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IRS issues reporting guidance for MIP
On February 22, the IRS issued a notice providing guidance to mortgage lenders on the reporting of mortgage insurance premiums (MIP) treated as qualified residence interest. The IRS emphasizes that MIP paid or accrued through December 31, 2017 will be deductible for eligible taxpayers and informs lenders to report MIP received in 2017 on Form 1098. If a lender has already filed Form 1098 and did not include the reportable MIP, the IRS requires lenders to file corrected forms by the filing due date and to furnish corrected statements to borrowers by March 15.
Alabama extends right of redemption period
On February 22, Alabama enacted HB 90, which amends the Code of Alabama section relating to the right of redemption on residential property. The amendment provides for a one-year right of redemption period after the foreclosure sale date. Alabama requires a mortgagee to mail a notice of a mortgagor’s right of redemption at least 30 days prior to the foreclosure sale, and the amendment allows the mortgagee to use the proof of mailing of the notice as an affirmative defense to any notice requirement action. Finally, the amendment reduces the time all actions related to the notice requirement must be brought from two years to one year after the date of foreclosure.
Virginia district judge holds RESPA early intervention requirements confer private right of action
On February 20, a judge for the U.S. District Court for the Western District of Virginia ruled that the early intervention requirements of RESPA allow for a private right of action to pursue claims against loan servicers. According to the opinion, consumers filed a complaint against a mortgage servicer for allegedly violating RESPA’s early intervention requirements under Regulation X, Section 1024.39, which require the servicer to “establish or make good faith efforts to establish live contact with a delinquent borrower not later than the 36th day of the borrower’s delinquency” and promptly inform the borrower of potential loss mitigation options. The servicer filed a motion to dismiss the action for failure to state a claim, arguing that Section 1024.39 does not provide a private right of action. In denying the motion to dismiss, the court concluded that the CFPB adopted Section 1024.39 pursuant to Section 6 of RESPA, which expressly provides a private right of action and therefore, Section 1024.39 had been intended to convey a private right of action as well.
FHA offers further relief to eligible borrowers in disaster areas
On February 22, the Federal Housing Administration (FHA) announced it will extend its foreclosure relief for borrowers with FHA-insured mortgages whose homes were affected by presidentially-declared natural disasters in 2017. Under Mortgagee Letter ML 2018-01 (ML 2018-01), the new “Disaster Standalone Partial Claim” loss mitigation option will allow borrowers whose property or employment is located in designated disaster areas to cover up to 12 months of missed mortgage payments through an interest-free second loan on the mortgage without a required trial payment plan. The second loan will become payable only when the borrower sells the home or refinances. Additionally, the loss mitigation option will streamline income documentation and other requirements to expedite relief to eligible borrowers struggling to pay their mortgages. ML 2018-01 instructs mortgagees to implement the policies set forth no later than May 1.
Find more InfoBytes disaster relief coverage here.
FFIEC releases 2018 HMDA reporting guide
On February 21, the Federal Financial Institutions Examination Council (FFIEC) issued the 2018 edition of the “A Guide to HMDA Reporting: Getting it Right!” which reflects updates to the Home Mortgage Disclosure Act (HMDA) rule, effective January 1, 2018. The HMDA reporting guide is updated annually to assist institutions with their reporting requirements for the specified calendar year. Additionally, the CFPB recently launched their 2018 Loan/Application Register (LAR) Formatting Tool to assist small volume lenders in creating an electronic file to submit to the FFIEC HMDA platform, previously covered by InfoBytes here.
House passes bill that would effectively overturn Madden; others amend RESPA disclosure requirements and adjust points and fees definitions under TILA
On February 14, in a bipartisan vote of 245-171, the House passed H.R. 3299, the “Protecting Consumers Access to Credit Act of 2017,” to codify the “valid-when-made” doctrine and ensure that a bank loan that was valid as to its maximum rate of interest in accordance with federal law at the time the loan was made shall remain valid with respect to that rate, regardless of whether the bank subsequently sells or assigns the loan to a third party. As previously covered in InfoBytes, this regulatory reform bill would effectively overturn the 2015 decision in Madden v. Midland Funding, LLC, which ruled that debt buyers cannot use their relationship with a national bank to preempt state usury limits. Relatedly, the Senate Banking Committee is considering a separate measure, S. 1642.
The same day, in a separate bipartisan vote of 271-145, the House approved H.R. 3978, the “TRID Improvement Act of 2017,” which would amend the Real Estate Settlement Procedures Act of 1974 (RESPA) to modify disclosure requirements applicable to mortgage loan transactions. Specifically, the bill states that “disclosed charges for any title insurance premium shall be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by either state regulation or the title company rate filings.”
