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VA updates Disaster Loan Modification guidance regarding re-amortization
On May 8, the Department of Veterans Affairs (VA) released clarification of its Disaster Loan Modification guidance in circular 26-17-39. (Previously covered by InfoBytes here.) The revised circular now allows a servicer to re-amortize if necessary to meet investor guidelines, so long as the new monthly payment is the same or less than the current.
Find more InfoBytes disaster relief coverage here.
7th Circuit affirms RESPA requires actual damages under QWR rules
On April 10, the U.S. Court of Appeals for the 7th Circuit affirmed the district court’s dismissal of a RESPA action because the plaintiff did not properly establish actual damages arising out of her non-receipt of a response to her Qualified Written Request (QWR) to the bank. The opinion explains that the plaintiff’s property was vandalized in 2014 and the bank received insurance money to escrow for repairs. In 2015, the bank released funds for the repairs and subsequently, the plaintiff’s contractor abandoned the job; the property was then vandalized twice more. On September 5, 2015, the plaintiff sent the bank a letter asking about the status of her loan, specifically regarding how insurance money was being handled. The bank sent a response to the letter on September 25, 2015, but the plaintiff alleges she never received the bank’s response and contends the bank’s failure to respond to her QWR caused her emotional distress and contributed to her divorce. The 7th Circuit agreed with the district court that the plaintiff failed to establish how a response to her QWR would have resolved her financial inability to make the required repairs since RESPA does not require the bank to pay money in response to a written request. Moreover, the Appeals Court held that some of the plaintiffs asserted injuries, such as her divorce, are outside the scope of RESPA.
D.C. Appeals Court holds that a condominium association may not foreclose on its super-priority lien while leaving the property subject to the first-lien mortgage
On March 1, the District of Columbia Court of Appeals held that a condominium association acting on its six-month super-priority lien for unpaid condominium fees may not perform its foreclosure sale while leaving the property subject to a first deed of trust lien, even if the terms of the sale stated that the condo unit could be sold subject to the first deed of trust. The D.C. Appeals Court was tasked with deciding whether the mortgagee’s first mortgage lien was extinguished by foreclosure of the HOA’s super-lien under D.C. Code § 42-1903.13(a)(2). In the District of Columbia, condominium associations are granted a “super-priority lien” over first mortgage lienholders, which permits an association to collect up to six months of unpaid assessments upon foreclosure on a condominium unit. Foreclosure of a unit extinguishes all liens when the proceeds of the foreclosure sale are insufficient to satisfy them. The D.C. Appeals Court held that a condominium association could not foreclose on its super-priority lien while leaving the property subject to the unsatisfied balance of the first mortgage or first deed of trust.
The D.C. Appeals Court reversed the trial court’s order granting summary judgment to the mortgagee and remanded for further proceedings.
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.
District Court grants FTC request for preliminary injunction against mortgage assistance relief operation that allegedly misrepresented material facts to distressed homeowners
On May 8, the FTC announced that the U.S. District Court for the Central District of California entered a preliminary injunction on April 27 at the FTC’s request against a mortgage assistance relief operation and its principals (defendants), prohibiting them from misrepresenting material facts to consumers and imposing an asset freeze and other equitable relief. According to a complaint filed by the FTC on April 12, which sought “temporary, preliminary, and permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief,” the defendants allegedly violated the FTC Act and the Mortgage Assistance Relief Services Rule (Regulation O) in their marketing and sale of mortgage relief services to distressed homeowners.
The FTC claimed in its press release that the defendants “misrepresent[ed] the likelihood of success” of their mortgage payment reduction program and directed “confirmed” consumers to pay thousands of dollars in “closing costs” prior to discussing the defendants’ terms with their loan holders or servicers. Furthermore, the defendants allegedly discouraged consumers from communicating with their mortgage lenders and encouraged consumers to stop payments to their lenders without informing them that their actions could lead to foreclosure or damage their credit ratings.
In granting the preliminary injunction, the court ruled that there was good cause to believe that, unless the defendants continued to be restrained and enjoined by order of the court, “the court’s ability to grant effective final relief in the form of monetary restitution and disgorgement of ill-gotten gains will suffer immediate and irreparable damage from [the] [d]efendants’ transfer, dissipation, or concealment of [a]ssets or business records.” Furthermore, the court found good cause to (i) appoint a temporary receiver; (ii) grant the FTC limited expedited discovery from third-parties related to assets; and (iii) freeze defendants’ assets.
