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District Court finds job recruitment texts are not “solicitations” under the Telephone Consumer Protection Act
Recently, the U.S. District Court for the Central District of California recently dismissed a lawsuit alleging violations of the Telephone Consumer Protection Act (TCPA) against a mortgage company. The plaintiff, who registered his cell phone number on the National Do-Not-Call Registry, claimed the company contacted him four times within three days via three text messages and one voicemail.
The court dismissed all three allegations, ruling that the communications were not “solicitations” under the TCPA because they aimed to recruit the plaintiff for an independent contractor position, and were not selling him anything. The messages described benefits and compensation, which the court considered recruitment efforts. The court also dismissed the plaintiff’s claim that the company used an automatic telephone dialing system, noting the complaint lacked sufficient facts to support this allegation. Additionally, the court dismissed the claim that the voicemail was prerecorded, stating that the plaintiff’s allegations of pauses and delays in the voicemail did not prove it was prerecorded. The court dismissed the case with prejudice.
CFPB Director speaks on mortgages and interest rates
On September 9, CFPB Director Rohit Chopra spoke at the National Housing Conference on how a decrease in interest rates could impact mortgage refinancing. Chopra noted that over a fifth of all mortgages currently have interest rates above 5 percent and that millions of borrowers could benefit from refinancing as interest rates decline. Despite the economic benefit that homeowners could receive from refinancing, Chopra emphasized that the costs of the process could serve as a barrier to many borrowers. Chopra also argued that, based on previous refinancing history, there were concerns that minority homeowners and those in less affluent neighborhoods would be less likely to benefit from refinancing opportunities.
To encourage more refinancing, the CFPB will: (i) closely monitor the implementation of new mortgage technologies like AI; (ii) explore the need to change existing mortgage regulations to reduce closing costs and streamline refinancing processes; and (iii) pursue rules to shift to “open banking,” which the CFPB believes could lower underwriting costs.
Chopra concluded his remarks by stating uncertainly whether the predicted interest rates cuts would relieve many homeowners of high monthly mortgages. However, he concluded that “[i]f we can collectively refinance millions of mortgages in neighborhoods across the country, it will be a huge boost for those families and their local economies.”
7th Circuit: Credit reporting agency did not provide inaccurate info
On August 7, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s decision in favor of a credit reporting agency (the defendant), finding it did not report inaccurate credit information. An individual brought a case against the defendant under the FCRA alleging the company reported inaccurate late payments in her consumer report. The individual made mortgage payments on her home from 2007 to 2015 but was later found delinquent on her mortgage. She settled her debt through a short sale and the account was closed. Years later, the plaintiff discovered her closed mortgage account was still reported as delinquent in her credit reports and contacted the defendant. The defendant confirmed the information on file, and the lower court ruled that all the information “furnished and reported by [the defendant] … was all true.”
The inaccuracy arose when the individual applied for another mortgage in 2020 with a bank. The bank contracted a third party to create a “tri-merge” report aggregating data from the three largest credit reporting agencies. This report showed inconsistent information: the third party failed to include the previous mortgage’s “closed date” or indicate a short sale. The 7th Circuit recognized there was no field for the third party to include this information. This inaccuracy led the individual to file three separate lawsuits. In the suit against the bank’s contracted company, the parties settled, and a district court dismissed the suit with prejudice. However, in this suit, the individual argued that the credit agency’s reporting was inaccurate based on its prepared report. The 7th Circuit held that the credit reporting agency cannot be held liable for a report it neither prepared nor sent, since the individual’s injury was not connected with the defendant’s credit report.
FHA finalizes rule for modernization of engagement with mortgagors in default
On August 2, the FHA finalized a rule allowing mortgagees to communicate with borrowers in default remotely, rather than in-person which was previously required, citing positive feedback after waivers of the in-person requirement were issued during the Covid-19 pandemic. According to the FHA, in an effort to modernize its practice, the final rule allows for the use of electronic and other remote methods of communication to satisfy HUD’s requirement to meet with a borrower who is in default, while preserving consumer protections. However, the rule also eliminates certain exceptions to the meeting requirements, including in situations where the borrower did not reside in the mortgage property and where the mortgaged property was not within 200 miles of the mortgagee’s offices, servicers, or branches. The final rule is effective on January 1, 2025.
FHA also noted it will soon post a draft of the Mortgagee Letter that will implement the provisions of the rule on the Single Family Housing Drafting Table for stakeholder feedback.
Financial regulators release final AVM rule for publication
On July 17, the CFPB, OCC, Fed, FDIC, NCUA and FHFA adopted a final rule titled “Quality Control Standards for Automated Valuation Models.” As previously covered by InfoBytes, this final rule implemented new provisions governing the use of automated valuation models (AVMs), which were commonly used by mortgage originators and secondary-market issuers to estimate a property’s value for loan underwriting and portfolio monitoring. The Dodd-Frank Act mandated these new rules to give mortgage originators and secondary market issuers a chance to issue quality control standards while using AVMs in determining the collateral worth of a mortgage secured by a consumer’s principal dwelling. The previous version of this final rule can be found here.
HUD updates consultant fees for its mortgage insurance program
On July 9, HUD released Mortgagee Letter 2024-13 which revised Section 203(k) of the Rehabilitation Mortgage Insurance Program and specifically updated the 203(k) Consultant Requirements and Fees among other changes. The FHA 203(k) Rehabilitation Mortgage Insurance Program provided mortgage insurance to purchase a home or refinance an existing home mortgage. These updates will be on minor remodeling and nonstructural repairs, and the rehabilitation costs for the rehabilitation mortgage must not exceed $75,000. The Mortgagee Letter also specified that a 203(k) Consultant will be required to obtain a standard 203(k) Rehabilitation Mortgage and provided a schedule of updated 203(k) Consultant fees:
- Paid up to $1,000 for repairs less than $50,000.
