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Complaint filed against the USDA alleging discriminatory loan practices
On March 29, the U.S. District Court for the District of Columbia received a complaint by two Black farmers, among others as part of a class action, alleging that the United States Department of Agriculture (USDA) disproportionately denied them federal farm loans. The plaintiffs alleged the USDA admitted to having a pattern and practice of discrimination against racial and ethnic minorities. The complaint delved into a complex story and long-standing claims from the two primary plaintiffs, with one farmer sharing that a loan manager stated, “I don’t lend to your kind” (italics omitted).
The plaintiffs asserted six causes of action. The first cause of action was under ECOA, where the plaintiffs alleged the USDA violated the ECOA by discriminating based on race. Second, the plaintiffs asserted a cause of action for discrimination under the APA. Third, the plaintiffs asserted a due process claim under the Fifth Amendment, alleging that the USDA allocated funds disproportionally in favor of White farmers. Fourth, the plaintiffs sought a writ of mandamus barring USDA Committeemen from intervening in the loan process. Fifth, the plaintiffs asserted a claim for declaratory relief seeking a declaration that the USDA violated their rights. Finally, the plaintiffs asserted a claim to compel the production of requested documents under FOIA.
Supreme Court agrees with Third Circuit that consumers may sue “any” government entity under FCRA
On February 8, the Supreme Court of the United States unanimously decided that a consumer can sue any government agency—in this case the U.S. Department of Agriculture (USDA)—for damages for violating the Fair Credit Reporting Act of 1970, as amended by the Consumer Credit Reporting Reform Act of 1996 (the Act). The court found that government agencies are expressly included in the definition of any “person” who violates the statute. On appeal from the 3rd Circuit, the case involved an individual who sued the USDA for monetary damages under FCRA, alleging that the USDA furnished incorrect information to a credit reporting company stating that his account was past due, damaging his credit score and impairing his ability to access affordable credit.
In affirming the 3rd Circuit’s reversal of the lower court’s dismissal of the case, the Supreme Court noted that, while the U.S. is “generally immune” from monetary judgment suits as a sovereign body, Congress can waive this immunity. Applying a “clear statement” rule, the Supreme Court interpreted the Act’s statutory language that authorizes consumer suits for money damages against “[a]ny person” who willfully or negligently fails to comply with [the law]” to constitute a clear waiver of federal government sovereign immunity. As the Court explained, “the Act defines the term ‘person’ to include “any . . . governmental . . . agency,” therefore “FCRA clearly waives sovereign immunity in cases like this one.”
Biden orders agency action on medical debt
On April 11, the Biden administration released a Fact Sheet regarding an initiative to decrease “malicious” and “predatory” billing and collection practices related to medical debts, including holding medical providers and debt collectors “accountable for harmful practices.” According to the Fact Sheet, the administration has ordered several agencies to take actions intended to “lessen the burden of medical debt and increase consumer protection.” The Fact Sheet provides “guidance to all agencies to eliminate medical debt as a factor for underwriting in credit programs,” and states, among other things, that the: (i) FHFA is reviewing the credit models that Fannie Mae and Freddie Mac use; (ii) USDA is discontinuing “the inclusion of any recurring medical debts into borrower repayment calculations”; and (iii) VA is reviewing its underwriting guidelines to ensure it minimizes or eliminates medical debt reporting as a proxy for creditworthiness. Additionally, the Fact Sheet noted that the Department of Health and Human Services is requesting data from over 2,000 providers on medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and third party contracting or debt buying practices. The Fact Sheet also noted that the CFPB “will investigate credit reporting companies and debt collectors” in regard to “patients’ and families’ rights,” which includes targeting “coercive credit reporting” and determining whether medical debts should be included in consumer credit reports.
Agencies extend Covid-19 eviction moratorium
On July 30, USDA, HUD, the VA, and FHFA extended their foreclosure-related eviction moratoria until September 30. The extensions follow President Biden’s July 29 announcement, which asked federal agencies to extend their respective eviction moratoria through the end of September following the expiration of the CDC’s moratorium on residential evictions on July 31. While Biden called on Congress to pass legislation to extend the eviction moratorium following a recent U.S. Supreme Court ruling, which stated that “clear and specific congressional authorization (via new legislation) would be necessary for the CDC to extend the moratorium past July 31”, emergency legislation to extend the federal eviction moratorium through the end of the year did not pass the U.S. House.
USDA extended its eviction moratorium for homeowners of properties financed or guaranteed by USDA through September 30 and reminded servicers that the single family foreclosure moratorium will expire on July 31. After this date, no new foreclosure filings should occur until homeowners are reviewed for new options to reduce their payments and stay in their homes, USDA noted.
FHA also announced the extension of its eviction moratorium for foreclosed borrowers and their occupants through September 30. The moratorium applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, excluding legally vacant or abandoned properties (see Mortgagee Letter 2021-19). The extension is intended to ensure borrowers with FHA-insured mortgages are not immediately displaced from their homes. FHA also noted the expiration of the foreclosure moratorium on July 31.