Mortgage servicer must face TCPA allegations after court dismisses other claims
On May 2, the U.S. District Court for the Eastern District of New York granted in part and denied in part a mortgage loan owner and mortgage loan servicer’s motion to dismiss a consumer’s lawsuit alleging various violations of TILA, RESPA, FDCPA, TCPA and certain New York state laws. The court’s decision explains that the mortgage loan owner first initiated foreclosure proceedings against the consumer in 2009, but in August 2013 that action was dismissed and the parties executed a modification agreement. The consumer argues in the amended complaint that the mortgage debt is time-barred based on the six year statute of limitations to enforce the mortgage note, starting the clock with the 2009 foreclosure filing. The consumer alleges that after the statute of limitations expired, the mortgage servicer contacted the consumer by mail and by telephone to collect the mortgage debt, totaling over 600 calls placed by an autodialer and up to four threatening collection letters per month since 2015. The court, however, agreed with the mortgage companies that the execution of the 2013 modification agreement restarted the statute of limitations and therefore, the consumer’s alleged violations of New York state laws and the FDCPA failed because the mortgage debt was not time-barred. The court also held that the consumer failed to plead sufficient facts to support the alleged violations of TILA, RESPA, and New York’s General Business Law. In contrast, the court denied the mortgage servicer’s motion to dismiss the consumer’s claim under the TCPA, holding that the mortgage application signed by the consumer did not clearly consent to contact by an autodialer on his cell phone.
FDIC issues regulatory relief guidance for financial institutions in areas of Alabama affected by severe storms
On May 4, the FDIC issued a Financial Institution Letter, FIL-24-2018, to provide regulatory relief to financial institutions and facilitate recovery in areas of Alabama affected by severe storms and tornados. The FDIC is encouraging institutions to consider, among other things, extending repayment terms and restructure existing loans that may be affected by the natural disasters. Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act (CRA) consideration for certain development loans, investments, and services in support of disaster recovery. The FDIC letter also contemplates regulatory relief for banks located in the affected areas.
Find continuing InfoBytes coverage on Disaster Relief here.
FHFA issues guidance for assessing mortgage asset credit risk
On April 25, the Federal Housing Finance Agency (FHFA) issued advisory bulletin AB 2018-02 to provide guidance for Federal Home Loan Banks (FHL Banks) on the use of models and methodologies when assessing mortgage asset credit risk. The advisory bulletin applies to FHL Banks that acquire Acquired Member Asset loans, mortgage-backed securities (MBS), and collateralized mortgage obligations. Exclusions from application of the guidance include certain mortgage-related assets that are guaranteed by, or operating with the capital support of, the U.S. government, including Fannie Mae and Freddie Mac. When selecting a credit risk model that is “sufficiently robust to produce meaningful loss estimates,” FHFA advises FHL Banks to consider the following when complying with regulatory requirements: (i) mortgage asset credit risk model selection; (ii) macroeconomic stress scenarios; (iii) stress scenario determinations; and (iv) credit enhancements. The guidance permits the exclusion of legacy private label MBS from application of the guidance where the stress loss estimates would be de minimis, and provides methods for determining estimated credit losses associated with securities that cannot be modeled.
The new guidance supplements general FHFA guidance on model risk management and takes effect January 1, 2019.
OCC files amicus brief in support of rehearing in 9th circuit preemption decision
On April 24, the OCC filed an amicus curiae brief in support of an en banc rehearing of the U.S. Court of Appeals for the 9th Circuit’s March decision, which held that a California law that requires the bank to pay interest on escrow funds is not preempted by federal law. As previously covered by InfoBytes, the 9th Circuit held that the Dodd-Frank Act of 2011 (Dodd-Frank) essentially codified the existing National Bank Act (NBA) preemption standard from the 1996 Supreme Court decision in Barnett Bank of Marion County v. Nelson.
In a strongly worded brief, the OCC states that the court “errs in matters of fundamental importance to the national banking system” and “comprehensively misinterpreted” Barnett Bank and the cases upon which that decision rests. The OCC specifically argues that the court misinterpreted the legal standard for preemption articulated by Barnett Bank, ignored applicable Supreme Court standards prescribing a test for reviewing preemptive regulations, improperly created a burden of proof on national banks to demonstrate Congressional intent as to preemption, and inappropriately imposed a higher bar for “large corporate banks” to show state law interference. The OCC also argues that the court’s reliance on the effective dates of the Dodd-Frank provisions relied upon by the Court pre-date the transactions that were at issue in the case, and would therefore have no application to the facts of the case.
This filing supports the national bank’s petition for en banc rehearing filed April 13 and previously covered by InfoBytes here.
CFPB finalizes KBYO amendment to address “black hole”
On April 26, the CFPB issued a final amendment to its “Know Before You Owe” mortgage disclosure rule to address when mortgage lenders with a valid changed circumstance or other justification are permitted to reset tolerances and pass on increased closing costs to consumers using the Closing Disclosure. Last summer, as previously covered in a Buckley Sandler Special Alert, the Bureau published a proposal seeking public comment on whether to close the “black hole” that prohibited creditors from passing on cost increases (particularly rate lock extension fees) when closing was significantly delayed after the Closing Disclosure. After considering comments, the Bureau finalized the proposed amendment. The final amendment will take effect 30 days after publication in the Federal Register.