Schumer Seeks Fiduciary Duty for Brokers

Sen. Charles E. Schumer, D-N.Y., wants to impose a fiduciary duty on mortgage brokers and the initial lender that funds a subprime loan under a bill he is trying to get through the Senate Banking Committee."We need a fiduciary duty" that applies to nonbank lenders that are not federally regulated, Sen. Schumer told reporters. "If we did that, the vast majority of abuses would be cleaned up without affecting the functioning of the subprime market." The National Association of Mortgage Brokers contends that there are many problems with this approach -- since relationships between businesses and consumers are usually addressed at the state level. "The idea that imposing a fiduciary/agency relationship is going to fix everything is a fallacy, and it is not well thought out," said NAMB executive vice president Roy DeLoach. The Schumer bill (S. 1299) also requires lenders to underwrite loans at the fully indexed rate and requires escrow accounts on all subprime loans. Sen. Schumer told reporters that he plans to talk to banking committee Chairman Christopher J. Dodd D-Conn., about holding a mark-up of the bill. "The sooner the better," he said.