- Paid up to $1,200 for repairs between $50,001 and $85,000.
- Paid up to $1,400 for repairs between $85,001 and $140,000.
- Up to 1 percent of the repair costs or $2,000, whichever would be lower, for repairs over $140,000.
Section 203(k) Consultants may also charge a maximum of $375 in draw inspection fees, $120 in change order fees, $225 in reinspection fees, and mileage fees subject to IRS limitations. This Mortgagee Letter will go into effect for FHA case numbers assigned on or after November 4.
HUD proposes rule to govern the sale of FHA mortgage notes
On July 17, HUD announced a rule to regulate the sale of seriously delinquent mortgage loans insured by FHA. According to HUD, the proposed rule would increase the availability of affordable homes and enhance the stability of communities.
HUD proposed the merger of two existing demonstration programs, the Single Family Loan Sale Program (SFLS) and the HUD-held Vacant Loan Sales Program for Home Equity Conversion Mortgages (HLVS), into a single permanent program called the Single Family Sale Program. The new program will continue to sell forward and reverse mortgage loans separately, but it will be designed to provide FHA with the flexibility to maximize returns to the Mutual Mortgage Insurance Fund and manage defaulted loans more efficiently, including the sale of such loans.
The proposed rule would codify the demonstration structure and process under SFLS and HVLS. Additionally, the proposal will include guidelines for servicers on borrower notifications regarding loan sales and establishes post-sale requirements, such as a “first-look” provision for certain entities when properties become owned after foreclosure.
The proposed rule further set forth (i) HUD’s ability to reduce or reject claims that were filed late or remain in suspended status, (ii) mortgagees’ requirements to certify certain mortgages, (iii) what constitutes qualified participants in the Single Family Sale; (iv) requirements of Purchasers; (v) settlement procedures for a Single Family Sale; (vi) purchasing servicing requirements; (vii) disqualifications; and (viii) relevant definitions, among other things.
HUD is seeking public comment on the proposed rule and comments must be received by September 16.
CFPB emphasizes importance of accurate HMDA data reporting
Recently, the CFPB released a blog post to remind mortgage lenders of its commitment to maintaining a fair, competitive, and nondiscriminatory market. The CFPB’s research found a small group of lenders and loan originators allegedly failed to report HMDA data, particularly demographic information for an abnormally large percentage of their total loan originations, which could be an indicator that this group was misreporting data. The Bureau’s analysis found thousands of loan officers who reported a lack of demographic information for 95 percent or more of their mortgage applications, raising concerns about potential discrimination. The CFPB noted its work against two major lenders for failing to report accurate data under HMDA, one against a large mortgage lender (as covered by InfoBytes here) for allegedly submitting false mortgage lending information and imposed a $3.95 million civil penalty. The CFPB separately ordered another bank to pay a $12 million penalty for allegedly failing to collect accurate demographic information from mortgage applicants and reporting that applicants had chosen not to respond.
HMDA requires lenders to collect and report certain applicant data, including demographic information. If an applicant declines to provide this information in person, the lender must attempt to collect it through either visual observation or surname. Failure to comply with these requirements constitutes a violation of HMDA and Regulation C.
The CFPB has intensified its efforts to address HMDA compliance through enforcement actions and supervisory examinations. The agency emphasized its commitment to holding companies accountable for non-compliance and encourages employees who suspect violations to report them.
CFPB reports on borrowers’ issues with their mortgage servicers
Recently, the CFPB released a report examining the experiences of mortgage borrowers who struggled to make payments during the Covid-19 pandemic. For the report, the CFPB used a dataset from the 2020 American Survey of Mortgage Borrowers, derived from the National Mortgage Database. The report found that the most common challenges borrowers faced included (i) thinking they did not qualify for assistance programs; (ii) not knowing how to apply for them; and (iii) experiencing “too much trouble” with the application process. The CFPB also found many borrowers felt uncomfortable talking to their mortgage servicer and noted data and evidence that borrowers with limited English proficiency were more likely to face challenges.
The report also found that over half of distressed borrowers discussed their repayment difficulties with their servicer, and those who discussed these difficulties were more likely to receive offers for assistance (such as repayment plans or loan modifications). The most common topics discussed with servicers were forbearances, loan modifications, repayment plans, refinancing options and available government programs. Most borrowers who received a forbearance reported being satisfied with the process, but more than a third were unclear about what would happen at the end of the forbearance period and how to repay forborne payments. Some borrowers were also confused at the outset about how deferred payments would work after entering a loan forbearance.
FHA expands its definition of Government-Sponsored Enterprises (GSEs)
Recently, HUD issued Mortgagee Letter 2024-12, updating its regulations to redefine Government-Sponsored Enterprises (GSEs) as separate from other governmental institutions with respect to FHA requirements for specific loan and mortgage origination activities. Acknowledging that GSEs do not have the infrastructure to comply with FHA origination requirements due to the nature of their lending activities, HUD has exempted GSEs from those specific FHA rules. After a period of public comment, on April 23 HUD published the final rule in the Federal Register, which amends regulations in 24 CFR Parts 202 and 5. The update also clarifies the definition of “Investing Mortgagee” to specify that it is not approved as a Supervised Mortgagee, a Nonsupervised Mortgagee, or a Government Mortgagee. These changes have also been incorporated into HUD Handbook 4000.1.