Economic Justice

I wish all companies followed this principle!

Economic justice can be best summarized by the popular adage, “It must be a win-win.” Every transaction should benefit all parties involved. Justice requires that borrowers receive something of value for the fees they pay. The items or services received must also be worth what they are paying for them.
A practical application of the principle of economic justice is the tangible benefit test now being required in many states. Regulators require that a lender be able to demonstrate that a borrower has benefited from a refinance transaction. That benefit can be in the form of a lower interest rate, a beneficial change in term, a lower payment, or cash received to pay bills.

The fees charged in order to provide the benefit received must also be reasonable for the principle of economic justice to work. A borrower might receive a bill consolidation loan, but if the fees charged are greater than the interest they will save from the consolidation, they have not benefited. The transaction was not just.

Most states have accepted the industry standard of two years when considering whether closing costs can be recouped in a timely manner. If a borrower will not recover the costs within two years, some other tangible benefit must be demonstrated.