Bill seeks to protect homebuyers in Va.

-- Two Richmond-area lawmakers are proposing legislation to make it harder for mortgage brokers to cheat buyers.

Sen. A. Donald McEachin, D-Henrico, told a news conference yesterday that mortgage brokers in 2006 were originating 45 percent of all mortgages and 72 percent of all subprime loans.

Defective subprime loans are the major source of the wave of foreclosures in Virginia and the nation, he noted.

He and Del. Jennifer L. McClellan, D-Richmond, introduced the "Truth in Lending" bill yesterday.

McEachin said the bill would apply to mortgage brokers only and not to banks or lenders. He blamed the industry's problems on "a few bad apples."

A Lorton woman, Sandra Berrios, fought back tears as she spoke about losing her house because a broker talked her into refinancing her loan.

"People are overwhelmed by data thrust at them" during deal closings, McClellan said.

Helen O'Beirne, director of Housing Opportunities Made Equal, said, under the current mortgage origination system, lending institutions offer higher commissions to brokers who arrange loans to people with shaky credit because the loan involves more paperwork and has a higher rate of refusal.

The proposed law would require brokers to act in the borrower's best interest. It would prohibit flipping of mortgages. Homebuyers who think their interest has not been served could go to court and seek treble damages.

McEachin, a lawyer, said the best-interest phrase is "a term of art" that has led to prosecutions in other states.

Steve Baugher, executive director of the Virginia Association of Mortgage Brokers, said his organization has been talking with HOME about the bill. "We agree with it in theory but have some problems with the language," he said.

He agreed there are bad apples in the industry, just as in all walks of life.

"We are out to help the consumer, that's the only way we can make a living," Baugher added.

Contact Tyler Whitley at (804) 649-6780 or .