Additionally, VA Circular 26-21-14 extends eviction relief for properties previously secured by VA-guaranteed loans (including properties in VA’s Real Estate Owned (REO) portfolio through September 30, excluding vacant or abandoned properties.
Further, FHFA announced that Fannie Mae and Freddie Mac (GSEs) will extend their moratorium on single-family REO evictions until September 30. The current moratorium was set to expire July 31. The REO eviction moratorium applies only to properties that have been acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions. FHFA also encouraged landlords of Fannie Mae or Freddie Mac-backed properties to apply for Emergency Rental Assistance (ERA) before beginning the process of evicting a tenant for non-payment of rent, and directed tenants and landlords to the CFPB’s online Rental Assistance Finder.
Agencies announce additional actions to prevent Covid-19 foreclosures
On July 23, President Biden announced additional actions taken by HUD, the VA, and USDA, which are intended to ensure stable and equitable recovery from disruptions caused by the Covid-19 pandemic and prepare homeowners to exit mortgage forbearance. According to the Biden administration, the goal of these new measures is to bring homeowners with HUD-, VA-, and USDA-backed mortgages closer in alignment with options provided for homeowners with Fannie Mae- and Freddie Mac-backed mortgages (covered by InfoBytes here). Specifically, mortgage servicers will be required or encouraged to offer new payment reduction offers to assist borrowers.
- HUD. FHA announced enhanced Covid-19 recovery loss mitigation options to help homeowners with FHA-insured mortgages who have been financially impacted by the pandemic. Mortgagee Letter (ML) 2021-18 supersedes previously issued FHA-loss mitigation options, and will, among other things, require mortgage servicers to offer a zero-interest subordinate lien option to eligible homeowners who can resume their existing mortgage payments under the “COVID-19 Recovery Standalone Partial Claim” option. For borrowers that are unable to resume their monthly mortgage payments, FHA established the “COVID-19 Recovery Modification” option, which extends the term of a mortgage to 360 months at market rate and targets a 25 percent principal and interest (P&I) reduction for all eligible borrowers. Servicers may start offering the options as soon as operationally feasible but must begin using the new options within 90 days. These additional options supplement FHA Covid-19 protections published last June (covered by InfoBytes here), which extended the foreclosure and eviction moratorium, expanded the Covid-19 forbearance and home equity conversion mortgage extension, and established the Covid-19 advance loan modification.
- VA. The VA also announced it will offer a new “COVID-19 Refund Modification” option to assist veterans impacted by the pandemic who need a significant reduction in their monthly mortgage payments. Under the plan, the VA will be able to purchase a veteran’s past-due payments and unpaid principal—subject to certain limits—“depending on how much assistance is necessary,” and, in certain circumstances, veterans will be able to receive a 20 percent payment reduction (certain borrowers may be eligible to receive a larger reduction). Mortgage servicers will modify the loan to ensure veterans can afford future mortgage payments. Similar to the VA’s “COVID–19 Veterans Assistance Partial Claim Payment” (covered by InfoBytes here), the deferred indebtedness will be established as a junior lien, which will not accrue interest, will not require monthly payments, and will only become due once the property is sold or the guaranteed loan is paid off or refinanced. The option is available through September 30, 2021.
- USDA. The agency announced new Covid-19 special relief measures, as well as clarifications to existing policies, for servicing borrowers impacted by the pandemic. USDA noted that Chapter 18 Section 5 of Handbook-1-3555 will be expanded to include “COVID-19 Special Relief Alternatives,” which includes an option that targets a 20 percent reduction in a borrower’s monthly P&I payments and offers “a combination of interest rate reduction, term extension and mortgage recovery advance.” These measures are immediately available and will be effective through December 31, 2022. Eligible borrowers must occupy the property, must not be more than 120 days past due on March 1, 2020, and must have received an initial forbearance due to a pandemic-related hardship before September 30, 2021.
Biden extends foreclosure protections
On February 16, the Biden administration announced an extension of the Covid-19 forbearance and foreclosure protections for homeowners through June 30. According to the White House statement, the administration has directed HUD, Department of Veterans Affairs, and Department of Agriculture to (i) extend the foreclosure moratorium for homeowners through June 30; (ii) extend the mortgage payment forbearance enrollment window until June 30; and (iii) provide up to six months of additional mortgage payment forbearance, in three-month increments. The announcement notes that the extension will “directly benefit the 2.7 million homeowners currently in COVID forbearance and extend the availability of forbearance options for nearly 11 million government-backed mortgages nationwide.” The FHA extensions are reflected in Mortgagee Letter 2021-05 and the VA extensions are reflected in Circulars 26-21-04 and 26-21-05.
As previously covered by InfoBytes, FHFA announced an extension of Fannie Mae and Freddie Mac’s foreclosure moratorium until March 31 and the option for borrowers to receive an additional three-month Covid-19 forbearance extension.