InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Oregon Passes Loan Modification, Foreclosure Legislation
Oregon Governor Ted Kulongoski recently signed two bills, H.B. 2191 and S.B. 628, pertaining to loan modifications and foreclosures. H.B. 2191 expands Oregon law regulating debt consolidation companies to include the regulation of “debt management services” – including services in connection with loan modifications. Under H.B. 2191, a debt management service is any activity done for consideration where a person (i) receives or offers to receive funds from a consumer for the purpose of distributing the funds among the consumer’s creditors in full or partial payment of the consumer’s debts, (ii) improves or offers to improve a consumer’s credit record, credit history or credit rating, (iii) modifies or offers to modify the terms and conditions of an existing loan or obligation, or (iv) obtains or attempts to obtain a concession from a creditor including, but not limited to, a reduction in the principal, interest, penalties or fees associated with a debt. Among other requirements, debt management service providers must (i) register with the Oregon Department of Consumer and Business Services, (ii) post a surety bond of at least $10,000, and (iii) adhere to certain fee limitations. S.B. 628 requires mortgage creditors to send borrowers a notice whenever a trustee records a notice of default on property subject to a residential trust deed. The required notice must include a form that a borrower may use to request a loan modification. Additionally, S.B. 628 provides the borrower with up to 30 days from when the trustee signs a notice of default to request a loan modification, during which time the trustee cannot initiate foreclosure proceedings. If the borrower opts to pursue a loan modification, the creditor has up to 45 days to approve or deny the request and cannot initiate foreclosure proceedings until a final decision has been made regarding the modification request. Both bills became effective immediately on passage. However, S.B. 628’s loan modification provisions become effective September 29, 2009 and are scheduled for repeal January 2, 2012.
Nevada Passes Legislation Regarding Mortgage Foreclosure; Requires Licensure of Foreclosure, Loan Modification Consultants
Recently, Nevada Governor James A. Gibbons acted on four bills (AB 149, AB 151, AB 152, and AB 486) relating to mortgage foreclosure. Signed on May 29 and phasing into place by July 1, 2009, AB 152 requires certain foreclosure consultants, loan modification consultants, and others to register and be licensed as mortgage brokers or agents. Signed on May 29 and effective July 1, 2009, AB 149 concerns foreclosure mediation and will allow homeowners in default to request a mediation hearing with their lender and no further action may be taken to exercise the power of sale until the completion of the mediation. Also signed on May 29 and effective upon the governor’s signature, AB 151 requires mortgage brokers to include their license number on each loan secured by a lien on real property. Among other things, the bill also details applicable fines and penalties associated with failing to properly disclose a license number as directed. Finally, AB 486, effective October 1, 2009, became law without the Governor’s signature on May 26. This bill allows a party to a loan contract to void the contract if a person engaged in the escrow business or as a mortgage broker, mortgage agent or mortgage banker is operating without a proper license. The bill designates a $50,000 administrative fine against such unlicensed parties, and also authorizes parties to bring civil suits against unlicensed parties in certain circumstances
Nevada Law Requires Businesses to Encrypt Personal Information; Compliance with PCI Data Security Standard
On May 29, Nevada Governor James A. Gibbons signed SB 227, a bill that requires Nevada data collectors to encrypt “personal information” that is moved or electronically transferred to an outside party. If such encryption is in place, a company is shielded from liability resulting from a data breach, except in cases of gross negligence or intentional misconduct. The bill further requires data collectors that accept debit or credit cards to comply with the current Payment Card Industry Data Security Standard. The bill becomes effective January 1, 2010.
Nevada Amends State Mortgage Law
On May 29, Nevada Governor Jim Gibbons signed AB 513, a bill amending Nevada state mortgage law. Among other things, the bill (i) requires additional disclosures pertaining to fees earned by mortgage brokers, (ii) eliminates the mortgage broker, agent, and banker licensure exemption for “consumer finance companies,” and (iii) requires proof of the right to transact mortgage loans, if applicable, in another jurisdiction as a condition to obtaining, among other things, a licensing exemption. The cited portions of the bill are effective immediately.
Alabama Enacts SAFE Act Legislation
On May 21, Alabama Governor Robert Riley signed SB 249. The bill implements the mandate of the federal Safe and Fair Enforcement for Mortgage Licensing Act of 2008 by providing for the licensing of all mortgage loan originators under the Nationwide Mortgage Licensing System. In addition to technical amendments, the bill prescribes loan originator requirements relating to licensing, prior and continuing education, testing, minimum net worth, and surety bond coverage. The bill becomes effective June 1, 2009, with licensing provisions becoming effective as early as July 1, 2010.
