Schumer Pushing Fiduciary Duty for Brokers

Mortgage brokers and other nonbank lenders would have a fiduciary duty to their borrowers under a bill introduced by Sen. Charles E. Schumer, D-N.Y., that also holds lenders accountable for the subprime loans they fund and purchase from brokers.The bill introduced by Sens. Schumer, Robert P. Casey Jr., D-Pa., and Sherrod Brown, D-Ohio, amends the Truth in Lending Act to prohibit all lenders from steering borrowers into loans they cannot afford or repay. It also requires all originators to underwrite loans at the fully indexed rate and mandates the establishment of escrow accounts. The subprime market has been the "Wild West" of the mortgage industry, and this bill "brings the sheriff back in town," Sen. Schumer said. The senators are also calling for a $300 million appropriation to fund foreclosure prevention counseling that could help 300,000 distressed subprime borrowers. The senators are also calling on mortgage companies to voluntarily match these federal funds.