Borrowers defrauded by licensed mortgage brokers and originators in the state of Texas have a place to turn to recover money when all other efforts have failed.
Yet few people know about the remedy and far fewer actually take advantage of it.
It’s called the Mortgage Broker Recovery Fund, and it contains nearly $2 million for what a top state regulator calls consumers who have been “aggrieved” by mortgage loan officers or brokers and have not been able to collect through legal or other remedies.
“The fund is a last resort, if you will, after all else has been exhausted and there remains no remedy,” Danny Payne, Commissioner of the Texas Department of Savings and Mortgage Lending, told Mortgage Daily.com in a series of e-mails.
Payne said the fund has a current balance of $1.945 million. The money comes from mortgage brokers who are required to pay $20 into the fund when they receive a state license in Texas and from all regulatory penalties and fines assessed by the department.
The maximum payout is $25,000. All efforts to collect from the licensed mortgage broker “must be exhausted before a court will direct payment,” Payne said.
But just three claims are pending and only four claims totaling about $100,000 have been paid out in the last year, Payne said.
“We have paid several claims to date with a few pending,” Payne said. “We have found that several people desire to not go through the process for recovery due to court costs, personal expense in legal costs, etc., which we think is unfortunate.
“The process outlined in our statute does not seem to be over burdensome and is created for their benefit, assuming they can prove actual damages and efforts to collect have been unsuccessful,” he said.
Borrowers learn about the fund during the application process.
“We have required disclosures to each mortgage loan applicant at application stating the consumers’ rights and details of how to file a claim,” Payne said.
The state also attempts to reach “prospective claimants through consumer and industry educational efforts” that includes posting information about the fund on the department’s Web site.
Payne said while more consumers should be attempting to utilize the fund, the overall number of claims paid out is misleading because some cases are settled before a payout from the state is necessary.
“There are quite a few aggrieved consumers who receive restitution from the broker or loan officer after we investigate and issue an order to the licensed perpetrator, and prior to any ‘recovery’ claim being pursued at the court level,” he said. “There are many who ‘settle’ prior to pursuing the claim process.”