Washington State Implements SAFE Act for Mortgage Brokers
On May 18, Washington Governor Christine Gregoire signed HB 1749 regarding the regulation of mortgage broker business practices in order to assure compliance with the federal Safe and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). The bill amends the Mortgage Broker Practices Act to implement the mandate of the SAFE Act by providing for the licensing of all mortgage loan originators under the Nationwide Mortgage Licensing System. In addition to technical amendments, the bill prescribes loan originator requirements relating to licensing, prior and continuing education, testing, minimum net worth, and surety bond coverage. This is the second piece of SAFE Act implementing legislation signed by Governor Gregoire. In April, the Governor signed HB 1621, which relates to the business practices of Washington consumer loan companies. Both bills become effective July 1, 2010, with certain provisions becoming effective January 1, 2010.
New York State Banking Department Proposes Regulations for Mortgage Loan Servicers
On May 13, the New York State Banking Department (NYSBD) issued proposed regulations that would impose registration, financial responsibility, and business background requirements on mortgage loan servicers doing business in the state. Under the proposed rules, any entity engaging in the business of servicing mortgage loan must register with the NYSBD Superintendent, unless the entity is specifically exempted under the regulations. Currently, the proposed regulations exempt state and federally regulated financial institutions, New York licensed mortgage bankers and mortgage brokers, and their employees. The proposed regulations seek to impose financial responsibility requirements that would be applicable to registrants and exempt entities alike. Under these requirements, all servicers must have (i) an adjusted net worth of at least 1% of the outstanding principal balance of loans serviced, but never less than $250,000, (ii) a ratio of adjusted net worth to total assets of at least 5%, (iii) a corporate surety bond, and (iv) an Errors & Omissions bond that varies based on the dollar amount of the loans serviced. Apart from registration and financial responsibility requirements, non-exempt entities would also need to satisfy the proposed rules’ business background and character and fitness requirements, including proof of five year experience in the mortgage servicing business. The NYSBD is currently accepting public comment on the rules, but expects to exercise its emergency authority to adopt final regulations on or before July 1, 2009.
West Virginia Enacts SAFE Mortgage Act
On May 8, West Virginia Governor Joe Manchin approved a bill to create the West Virginia SAFE Mortgage Licensing Act (S.B. 532). The Act (i) requires licensing and registration of mortgage loan originators, (ii) authorizes the Division of Banking to participate in the Nationwide Mortgage Licensing System and Registry, (iii) requires prelicensure education of mortgage loan originators, (iv) implements a prelicensure testing requirement for mortgage loan originators; (v) explains standards for mortgage loan originator license renewal, (vi) clarifies annual continuing education requirements for mortgage loan originators, and (vii) outlines prohibited acts and practices for mortgage loan originators. The effective date of the West Virginia SAFE Mortgage Licensing Act for all individuals licensed as mortgage loan originators before July 1, 2009, is January 1, 2011. For all other individuals, the effective date is January 31, 2010. In addition to creating the West Virginia SAFE Mortgage Licensing Act, S.B. 532 makes amendments to the West Virginia Residential Mortgage Lender, Broker and Servicer Act, and the West Virginia Consumer Credit and Protection Act, relating to the West Virginia Division of Banking’s participation in the Nationwide Mortgage Licensing System and Registry.
Oregon Enacts Legislation Enhancing Protections Available under the Servicemembers Civil Relief Act
On May 8, Oregon Governor Ted Kulongoski signed into law HB 2303, an Act that supplements the rights given to members of the armed forces under the federal Servicemembers Civil Relief Act (SCRA). Among other things, the SCRA limits the interest that can be charged on debts incurred by servicemembers before they enter into active duty and restricts the rights of landlords and creditors in eviction and foreclosure proceedings against servicemembers. Oregon’s legislation enhances these protections by allowing a servicemember to enforce the SCRA without regard to arbitration or choice of law provisions. Additionally, if a servicemember makes a written demand on the opposing party for relief under the SCRA within 10 days of commencing an action or filing a counterclaim, then the court may award the servicemember attorneys fees and the greater of $1,000 or actual damages. Finally, if an opposing party willfully violates SCRA, the court can award additional damages equaling the lesser of $5,000 or treble damages. The Act was passed under emergency authority and is effective immediately.
Washington Legislature Enacts “Prevent or Reduce Owner-Occupied Foreclosure Program”
On May 7, 2009, Washington Governor Christine Gregoire signed into law S.B. 6033, which creates the “Prevent or Reduce Owner-occupied Foreclosure Program” (PROOF). The Act requires the Washington Department of Financial Institutions (Department) and the Washington State Housing Finance Commission (Commission) to enter into an interagency agreement to implement and administer the program. The Commission, in consultation with the Department, will assist households and individuals facing foreclosure in obtaining work-out or modification agreements with their creditors. The Commission must also provide an annual report in which the Commission will create specific metrics and criteria by which the PROOF program can be measured. Section 4 of the Act, which would have required the State Housing Finance Commission to establish a program oversight committee, was vetoed by the Governor.