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On April 2, the New Mexico governor signed HB 584, which amends the Collection Agency Regulatory Act and the Motor Vehicle Sales Finance Act to, among other things, require sales finance companies obtain a license to conduct business in the state. The bill outlines licensing requirements for such companies. State and national banks authorized to do business in the state are not required to obtain a license under the Motor Vehicle Sales Finance Act, “but shall comply with all of its other provisions.” Under HB 584, the Director of the Financial Institutions Division of the Regulation and Licensing Department may utilize the Nationwide Multistate Licensing System and Registry (NMLS) or other entities designated by the NMLS in order to receive and process licensing applications. The Director is also granted the authority to issue and deny licenses.
HB 584 also amends definitions used within the state’s Mortgage Loan Originator Licensing Act, and outlines provisions related to (i) licensing, registration, renewal, and testing requirements; (ii) certain exemptions; (iii) the issuance of temporary licenses to out-of-state mortgage loan originators who are both licensed through the NMLS and complete the mandatory education and testing requirements; and (iv) continuing education requirements. HB 584 also grants the Director the authority to establish rules for licensing challenges; “deny, suspend, revoke or decline to renew a licenses for a violation of the New Mexico Mortgage Loan Originator Licensing Act”; and impose civil penalties for violations.
Furthermore, HB 584 also amends the definitions used within the state’s Uniform Money Services Act and the Collection Agency Regulatory Act by listing licensing application requirements, and granting the Director the same authorities provided above.
The amendments take effect July 1, 2019.
On March 19, the Montana governor signed HB 107, which amends the Montana Mortgage Act to, among other things, add capital requirements for mortgage servicers and net worth requirements for mortgage originators licensed in the state. The bill provides that a failure to meet or maintain the outlined standards could result in a license application denial or the suspension or revocation of a current license. Additionally, the bill adds a definition for mortgage “servicer providers” and authorizes the banking division of the Montana Department of Administration to adopt rules to (i) define false, deceptive, or misleading advertising; and (ii) establish requirements for licensee advertising using the internet. The bill is effective October 1.
On January 23, the U.S. District Court for the Middle District of Florida dismissed a putative class action suit, ruling that a national bank did not qualify as a debt collector under the FDCPA. According to the order, the three plaintiffs defaulted on loans that were originated (or acquired via merger) by the bank. The loans were ultimately satisfied by the proceeds of related short sales of the plaintiffs’ homes. Following the satisfaction of the loans, the bank sent the plaintiffs letters that stated it would not report any negative information regarding the plaintiffs’ loans to the credit bureaus or charge any late fees for a period of 90 days due to the plaintiffs’ residences being located in a FEMA-declared disaster area. The plaintiffs alleged that these letters violated the FDCPA and the Florida Consumer Collection Practices Act (FCCPA) because the bank “systematically misrepresent[ed] the status” of the plaintiffs’ satisfied loans as well as the plaintiffs’ “obligations under the loans.” The bank moved to dismiss arguing, among other things, that the FDCPA claims should be dismissed because the bank—as originator and owner of the loans—is not a debt collector under the FDCPA, and the complaint failed to contain any allegations supporting the assertion that the bank’s principal purpose as a business is the collection of debts. Moreover, the bank argued that the letters were sent purely for informational purposes, and as such, did not constitute an attempt to collect a debt under the FDCPA or FCCPA.
The court agreed with the bank, finding that the bank was “exempt from the definition of a debt collector” due to its status as the originator of the loans, and dismissed the FDCPA claims with prejudice. The court also dismissed plaintiffs’ FCCPA claims, finding that it lacked original jurisdiction over these claims because the plaintiffs failed to file a motion for class certification within 90 days of filing the complaint, as required under local rules.
On December 26, Fannie Mae issued temporary guidance relating to loan origination and loan servicing during the government shut down. According to LL-2018-06, loans are not rendered ineligible for purchase solely because a borrower’s employment is directly impacted by the shutdown. However, the lender must still be able to obtain a verbal verification of employment prior to the time of loan delivery in order for the loan to be eligible for sale to Fannie Mae. For military borrowers, the lender can use a Leave and Earnings Statement dated within 30 calendar days prior to the note date in lieu of a verbal verification. Additionally, among other things, if a borrower is furloughed on or after closing, the loan remains eligible for sale to Fannie so long as the lender has obtained all required documentation, including the verbal verification.
The guidance also addresses government verifications of certain information. For IRS transcripts, Fannie Mae notes that Desktop Underwriter will continue to process tax transcript verification reports received prior to the shutdown, but will not able to access new verification reports for validation. As a result, requests for verification reports may remain in pending status until normal government operations resume. Further, Fannie Mae is temporarily allowing lenders to obtain verification of a borrower’s social security number, if needed, prior to the delivery of the loan. If the number cannot be verified prior to delivery, however, the loan will not be eligible for sale. With respect to flood insurance, Fannie Mae advises that it will purchase loans secured by properties located in Special Flood Hazard Areas so long as the loans meet certain conditions, including proof the borrower has completed an application for the insurance and paid the initial premium. Lenders are obligated to have a process in place to identify any mortgaged properties that do not have proper evidence of active flood insurance, or where an increase in coverage or renewal of existing policies would have occurred during the shutdown, and to make sure coverage is obtained once the shutdown ends. Finally, with respect to loan servicing, servicers are authorized to offer forbearance plans to assist borrowers who cannot make their regular monthly payment as a result of the shutdown
Fannie Mae notes that additional guidance will be released if the shutdown lasts “for a prolonged period.”
