Lenders are edgy, the Department of Housing and Urban Development is under fire, and mortgage industry lawyers are throwing rocks. The reason: a federal judge's ruling in the lawsuit filed against Crestar Mortgage Corp. and Saxon Mortgage Inc.

The suit charged the lenders, both based in Richmond, Va., with violating the Real Estate Settlement Procedures Act by paying fees to brokers who had already been paid by borrowers. The case was forced into the spotlight following a ruling last week by Judge Albert V. Bryan Jr. of the U.S. District Court for the Eastern District of Virginia, in Alexandria, who decided such fees were prohibited by Respa.

Almost a dozen similar suits are pending nationwide.

For mortgage companies, the ruling has been a lightning rod.

The Mortgage Bankers Association of America met last week, in part to set up a fund to deal with the problem, industry insiders say. The trade association is reportedly considering hiring a permanent outside counsel to advise companies faced with such suits.

In addition, Marc C. Smith, president of Crestar Mortgage, has reportedly been in discussions with Rep. Jim Leach, R-Iowa, chairman of the House Banking Committee, to discuss possible legislation to resolve the problem. Neither Mr. Smith nor Rep. Leach were available for comment.

Meanwhile, other lenders are weighing in with further comment.

"We are informed that a judge in Virginia just ruled on a motion to dismiss (without any facts before him) that yield spread premiums are a per se violation of Respa. ... This is clearly a situation in which HUD should act to clarify the law. ... The key point is that payments by lenders to brokers for providing mortgage brokerage services are not now and never have been prohibited by Respa," wrote Angelo Mozilo, chairman of Countrywide Home Loans, Pasadena, Calif., in a letter to HUD's assistant secretary for housing, Nicolas P. Retsinas.

A HUD statement of policy on the issue is now pending before the Office of Management and Budget.

The Mortgage Bankers Association has sent a letter to the OMB urging speedy approval of the policy statement.

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