Finally, last week on February 8, the House voted 280-131 to pass H.R. 1153, the “Mortgage Choice Act of 2017,” to adjust definitions of points and fees in connection with mortgage transactions under the Truth in Lending Act (TILA). Specifically, the bill states that “neither escrow charges for insurance nor affiliated title charges shall be considered ‘points and fees’ for purposes of determining whether a mortgage is a ‘high-cost mortgage.’” On February 12, the bill was received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs.
International bank and head trader settle with SEC for CMBS fraud
On February 12, the Securities Exchange Commission (SEC) announced that it reached an agreement with an international bank and its former head trader for allegedly selling commercial mortgage-backed securities (CMBS) to customers by using false and misleading statements. The bank has agreed to repay more than $3.7 million to the affected customers According to the order, the bank misled customers about the original purchase price of the CMBS and failed to institute proper compliance and surveillance procedures in order to detect and prevent the misconduct. Additionally, the order states that the bank’s former head trader failed to properly supervise the traders making the allegedly false statements and failed to take appropriate action when he became aware of the statements.
In addition to the customer repayment, the bank has agreed to pay a $750,000 civil money penalty to the SEC, while the former head trader has agreed to a $165,000 civil money penalty and a 12-month suspension from the securities industry. According to the SEC, the settlement amounts reflect substantial cooperation by both parties during the investigation and remedial efforts taken by the bank to improve surveillance and compliance controls. Both parties consented to the order without admitting or denying the findings.
Mortgage debt collection class survives dismissal motion
On February 8, a federal judge for the U.S. District Court of the Western District of Pennsylvania denied a debt collector’s motion to dismiss, concluding that the plaintiffs are not precluded from bringing the claims against the debt collector even though the plaintiffs previously settled similar claims with the lender and loan servicer for their maximum recovery amounts under the Fair Debt Collection Practices Act (FDCPA). According to the third amended complaint, a pair of named plaintiff homeowners, defaulted on their mortgages in 2010 and worked out a new payment plan with their lender; however, they continued to receive conflicting foreclosure communications from their lender, servicer, and an associated debt collector, which resulted in the payment of allegedly unauthorized fees and expenses. In 2011, the two homeowners filed class action claims against all three entities and in 2016, they settled one claim with the lender and three claims with the servicer.
In response to the third amended complaint, the debt collector filed a motion to dismiss the remaining class claim, which includes “all former or current homeowners” who received communications from the debt collector demanding foreclosure fees and costs that had not yet been incurred. The debt collector argued, among other things, in its dismissal motion that the plaintiffs are not entitled to any further damages for the alleged FDCPA violations because they previously exhausted the $1,000 maximum penalty per borrower permitted by the FDCPA by settling with the mortgage servicer. In denying the motion, the judge disagreed with the debt collector’s argument, noting that it cannot be assumed the settlement with the mortgage servicer was an admission of liability under the FDCPA; therefore, the judge reasoned, the court cannot credit the debt collector “with the full impact of the [servicer’s] settlement funds that maybe were (or maybe were not) allocated to that specific FDCPA claim.” The judge also noted that there is a “major split” on this issue among U.S. district courts.
Ginnie Mae tells companies to address VA refi churning
On February 8, Ginnie Mae announced that it had sent notices to a small number of issuers in the Ginnie Mae multi-issuer mortgage-backed security (MBS) program warning them about their VA mortgage loan prepayment speeds, which deviated from the norm and put the veteran benefit at risk. According to Ginnie Mae, the notices require the issuers to create a “corrective action plan that identifies immediate strategies to bring prepayment speeds in line with market peers.” Issuers unable to correct their performance risk losing access to Ginnie Mae multi-issuer pools. The warnings are a result of a task force formed between Ginnie Mae and the Department of Veterans Affairs (VA), to address refinance speeds and aggressive marketing in the VA loan space.
As previously covered by InfoBytes, Ginnie Mae also issued APM 17-06 which imposes tougher pooling standards on certain refinance loans. Additionally, the VA issued new policy guidance for its Interest Rate Reduction Refinance Loans (IRRRL) disclosures in an effort to assist borrowers in deciding whether the IRRRL is in their best interest, previously covered by InfoBytes here.
OCC requests comments on registration of mortgage loan originators
On February 6, the OCC published a notice and request for comment in the Federal Register concerning its information collection entitled, “Registration of Mortgage Loan Originators.” Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), any person employed by a regulated entity, who is engaged in the business of residential mortgage loan origination, must register with the Nationwide Mortgage Licensing System and Registry (NMLS), obtain a unique identifier, and adopt policies and procedures to ensure compliance with the SAFE Act’s requirements. The NMLS is structured to, among other things, (i) improve information sharing between regulators; (ii) increase mortgage loan originator accountability; and (iii) provide consumers easy access to background information on mortgage loan originators, including publicly adjudicated disciplinary and enforcement actions. The OCC retains enforcement authority under the SAFE Act for financial institutions (including federal branches of foreign banks) with total assets of $10 billion or less. Comments on the notice must be received by April 9.