Mortgage industry representatives say they are pleased by the outcome of the Long Beach Mortgage case.
Last week the California-based lender settled with the Department of Justice after a two-year investigation of its fair-lending practices.
Although the lender agreed to pay $4 million - to borrowers and to fund an educational program - industry representatives say the outcome could have been much worse.
Terms of the settlement, and the case itself, were "not what we were fearing," said Paul Mondor, director of regulatory compliance for the Mortgage Bankers Association of America. "Our concern was that the Department of Justice was going to force wholesalers to be their street cops."
Lenders and trade associations feared the case would hold wholesalers responsible for the actions of originators from which they purchase closed loans.
Instead, most of the $4 million will go to borrowers whose loans were underwritten by Long Beach itself.
The settlement requires Long Beach to periodically review wholesale originations, which most lenders already do, Mr. Mondor added.
The National Association of Mortgage Brokers is pleased the case doesn't require wholesalers to actively monitor broker actions or to set caps on broker fees, said Joseph Falk, a director of the group.
In fact, the group is relying for guidance on the Department of Housing and Urban Development's rule on mortgage broker fees, Mr. Falk said.
"Mortgage brokers are focusing on the HUD pronouncement," he said, "not the reaction to one specific case that is highly complicated."
But the fair-lending requirements and Real Estate Settlement Procedures Act regulations are "two different sets of concerns," said Sarah Rosen, a HUD representative . The department is due to publish a proposed rule on the subject this fall, she said.
