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FDIC announces North Carolina disaster relief
On September 13, the FDIC issued FIL-65-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of North Carolina affected by remnants of Tropical Storm Fred. The FDIC acknowledged the unusual circumstances faced by institutions in affected areas, and suggested institutions take certain steps to meet the needs of their communities and keep the FDIC informed of business impacts. These steps include (i) working with borrowers to adjust or alter loan terms in a safe and sound manner; (ii) identifying potential community development activities to revitalize or stabilize the disaster area (which the FDIC noted may receive favorable CRA consideration); (iii) monitoring potentially impacted municipal securities and loans; (iv) notifying the FDIC of delays in meeting filing and publishing requirements, or in the event temporary banking facilities are needed; and (v) processing consumer requests under Regulation Z for a waiver or modification of the three-day rescission period for dwelling-secured loans in the event of a “bona fide personal financial emergency.”
6th Circuit reverses FCRA ruling over misreported debt
On September 13, the U.S. Court of Appeals for the Sixth Circuit reversed a district court’s summary judgment ruling in favor of a defendant mortgage servicer, holding that a jury could find the defendant “willfully and negligently” violated the FCRA by incorrectly reporting a past due account status to consumer reporting agencies (CRAs) for over a year after the plaintiff’s mortgage loan was discharged in bankruptcy. The plaintiff discovered the loan was being mis-reported as past due when he checked his credit score in advance of buying a car and found it to be lower than expected. The plaintiff disputed the tradeline, and the CRAs forwarded his dispute to the mortgage servicer. In response to the dispute, the servicer changed the plaintiff’s account status from past due to “no status”—which meant the status had not changed from the prior month—and continued reporting it to the CRAs.
The plaintiff sued the servicer for violating the FCRA, claiming the defendant knew the loan had been discharged but still reported it as past due for more than a year. The defendant countered, among other things, that because the plaintiff “chose not to apply for a car loan” he could not prove that he was harmed by negligence due to the mis-reporting. The district court ultimately ruled that (i) the plaintiff did not have standing to allege a negligent violation of the FCRA, and (ii) no “reasonable jury” would find that the defendant had willfully violated the statute.
On appeal, the 6th Circuit disagreed, finding that the plaintiff had standing to assert a negligence claim under FCRA and that a reasonable jury could find a negligent and willful violation. The court pointed out that the plaintiff’s credit score increased by almost 100 points once the tradeline was removed, suggesting the servicer’s mis-reporting did harm the plaintiff and gave him standing to sue in negligence. The court also found the defendant “knew that [the plaintiff’s] loan had been discharged but for more than a year told the credit-reporting agencies that the loan was past due. A jury could therefore find that [the defendant] was either incompetent or willful in its failure to correct its reports sooner.” The 6th Circuit added that the defendant’s implementation of policies to guide its analysts through resolving credit disputes “hardly disproves as a matter of law that [the defendant] acted willfully.” The court held the defendant was not entitled to summary judgment and remanded the case for further proceedings.
CFPB releases 2022 HMDA filing instructions
On September 9, the CFPB released the Filing Instructions Guide for HMDA data collected in 2022 that must be reported in 2023. The guide states that there are no significant changes to the submission process and that the required data fields to be collected and reported have not changed. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide, which was issued the same day. According to the most recent HMDA reporting guide by the FFIEC, the next HMDA report is due for entities on March 1, 2022.
