ABC National Bank regularly purchases mortgage loans from ACME Mortgage Company, a local mortgage broker. ACME places a mandatory arbitration clause in each of its mortgage documents. ACME believes this clause is necessary because of state laws governing arbitration. Is this clause a problem for ABC National?
The presence of a mandatory arbitration clause alone is not necessarily a problem for ABC National Bank. Such clauses are common in mortgage documents and may be influenced by state laws governing arbitration. However, if there are other predatory or abusive lending practices evident in the loans sold by ACME Mortgage Company, then ABC National Bank should be concerned. The clause itself does not automatically imply abusive practices, and thus, by itself, is not a problem for the bank.
he presence of a mandatory arbitration clause alone is not necessarily a problem for ABC National Bank. However, if there are other predatory or abusive lending practices evident in the loans sold by ACME Mortgage Company, then ABC National Bank should be concerned. Otherwise, the arbitration clause may simply be a standard part of the mortgage documents influenced by state laws governing arbitration.