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You should review your lending policies for ambiguities on broker relationships in light of a U.S. Department of Justice (DOJ) settlement.
Lending agencies could be held liable for discriminatory practices of third-party originators in the wake of a suit filed by the DOJ against Calif.-based Long Beach Mortgage Co.
Long Beach mortgage entered a settlement agreement Sept. 3 with the DOJ for $3 million to compensate consumers who were allegedly overcharged for loans. The DOJ alleged that Long Beach Mortgage allowed employees and brokers to charge additional discretionary amounts for retail loans above its risk-based pricing structure, based on the applicant's race, national origin, sex and age.
Lenders say the DOJ's failure to distinguish between wholesale and retail loans forces lenders to speculate on their responsibility to monitor a broker's pricing practices.
Long Beach denied any discriminatory practices and argued it should not be held liable for wholesale lending practices of brokers. The DOJ maintained that lenders retain the right to decide whether or not to grant a loan brought to it by a broker and to set the terms and conditions of financing.
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