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  • California begins accepting applications for their Covid-19 rent relief program

    State Issues

    On March 15, California launched their CA COVID-19 Rent Relief Program to aid landlords and renters who have unpaid rental debt due to Covid-19. In order to be eligible, a tenant must have “suffered a financial hardship” as a result of Covid-19 and have 80% or less of the area median income for their location. Landlords with eligible tenants may receive up to 80% of a tenant’s unpaid rent if they agree to waive the remaining 20%.

    State Issues California Covid-19 Mortgages Tenant Rights

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  • Nevada Dept. of Business and Industry extends work from home guidance

    State Issues

    On March 15, the Nevada Department of Business of Industry, Division of Mortgage Lending extended its provisional guidance allowing licensed mortgage loan originators to work from home (previously covered herehere, and here) until June 30, 2021.

    State Issues Covid-19 Nevada Mortgages Mortgage Licensing Licensing Mortgage Origination

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  • 4th Circuit affirms $10 million penalty for appraisal practices

    Courts

    On March 10, a divided U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act. According to the opinion, a class of borrowers filed a lawsuit against a lender and an appraisal management company, alleging the defendants relayed home value estimates provided by borrowers on their applications to appraisers and allegedly asked appraisers “to take another look” if the appraisal value came in lower than the estimated value. The plaintiffs claimed, among other things, that this practice constituted a breach of contract and unconscionable inducement under West Virginia law. Plaintiffs also filed a civil conspiracy claim against the defendants. The district court conditionally certified the class. It ultimately imposed a $9.6 million statutory penalty and awarded class members the appraisal fees paid as damages for breach of contract in an amount totaling nearly $1 million. However, no damages were awarded for conspiracy. The defendants appealed, arguing that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones.

    On appeal, the majority determined, among other things, that the acceptability of the challenged practice “shifted dramatically during the class period,” and that “[w]hat started out as a common (though questionable) practice became one that, in short order, was explicitly forbidden.” The majority determined the plaintiffs established their claim for unconscionable inducement, and that it “was unethical for Defendants to attempt to pressure or influence appraisers.” The majority also affirmed the district court’s ruling on the conspiracy claim. However, the appellate court concluded that the district court improperly granted summary judgment on the breach of contract claim and ordered the district court to reexamine whether breach of contract occurred and whether the plaintiffs suffered resulting damages.

    The dissenting judge called the majority opinion “startling,” writing that “[t]his is an unjust punishment indeed for a company that followed a practice that was both customary and legal and only later modified to avoid potentially influencing appraisers.”

    Courts Appraisal Settlement Mortgages Appellate Fourth Circuit State Issues

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  • HUD approves settlement resolving Fair Housing Act violation

    Federal Issues

    On March 8, HUD released a Conciliation Agreement between an African-American consumer and a mortgage lender to resolve allegations that the consumer’s home was appraised at an amount lower than its actual worth due to her race. Under the Fair Housing Act, a homeowner’s race may not influence the valuation of a home, HUD stated. While the lender denied having engaged in any discriminatory behavior, it agreed to pay $50,000 to the consumer and will provide mandatory training to all of its home lending advisors and client care specialists nationwide on the reconsideration of value (ROV) process and fair lending issues related to appraisals. Training will include information on how to handle complaints of discrimination in the appraisal process and the process for consumers to submit ROV requests.

    Federal Issues HUD Fair Lending Fair Housing Act Settlement Mortgages

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  • FHFA extends Covid-19 flexibilities until April 30

    Federal Issues

    On March 11, the FHFA announced the extension of several loan origination guidelines put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA extended until April 30 existing guidelines related to: (i) alternative appraisal requirements on purchase and rate term refinance loans; (ii) alternative methods for documenting income and verifying employment before loan closing; and (iii) the expanded use of power of attorney to assist with loan closings. The extensions are implemented in updates to Fannie Mae Lender Letters LL-2021-03 and LL-2021-04, and Freddie Mac Guide Bulletin 2021-10 and Selling FAQs.

    Federal Issues FHFA Covid-19 Fannie Mae Freddie Mac GSE Appraisal Mortgages

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  • New York governor signs bill setting forth eviction and foreclosure protections for small businesses

    State Issues

    On March 9, the New York governor signed the COVID-19 Emergency Protect Our Small Businesses Act of 2021 (S471A/A3207), which sets forth eviction and foreclosure protections for small businesses. Among other things, the act prohibits removal of a commercial tenant prior to May 1, 2021, except by eviction proceedings.  The act also prohibits the initiation of eviction proceedings until May 1, 2021 and stays pending eviction proceedings for a certain period of time depending on whether an eviction warrant or judgment of possession or ejectment has been issued. The act further requires landlords to provide certain pre-eviction notices. The press release notes that the act builds on prior state moratoriums on residential and commercial evictions.

