CitiFinancial, Argent implement fair lending practices
By COCO SALAZAR
5/20/2005

Two companies have taken steps to ensure broker-originated and direct borrowers are given fair loan terms. Among the changes are lower limits on maximum broker fees.

Argent Mortgage Co. recently announced that it changed and added new features to its Fair Mortgage Lending Practices in an effort to better inform consumers about the mortgage lending process and ensure they pay fair costs for loans.

The Irvine, Calif.-based wholesaler said it set new limits to broker fees, which now may not exceed 5 percent of the loan amount.

"Many brokers are concerned about recent and pending legislation and its potential impact on providing fair fees for the valuable services they offer," said Jeff Gillis, Argent executive vice president of operations, in the prepared statement.

"To that end, we believe that setting higher standards for fair mortgage lending practices is vital to the health of the mortgage lending industry, and will benefit brokers, consumers and the industry at large," Gillis continued. "We hope that other organizations who share our desire to further the cause of fair lending will take similar steps."

To help its brokers better educate consumers, Argent said it created a consumer education resource center, located at www.argentloans.com, which walks borrowers through key questions about homeownership, getting a loan, and key lending laws.

Argent also added a new set of "plain language" disclosures to borrowers' early RESPA disclosure documents and final closing package to help them better understand and verify key pieces of information, and clearly identify estimated and final costs associated with a mortgage loan, the announcement said.

Another organization that has reportedly taken steps to further fair lending is CitiFinancial.

The Citigroup subsidiary -- which previously settled alleged federal lending violations and widespread deceptive and abusive lending practices with the Federal Reserve Board and the Federal Trade Commission -- announced Thursday it has made "significant changes" over the past three years in collaboration with community groups and lawmakers.

Among the changes, the Citigroup subsidiary said it banned the origination of Home Ownership and Equity Protection Act loans, beginning with the branch network. Violations of HOEPA provisions were among the accusations against the lender in the Fed settlement.

CitiFinancial also said it reduced the maximum prepayment penalty to 3% of the loan amount in the first year, 2% in the second, and 1% in the third. Full implementation of the change will be completed the third quarter. The term on prepayment penalties was also lowered, from five years to three years.

Yield spread premiums for wholesales customers were limited to 2%, according to the announcement, and maximum origination points charged on retail-originated loans were changed from five to three points.

The subprime subsidiary also noted it has a program that allows applicants to qualify for a rate comparable to Citigroup's prime channels while remaining with CitiFinancial. Another program rewards customers of lower credit quality, and who consistently make on-time payments, with lower interest rates for the remaining life of their loan.

On its agenda for later this year, CitiFinancial will be eliminating mandatory arbitration provisions on real estate secured loans originated after August 2005.

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