FHA issues presidentially declared major disaster area guidance
On September 10, FHA issued FHA INFO 21-7, which reminds mortgagees originating and/or servicing FHA-insured mortgages in the U.S. and its territories of guidance applicable in the event of a presidentially declared major disaster area (PDMDA) during the Covid-19 pandemic. For PDMDAs issued in connection with Covid-19, mortgagees must continue to follow existing guidance for borrowers already on a Covid-19 loss mitigation or recovery option. For all other borrowers, mortgagees must evaluate borrowers for all loss mitigation options available to them, which includes any applicable “PDMDA or COVID-19 Loss Mitigation Options or COVID-19 Recovery Options,” based on the reason for hardship. In addition, for all “mortgaged properties in areas covered by PDMDA declarations not related to the COVID-19 National Emergency,” FHA provides a number of other reminders to mortgagees, including: (i) FHA-insured forward mortgages secured by properties in a PDMDA are subject to a 90-day foreclosure moratorium after a disaster declaration; (ii) mortgagees should reach out to borrowers who may need loss mitigation assistance as soon as possible following the presidential declaration; and (iii) FHA-insured HECM loans secured by PDMDA properties that are due and payable for reasons other than the death of the last surviving borrower or the end of a deferral period due to the death of an eligible non-borrowing spouse are subject to a 90-day HECM foreclosure timeline extension.
HUD charges homeowner association with Fair Housing Act violations
On September 3, HUD announced a Charge of Discrimination against a Florida-based homeowner association (respondent) for allegedly violating the Fair Housing Act by discriminating against residents with disabilities. According to HUD, the complainants alleged that the respondents refused to accommodate their request to leave their shoes outside of their units to prevent tracking contaminants inside and exacerbating a respiratory disability. In addition, the complainant allegedly provided medical documentation from a physician, which advised the need to keep their home free from outdoor allergens, chemicals, or pollutants. HUD determined that a disability under the Act existed, and that the respondents refused to grant a reasonable accommodation. The charge will be heard by a United States Administrative Law Judge unless a party elects to have the case heard in federal district court.
FHA announces temporary partial waivers to HECM policies
On September 2, the FHA announced FHA INFO 2021-70, which issues the following temporary partial waivers to its Home Equity Conversion Mortgage (HECM) policies for those impacted by the Covid-19 pandemic: (i) the temporary partial waiver of Mortgagee Letter 2015-11, which allows mortgagees to offer repayment plans to HECM borrowers with unpaid property charges regardless of their total outstanding arrearage; and (ii) the temporary partial waiver of Mortgagee Letter 2016-07, which permits mortgagees to seek assignment of a HECM immediately after utilizing their own funds to pay property taxes and insurance on or after March 1, 2020, in addition to it eliminating the three-year waiting period for such assignments. Both waivers are effective through June 30, 2022.
The same day, the agency announced in FHA INFO 2021-71 the availability of the new COVID-19 Recovery Loss Mitigation Options training webinar, initially previewed in FHA INFO 21-61 (previously covered by InfoBytes here). The webinar is designed to help mortgage servicers and other stakeholders better understand the details of the new COVID-19 Recovery Loss Mitigation Options.
Maryland Court of Appeals says inspection fee ban applies to mortgage assignees and servicers
On August 27, the Maryland Court of Appeals held that the Maryland Usury Law applied to assignees of mortgage loans–and not just lenders as a defendant argued–and that the law’s prohibition on property inspection fees therefore applied to the mortgage servicer, as the agent of the loan’s assignee. The borrower entered into a mortgage loan secured by a deed of trust that was later assigned to Fannie Mae and contracted to the mortgage servicer. After the borrower defaulted, the servicer allegedly threatened foreclosure and assessed “fees for drive-by inspections of the property.”
The parties entered into a loan modification agreement to resolve the default, but the borrower objected to the inclusion of the property inspection fees. The borrower later filed a complaint claiming the servicer collected property inspection fees prohibited by the Maryland Usury Law (CL §12-121). The borrower also alleged violations of the Maryland Consumer Debt Collection Act (MCDCA). The trial court dismissed the claims concluding, among other things, that neither Fannie Mae nor the servicer were subject to state usury prohibitions because neither entity “fit the definition of ‘lender’ in the law.” An intermediate appellate court later reversed the trial court’s dismissal.
