Question of Ethics - Predatory Lending Peter Sutton\'s home was subject to two m

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Question of Ethics - Predatory Lending

Peter Sutton's home was subject to two mortgages with payments of more than $1400 per month, but his only source of income was $1,080 monthly from social security. Hoping to reduce the size of the payments, Sutton contacted Apex Mortgage Services. According to Sutton, the broker led him to believe that he could refiance with Countrywide Home Loans, Inc., for payments of $428 per month. In the end, the broker arranged an adjustable-rate loan from Countrywide with initial payments of about $1,000 per month subject to future increases. The loan included a prepayment penalty. Sutton paid the broker a fee and signed the agreement, but later claimed that he did not understand the terms. The payments proved too much for Sutton to afford, and he defaulted on the loan. Sutton sued the broker and lender claiming violations of federal law. [Sutton v. Countryside Home Loans, Inc., __________ F.3d ______________ (11TH cIR.2009)] (SEE PAGE 578.)

1. Who is ethically responsible for Sutton's predicament? To what extent did Sutton have a duty to read and understand what he signed? Discuss

2. Sutton argued that he should not have to pay the broker's fee because the broker did not provide any services that were of value. Do you agree? Why or why not?

3. Did Countrywide, the lender, have any ethical obligation to monitor the activities of the broker? Would the resulthave been different if Countrywide had intervened before the documents were signed? Explain.

Explanation / Answer

1.

It is Sutton responsibility and duty to read any agreement before him sign. Because an agreement terms aren’t unfair to him later does not mean that he should be able to get out of the agreement. Although it is arguable that Sutton should be not held responsible for any that sets out to defraud him into signing an agreement. And it's the broker ethical responsibility to sell a loan that wouldn't turn bad for Mr. Sutton.

2.

I consider Sutton might disagree because he was paying fees to the broker, the broker should have the responsibility to look out for the best interests in regards to Mr. Sutton. I have to oppose though because the broker did in fact provide service to him. It's not really the broker’s fault that Sutton decided to sign on with that company.

3.

They could have an ethical obligation to observe the broker’s behavior if they had been alert that this broker was acting in its own self concern and creating a contract that would result in the foreclosure of a purchaser’s house. It might have been dissimilar if nationwide would had intervened and made the terms more clear then Sutton wouldn't had gotten himself into it

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