In California, the California Supreme Court has determined unequivocally that mortgage brokers in California owe duties of honesty and truthfulness to consumers in connection with borrower transactions. See Realty Projects, Inc. v. Smith (1973) 32 Cal. App. 3d 204, 210-11 (stating California mortgage brokers have a “statutory duty, under the Real Estate Law, of fair and honest dealing imposed upon all real estate licensees (brokers and salesmen), when acting as or for mortgage loan brokers, in all of their dealings as such licensees. . . . Second, this statutory duty of fair and honest dealing by licensees, when acting as licensees, extends to their dealings with prospective borrowers before the execution of any loan authorization agreement by the loan officer and the prospective borrower.”).
This legal duty is also identified and discussed in later decisions like Wyatt v. Union Mortgage Co. (1979) 24 Cal. 3d 773, 782 (“[M]ortgage loan brokers [have] an obligation to make a full and accurate disclosure of the terms of a loan to borrowers and to act always in the utmost good faith toward their principals. . . . This relationship . . . imposes upon him the duty of acting in the highest good faith toward his principal. . . .”).
This is an important principle because if the mortgage brokers misrepresents the terms of a loan or is otherwise not truthful with respect to a loan then they are held to the same standard as real estate brokers. Moreover, brokers have an obligation to be honest.
As part of our mortgage broker litigation practice we typically see more problems with private or hard money loans then we do with commercial loans. In other words, the loans that tend to be more problematic in 2014 are private loans where the buyer may be duped into rather burdensome terms that the lender did not truthfully represent to the borrower.
For help with your mortgage broker dispute, contact our real estate attorneys at Schorr Law at 310-954-177, email@example.com or at www.schorr-law.com.