Per se CPA violations enforceable under RCW 19.86.090
Brazier – relied on (i) borrowers signed documents denying that broker was agent and (ii) court found no law requiring broker to get best deal for borrowers (i.e., would not have been a breach if duty existed)
Single-premium credit insurance used to be the big issue
What stands out – making Marley a possible target?
Fighting Predatory Lending in Washington: State Law Theories Eric Dunn Northwest Justice Project Seattle University School of Law March 18-19, 2008
Sec. 1. A new section is added to chapter 19.146 RCW to read as follows:
(1) A mortgage broker has a fiduciary relationship with the borrower. For the purposes of this section, the fiduciary duty means that the mortgage broker has the following duties:
(a) A mortgage broker must act in the borrower's best interest and in the utmost good faith toward the borrower, and shall disclose any and all interests to the borrower including, but not limited to, interests that may lie with the lender that are used to facilitate a borrower's request. A mortgage broker shall not accept, provide, or charge any undisclosed compensation or realize any undisclosed remuneration that inures to the benefit of the mortgage broker on an expenditure made for the borrower;
(b) A mortgage broker must carry out all lawful instructions provided by the borrower;
(c) A mortgage broker must disclose to the borrower all material facts of which the mortgage broker has knowledge that might reasonably affect the borrower's rights, interests, or ability to receive the borrower's intended benefit from the residential mortgage loan;
(d) A mortgage broker must use reasonable care in performing duties; and
(e) A mortgage broker must provide an accounting to the borrower for all money and property received from the borrower.
(2) A mortgage broker may contract for or collect a fee for services rendered if the fee is disclosed to the borrower in advance of the provision of those services.
(3) The fiduciary duty in this section does not require a mortgage broker to offer or obtain access to loan products and services other than those that are available to the mortgage broker at the time of the transaction.
(4) The director must adopt rules to implement this section
King Tubby Mortgage Co. has lending agreements with 32 banks, both conventional and subprime, and a staff of six loan officers. King Tubby’s advertising, which appears in print, TV, radio, outdoor, direct mail, and elsewhere, uses the slogan: “Your guide through the mortgage jungle.” Marley, who was seeking a home equity loan to pay for a new roof that his house desperately needs, received one of King Tubby’s mailings. Being a Jamaican émigré, having never finished school and recovering from a history of chemical dependency, Marley thought it would be a good idea to have a “guide through the mortgage jungle,” so he made an appointment with King Tubby’s in late 2007…
Yellowman, a loan officer with King Tubby’s, met with Marley. Marley told Yellowman that he had already received two bids on the roof and planned to go with Maytals Roofing ($9,000). “I can understand roofs, mon,” Marley told Yellowman, “but I need you help on this mortgage business. These numbers they drive me crazy.” Yellowman assured Marley that he had “nothing to worry about” and said, “let us do our job so you don’t have to.” Marley filled out and signed a number of documents but he doesn’t remember what. However, he kept the materials, which included a mortgage broker contract form stating “King Tubby Mortgage Co. is an independent loan brokerage agency and neither agent of the borrower nor lender.”
Marley bought the house in 1992 for $140,000, and thought it was now worth about $200,000 – but three days later, an appraisal by Uhuru estimated the value at $250,000. Marley, who makes $2,500 per month at Wailer Co., has been paying $820/mo. on the same 30-year fixed mortgage since purchase, and the balance on the note (originally $125,000) dipped just under $90,000 by the time of the phone call. Marley has good credit (FICO score is over 700) and no other significant debts besides the mortgage.
A couple days later, Yellowman informed Marley that he had found “the perfect loan” for Marley, and directed him to appear at a “signing appointment” later that week. “You’ll get your cash for the roof and a new, lower rate,” Yellowman said, “I think you’ll be very happy with it.” Yellowman stated that he would be dropping off some paperwork later that same day, which turned out to be the TILA disclosure statement. Marley thanked Yellowman, and said, “I trust you with this mon. If you say this the best deal I can get, then this the loan I take.” Yellowman did not reply to this remark
Later that week, Marley signed an adjustable rate note on a $160,000 loan from “Dekker Funding.” The loan has an initial “teaser” rate of 3.6%, so for the two years Marley’s monthly payments would be $727.43. Marley was pleased with these payments, but surprised to receive a check at closing for almost $58,000 in cash. When he returned home, he called Yellowman and asked, “Why so much cash?” Yellowman answered that he thought it was important to take out “a little extra in case the roof wound up costing more.” Marley thought that was a little fishy, so he asked his friend Cliff, who works in a law office, to look over the loan papers. Marley’s heart sank when Cliff explained how, after the initial two year period, Marley’s interest rate would adjust (to LIBOR + 4% margin), which (at present rates) would push Marley’s interest rate over 9%, and monthly payments to over $1,280. “I need a hammer,” Marley said, “to hammer them down.”