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PJC Brief Supports Protecting Consumers from Illegal Mortgage Brokers' Fees

Beth Mellen Harrison, PJC's Murnaghan Appellate Advocacy Fellow, wrote an amicus brief  for the PJC that was joined by the Maryland Consumer Rights Coalition, the Community Law Center, the National Consumer Law Center, the Center for Responsible Lending, and  the  AARP, in the case of  Linda Sweeney v. Savings First Mortgage, LLC, No. 148, Court of Appeals of Maryland, September Term 2004. 
The question in this case is whether Maryland's state law, which is more protective of consumers who are buying homes and being charged "finder's fees" by mortgage brokers, is pre-empted by less protective federal law. Maryland's Finder’s Fee Law limits brokers to a maximum “finder’s fee” of eight percent of the total loan amount brokered, and limits the fee on subsequent loans on the same property in a twenty-four month period to eight percent of the amount by which the subsequent loan exceeds the initial loan.  The law thus protects consumers from repetitive, excessive fees and removes the financial incentive for brokers to engage in abusive loan flipping, in which a property is refinanced multiple times in a relatively short period without additional benefit to the consumer. 

The brief argued that neither Congress, in enacting  the federal law, nor the Maryland General Assembly, in enacting the Finder’s Fee Law, intended for this state 's  consumer protection measure to be preempted by federal law.  The brief also described the recent emergence of a subprime mortgage market beset by predatory lending practices, and noted the critical role that mortgage brokers play in the subprime market.  Because of these recent market developments, elimination of the protections provided under the Finder’s Fee Law would have a particularly harsh impact on low- and moderate-income consumers and other vulnerable populations frequently served by the subprime mortgage market.  The case is pending. 

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