Senator Paul Sarbanes
309 Hart Senate Office Building
Washington, D.C. 20510

Senator Christopher J. Dodd
444 Russell Senate Office Building
Washington, D.C. 20510

Senator John F. Kerry
421 Russell Senate Office Building
Washington, D.C. 20510

Senator Richard H. Bryan
269 Russell Senate Office Building
Washington, D.C. 20510

Senator Barbara Boxer
112 Hart Senate Office Building
Washington, D.C. 20510 

Senator Carol Moseley Braun
324 Hart Senate Office Building
Washington, D.C. 20510

Senator Tim Johnson
502 Hart Senate Office Building
Washington, D.C. 20510  

Senator Jack Reed
320 Hart Senate Office Building
Washington, D.C. 20510

Dear Senators:

The undersigned representatives of consumers write today to urge you not to support any bill which would impose a stay on class actions involving fees paid by lenders to mortgage brokers, such as that proposed by Senators Grams and Faircloth. Consumers have been truly harmed by the payment of yield spread premiums; paying thousands of dollars more for their loans than their lenders required.

Consumers who do business with mortgage brokers generally have the understanding that the brokers will provide them the loan at the lowest rate which the broker finds for them. Consumers have generally understood and agreed to a specific broker's fee to be paid directly by them -- either in cash or by borrowing more -- to the mortgage broker to compensate the broker for obtaining the loan. What consumers do not understand, and have not agreed to, is when the mortgage broker receives an additional fee from the lender, called a yield spread premium. This is a fee which is paid by the lender to the broker solely in compensation for the higher rate loan. In other words, the lender would have made the consumer a loan at one rate, but because the loan is provided at a higher rate, the broker is paid a fee, or kickback. These lender paid broker fees are not for services provided to the consumers, nor for services provided to lenders. They are solely an extra fee the broker is able to extract from the deal. The result is the borrower will have a higher interest rate for the life of the loan.

Yield spread premiums are not necessary to support the business of mortgage brokers. Indeed, many loans from many brokers do not include yield spread premiums. They benefit neither borrowers nor lenders, but only the brokers. When yield spread premiums are paid in addition to the borrower paid broker fee, the result is not only a higher price loan to the borrower, the lender then also has a loan which will be refinanced sooner. Note that the mortgage lenders are not requesting this moratorium, just the brokers. Lenders do not benefit from yield spread premiums either.

Congress passed RESPA to prohibit unearned fees to keep loans secured by homes from being more expensive than necessary. Yield spread premiums are kickbacks generally paid to brokers without providing any benefit to the consumers who are ultimately paying for them in the higher price of their home loans. The federal courts are in the process of determining whether lender paid broker fees, when combined with borrower paid broker fees, violates RESPA's prohibition against unearned fees. Let the courts do their job.

Congressional action in support of a moratorium on class action lawsuits regarding the legality of lender paid broker fees would cause significant harm to consumers. Further, it would do little to provide assistance to the industry unless Congress also passes a statute providing retroactive immunity to the industry for illegal kickbacks. There is no justification for retroactive relief to the industry because consumers have suffered by the payment of unagreed to yield spread premiums.

Consumers, not mortgage brokers, need the protection of Congress. Please do not support a moratorium, such action would hurt consumers.

Sincerely,