Md. high court upholds state limits on loan fees

Broker charged $19,215 for bus driver's refinances

August 10, 2005|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Mortgage brokers that charge consumers fees for handling mortgage and refinance loans are subject to a state law that sets limits on such fees, Maryland's highest court ruled yesterday.

The Court of Appeals said the state's Finder's Fee Law, which sets limits on broker fees, is not preempted by a federal law designed to protect lenders from state regulation.

The opinion reversed a ruling of Frederick County Circuit Court, which had dismissed a consumer lawsuit against Savings First Mortgage LLC.

Frederick homeowner Linda R. Sweeney sued Savings First in March 2004, alleging the mortgage broker fee charged to refinance her loan violated the Maryland Finders Fee Law. The law sets limits on fees as a percentage of the total loans and limits fees charged for refinance loans.

Savings First had obtained a $140,250 refinance loan in August 2000 for Sweeney and charged $8,427 for brokering the loan, according to court documents. In July 2001, Savings First arranged a replacement mortgage refinance loan for the same home for $158,400 and charged $10,788, rolling the fee into the amount financed, the court decision said.

The Circuit Court dismissed the case after Savings First argued that federal law prohibits states from limiting charges that apply to qualifying mortgages.

In its opinion, the Court of Appeals said the Finder's Fee Law applied to mortgage brokers and the fees they charge borrowers, and that mortgage brokers are outside the reach of the federal statute.

Attorneys for the plaintiff viewed the opinion as a victory for consumers who are preyed on by predatory lenders. Attorneys for Savings First could not be reached yesterday and it was unclear whether Savings First would pursue the case.

"I'm very hopeful that the broker will go ahead and reimburse this woman for the amount of money she was overcharged," said Paul Bland, a staff attorney with Trial Lawyers for Public Justice in Washington, which argued the case before the Court of Appeals.

He said predatory lenders "charge [borrowers] fees much, much greater than the amount they would save by lower interest rates. They particularly target old people and less sophisticated people. This company and others have been overcharging consumers in amounts that are illegal under this law."

In the Frederick Case, Bland said, Savings First charged fees on the two refinance loans of more than $19,000. That's more than Sweeney, a bus driver, earned in a year.

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