Breaking the brokers?

Mortgage brokers like David Morris say they have good reason to be perturbed by the Georgia Fair Lending Act. The law, which went into effect Oct. 1 and was created to curb predatory lending, punishes predators and legit brokers alike — at least according to a lawsuit filed last month in Fulton Superior Court.

"Let me explain how dramatic what has happened here is," says Morris, one of whose clients is a plaintiff in the complaint against the state.

Morris deals predominantly in Federal Housing Administration loans. The FHA automatically tacks on points to its loans — but the new state law allows no more than five points. Morris claims that's not enough. He and other brokers are having trouble originating loans — even good, low-interest ones — with less than five points. The government tacks on 1.5 points to FHA loans, with closing and other costs totaling three points. That leaves just half a point in earnings for Morris, who says he needs to make at least twice that.

Like other brokers in this day of strikingly low interest rates, Morris offers a landmark low of around 6 percent interest on a mortgage.

"Does a six percent interest rate with one point on origination sound predatory to you?" Morris asks. "Of course, the answer is no. It's a godsend of a loan."

Barbara Dupler, Morris's client and one of several plaintiffs, tried last month to refinance her home with an FHA loan. The interest rate on her original loan was 8.5 percent, and her mortgage payments were $1,137. Morris told her he could get her a loan at 6 percent — dropping her payments to $982.

But the lender Morris hoped would back the loan turned Dupler down, citing fear of the new law's provision on points. Her loan's points totaled 5.75 percent.

Morris says that doing away with the five-point limit would erase Dupler's and other borrowers' woes — and allow the law to do its real job of protecting borrowers from unscrupulous lenders.

"It's just really frustrating," Dupler says. "I don't understand why I have to pay the price of this law."??

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