In a 6-1 holding, the Court of Appeals concluded that “the Maryland Commissioner of Financial Regulation has taken the position that mortgage servicers. . .are subject to the prohibition on inspection fees in CL §12-121 during the life of a mortgage loan,” and that, moreover, CL §12-121 “limits the authority of a person who makes a mortgage loan to charge property inspection fees in connection with that loan.” As such, the Court of Appeals held that the addition of the definition of “lender” to the Maryland Usury Law that made the Usury Law part of the Commercial Law Article, “did not change that rule.” The Court of Appeals also stated that the borrower adequately alleged the elements of an MCDCA claim when she asserted the servicer “attempted to collect an alleged debt by asserting a right to collect inspection fees with knowledge that the right did not exist.”
HUD announces Hurricane Ida disaster relief
On September 1, HUD announced disaster assistance for certain Louisiana parishes impacted by Hurricane Ida, providing foreclosure relief and other assistance to affected homeowners. This followed President Biden’s major disaster declaration for the same parishes issued on August 29. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to those victims whose homes were destroyed or severely damaged such that “reconstruction or replacement is necessary[.]” Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes. Flexibility measures for state and local governments, public housing authorities, tribes, and tribally designated house entities are also discussed.
NYDFS offers guidance on preventing sexual orientation discrimination in mortgage lending
On August 31, NYDFS issued new guidance to regulated mortgage lenders for developing and implementing programs to comply with the state’s fair lending law, which “prohibits discrimination in, among other things, the granting, withholding, extending, or renewing, or in the fixing of the rates, terms, or conditions of any form of credit on the basis of sexual orientation.” According to an analysis conducted by NYDFS of mortgage loan applications and mortgage loan terms (between 2016 and 2018) from four non-depository lenders and one bank, “in all but two of the fifteen data sets reviewed, same-sex pairs of applicants were denied mortgage loans at higher rates than opposite-sex pairs of applicants.” Additionally, the analysis found that “in six of the data sets, same-sex pairs received between 9 and 17 basis points higher average annual percentage rates than opposite-sex pairs.” NYDFS emphasized that a “same-sex pair” does not necessarily involve LGBTQI individuals, but could also be a mortgage loan application from a father and son or two business partners of the same sex, among other pairings. As such, NYDFS acknowledged that it was “unable to determine with certainty whether discrimination based on sexual orientation occurred as to any particular same-sex pair within the data set.”
However, because NYDFS concluded that its findings raised enough concerns over the potential for discrimination against LGBTQI mortgage applicants, NYDFS advised mortgage lenders to take the following actions, among others, to mitigate discrimination: (i) vest responsibility in senior management to develop a fair lending plan and ensure mortgage lending practices comply; (ii) monitor the implementation of the fair lending plan and “continually address[] application and underwriting processes as well as pricing policies”; (iii) implement a training program and semi-annually provide updates on fair lending issues; (iv) “[e]nsure automatic and timely review by a higher-level supervisor of all rejected or withdrawn applications for loans from same-sex pairs who indicated that they would live together in the mortgaged property; (v) extend (in writing) a fair lending plan’s principles to a mortgage lender’s refinancing and collection practices; and (vi) periodically review and update fair lending compliance programs and fair lending plans to ensure they remain current. Mortgage lenders are also advised to utilize rate sheets and exception logs to document applications from same-sex pairs, document approved loans for such applicants that received less favorable terms, and conduct statistical and regression analysis of loan data.
New York governor extends moratorium on residential and commercial evictions
On September 2, New York’s Governor Hochul extended the moratorium on Covid-19-related residential and commercial evictions until January 15, 2022. According to the announcement, “all protections of the Tenant Safe Harbor Act for residential tenants who are suffering financial hardship as a result of the pandemic will remain in place, along with new protections on commercial evictions.” For our previous coverage regarding the eviction moratorium, see here.
The new law also: (i) creates a $25 million fund to provide legal services to tenants facing eviction proceedings and to aid them in maintaining housing stability in areas of New York where there is not access to free legal assistance for such services; and (ii) establishes a $250 million Supplemental Emergency Rental Assistance program to serve additional households and to better support landlords