Mortgage industry officials urged Congress Friday to temporarily bar class actions arising from lender-paid broker fees.
Janice C. Hix, president of the National Association of Mortgage Brokers, told the House Banking subcommittee on housing opportunity and community development that a proliferation of so-called yield-spread premium suits would put brokers out of business and reduce the supply of low-cost loans.
James F. McCabe, a partner in the law firm Morrison & Foerster who represents the Mortgage Bankers Association of America, said the moratorium would give Congress and regulators time to develop a comprehensive solution to the yield-spread premium dispute.
Mortgage lenders were hit by a wave of suits in the past two years after a federal judge questioned the legality of yield-spread premiums, which are bonuses brokers receive when borrowers agree to higher rates than those mandated by the underwriter.
The Respa Class Action Relief Act of 1997, introduced in April 1997 by Rep. Robert Ehrlich Jr., R-N.Y., would place a moratorium on federal and state class actions Dec. 31. It currently has 112 cosponsors. Sen. Lauch Faircloth, R-N.C., is sponsoring a similar bill in the Senate.