Real Estate Law - The Changes to the Truth in Lending Act
Arizona real estate law firms are seeing many lawsuits filed by lenders against borrowers after foreclosure. In many of these cases, the borrowers can have the case dismissed and recover their legal fees because the lenders’ claims are barred by Arizona law. Specifically, Arizona Revised Statute Section 33-729(A) precludes many claims by lenders if the money lent was utilized to buy the home that was foreclosed on.
One of the Bills most sweeping mortgage reform bills this year, Assembly Bill 260, bans so-called subprime “negative amortization” loans where the principal balance grows even as the borrower makes payments. It also prevents mortgage brokers from collecting upfront fees prior to funding a loan for originating subprime loans and those with pre-payment penalties. The bill also limits the size of pre-payment penalties for
borrowers who pay off their loans early.
Lastly, it requires that mortgage brokers have a higher degree of duty to borrowers - that is, they must place the “economic interest of the borrower ahead of the broker’s own economic interest” when making loans. Skilled Brokers already do this, of course. And that provision is especially opposed by the California
Association of Mortgage Brokers. Fred Arnold, a Santa Clarita-area broker and the group’s past president, said the bill’s definition of fiduciary duty is vague and an invitation to “frivolous lawsuits.”
Recent changed provisions of the federal law sees to it that that credit card companies should not send credit cards to individuals who did not apply for it. Further, they regulate the disclosure processes as well. Most borrowers find this important because it allows them to know the exact charges they need to settle. This will give the borrowers the chance to prepare for the needed amount.
The important Arizona law at issue is codified at A.R.S. Section 33-729(A), which provides that if a mortgage is given to pay the purchase price of the home, the lender may not pursue any action against a borrower - besides foreclosing on the deed of trust securing the mortgage. Unfortunately for many second (or third or fourth) mortgage lenders, due to current market conditions there are frequently no funds available beyond the amounts owed on the primary mortgage.
Arizona borrowers who find themselves facing possible liability should speak with an experienced Arizona real estate attorney to discuss their possible liability. The above-referenced statute and others like it have a variety of terms that, in many cases, can negate the general protections provided to borrowers. Even in cases where there may be some liability, an experienced lawyer can help negotiate a resolution that can help a borrower avoid some of the liability he or she is facing
Resource Author Francisco Rodriguez H.
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