif., mortgage broker violated the state predatory-lending law and was a "covered" loan because the points and fees exceeded 6% of the loan amount. However, FI&L successfully argued that it was not a covered loan and that the plaintiffs erroneously included the $3,700 YSP in the points-and-fees test. The California law is similar to the Truth in Lending Act, which does not include YSPs in the points-and-fees test, according to Jon Jaffe, a partner in the San Francisco office of Kirkpatrick & Lockhart. "This is good news, but it is not definitive news," Mr. Jaffe cautioned. He noted that plaintiff attorneys could pursue similar cases in other appellate districts.