    State Issues Covid-19 New York Mortgages Evictions Foreclosure Small Business

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  • Illinois reissues and extends several Covid-19 executive orders

    State Issues

    On March 5, Illinois Governor JB Pritzker issued Executive Order 2021-05, which extends several executive orders through April 3, 2021 (previously covered hereherehereherehere, and here). Among other things, the order extends: (i) Executive Order 2020-07 regarding in-person meeting requirements, (ii) Executive Order 2020-23 regarding actions by individuals licensed by the Illinois Department of Financial and Professional Regulation engaged in disaster response, (iii) Executive Order 2020-25 regarding garnishment and wage deductions (previously covered here), (iv) Executive Order 2020-30 regarding residential evictions (previously covered here), and (v) Executive Order 2020-72 regarding the residential eviction moratorium (previously covered here and here).

    State Issues Covid-19 Illinois Mortgages Evictions Debt Collection

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  • NYDFS, mortgage lender reach $1.5 million cyber breach settlement

    State Issues

    On March 3, NYDFS announced a settlement with a mortgage lender to resolve allegations that the lender violated the state’s cybersecurity regulation (23 NYCRR Part 500) by failing to report it was the subject of a cyber breach in 2019. Under Part 500.17, regulated entities are required to provide timely notice to NYDFS when a cybersecurity event involves harm to customers (see FAQs here). A July 2020 examination revealed that the cyber breach involved unauthorized access to an employee’s email account, which could have provided access to personal data, including social security and bank account numbers. NYDFS also claimed that the lender allegedly failed to implement a comprehensive cybersecurity risk assessment as required by 23 NYCRR Part 500. Under the terms of the consent order, the lender will pay a $1.5 million civil monetary penalty, and will make further improvements to strengthen its existing cybersecurity program to ensure compliance with 23 NYCRR Part 500. NYDFS acknowledged that the mortgage lender had controls in place at the time of the cyber incident and implemented additional controls since the incident. NYDFS also acknowledged the mortgage lender’s “commendable” cooperation throughout the examination and investigation and stated that the lender had demonstrated its commitment to remediation.

    State Issues State Regulators NYDFS Enforcement Privacy/Cyber Risk & Data Security Settlement Mortgages Data Breach 23 NYCRR Part 500

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  • California extends commercial foreclosure and eviction moratorium

    State Issues

    On March 4, the California governor issued Executive Order N-03-21 extending the protections against commercial foreclosures and evictions arising from the nonpayment of rent or mortgage payments due to a substantial decrease in income or increase in medical expenses caused by the Covid-19 pandemic (previously discussed here and here) to June 30, 2021.

    State Issues Covid-19 California Mortgages Foreclosure

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  • CFPB, Maryland reduce disgorgement amount in mortgage kickback case

    Courts

    On February 25, the U.S. District Court for the District of Maryland granted a motion for entry of monetary remedy filed by the CFPB and the Consumer Protection Division of the Maryland Attorney General’s Office (collectively, “Regulators”) in an action concerning the disgorgement calculation for a banker found in contempt of a 2015 consent order. As previously covered by InfoBytes, in 2020, the U.S. Court of Appeals for the Fourth Circuit found that while the district court properly determined that the banker violated the terms of the consent order (which previously settled RESPA and state law mortgage-kickback allegations), the court relied on an overbroad interpretation of the consent order and lacked the causal connection between the banker’s profits and a violation when it ordered the banker to pay over $526,000 in disgorged income. The 4th Circuit vacated the disgorgement order and remanded the case to the court to reassess the disgorgement calculation based on the banker’s more limited conduct that did not comply with the order.

    On remand, the court reduced the sanctions amount to approximately $270,000, which represents the banker’s earned income (after taxes) “during the period in which he defied the three express provisions of the Consent Order.” Noting that the 4th Circuit rejected the banker’s argument that the Regulators were required to prove a specific monetary harm arising from his violations, the court wrote that in instances “[w]here harm is difficult to calculate, ‘a court is wholly justified in requiring the party in contempt to disgorge any profits it may have received that resulted in whole or in part from the contemptuous conduct,’” particularly where the party engaged in a “pattern or practice” of such conduct.

    Courts Mortgages State Issues State Attorney General CFPB RESPA Disgorgement

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