On November 8, the FHFA and the CFPB announced the release of a new loan-level dataset that was collected through the National Survey of Mortgage Originations (NSMO). Since 2014, in each quarter, FHFA and the CFPB send the NSMO survey to borrowers who recently obtained a mortgage to gather feedback on their experiences, perceptions, and future expectations of the mortgage market. This is the first public release of the compiled NSMO data. The NSMO is a component of the National Mortgage Database, which the FHFA and the CFPB launched in 2012 to help regulators better understanding mortgage market trends to support policymaking and research efforts and to fulfill the mortgage survey and mortgage market monitoring requirements of the Housing and Economic Recovery Act (HERA) and the Dodd Frank Act.
On August 24, New Jersey Governor Phil Murphy signed AB 2035, which amends the New Jersey Residential Mortgage Lending Act and certain related statutes. Among other technical and clarifying changes, the amendments create a framework for the issuance of a “transitional mortgage loan originator license,” which would allow an “out-of-state mortgage loan originator” or a “registered mortgage loan originator” to obtain temporary authority to engage in the business of mortgage loan origination in New Jersey for 120 days before obtaining a New Jersey mortgage loan originator license. The amendments provide specific definitions for what constitutes a “registered mortgage loan originator” and what constitutes an “out-of-state mortgage loan originator.” Specifically, the amendments define an “out-of-state mortgage loan originator” as an individual who is registered with Nationwide Mortgage Licensing System and currently holds a valid mortgage loan originator license issued under the law of any other state or jurisdiction in the country. And the law amends the definition of “registered mortgage loan originator” to include a requirement that such a person must be validly registered as a mortgage loan originator with a depository institution employer for at least the one-year period prior to applying for licensure under the act.
The amendments revise the types of fees that residential mortgage lenders have the right to charge related to the origination, processing, and closing of a mortgage loan: (i) application fee; (ii) origination fee; (iii) lock-in fee; (iv) commitment fee; (v) warehouse fee; (vi) discount points; and (vii) fees necessary to reimburse the lender for charges imposed by third parties, such as appraisal and credit report fees. The amendments also create a different list of fees a mortgage broker may charge in connection with the brokering of any mortgage loan transaction.
The amendments take effect 90 days after the bill’s enactment.
Conference of State Bank Supervisors announces single, national exam for mortgage loan originator licensing
On August 8, the Conference of State Bank Supervisors announced that all states and U.S. territories now use a single, common exam to assess mortgage loan originators (MLOs) in order to simplify the licensing process and streamline the mortgage industry. MLSs who pass the National SAFE MLO Test with Uniform State Content (National Test) will no longer be required to take additional state-specific tests in order to be licensed within any state or U.S. territory. The National Test is part of CSBS’ Vision 2020, which is geared towards streamlining the state regulatory system to support business innovation and harmonize licensing and supervisory practices, while still protecting the rights of consumers.
Find continuing InfoBytes coverage on CSBS’ Vision 2020 here.
On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.
On May 8, the Department of Justice announced a settlement with a Minnesota community bank to resolve allegations that the lender excluded predominantly minority neighborhoods from its mortgage lending service in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). According to the complaint filed in 2017, between 2010 and 2015, the bank engaged in unlawful redlining in and around Minneapolis-St. Paul, Minnesota by meeting the residential credit needs of individuals in majority-white census tracts, but avoided serving similar needs in majority-minority census tracts. The settlement requires the bank to expand its banking services in predominantly minority neighborhoods, including opening one full service branch within the specified census tract. In addition to compliance monitoring and reporting requirements, the bank is also required to (i) employ a Community Development Officer and an Executive leader; (ii) spend a minimum of $300,000 on advertising, outreach, and education and credit repair initiatives; (iii) invest a minimum of $300,000 in a program for special purpose loan subsidies; and (iv) continue to provide fair lending training to all employees.
FFIEC releases 2017 HMDA data; CFPB releases new annual report on mortgage market activity and trends
On May 7, the Federal Financial Institutions Examinations Council released the 2017 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions covering information submitted by financial institutions on or before April 18. The data will not remain static, but instead will be updated on an on-going basis to reflect late submissions and resubmissions. The data currently include information on 14.1 million actions: 12.1 million home loan applications, 7.3 million of which resulted in loan originations, and 2.1 million in purchased loans. Observations from the CFPB on the data include: (i) total number of originated loans decreased by 12.4 percent; home-purchase lending increased by 4 percent; (ii) nondepository, independent mortgage companies accounted for 56.1 percent of first-lien owner-occupied home purchase loans (up from 53.3 percent in 2016); and (iii) the share of refinance loans to low- and moderate-income borrowers increased from 16.9 percent to 22.9 percent.
On the same day, the CFPB also released its first annual series of data points describing mortgage market activity based on data reported under HMDA. The report summarizes the 2017 HMDA data and recent trends in the mortgage market.
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Buckley Webcast: The future of the Community Reinvestment Act
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Buckley Webcast: Amendments to the CFPB's proposed debt collection
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- APPROVED Webcast: State and SAFE Act licensing requirements for banks
- John C. Redding to discuss "TCPA compliance in the era of mobile" at the Auto Finance Risk Summit
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: Data breach litigation and biometric legislation
- Buckley Webcast: Trends in e-discovery technology and case law
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium