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FHA issues Covid-19 measures to protect borrowers
On February 3, FHA issued a series of temporary measures in its Single Family Housing Policy Handbook, which waive provisions that, among other things, normally require in-person contact between mortgage servicers and borrowers. These waivers, FHA states, are intended to allow mortgage servicing activities to continue in a safe manner during the Covid-19 pandemic, and augment FHA’s recent extension of its foreclosure and eviction moratorium for borrowers through March 31, as well as the agency’s decision to extend the deadline for impacted borrowers to request a new forbearance (covered by InfoBytes here). Specifically, the waivers build upon previous waivers and will allow the following provisions through December 31, 2021:
- Rather than conducting face-to-face borrower interviews, the waiver will allow substitute methods (such as phone interviews, email, video calling services, and other conference technology) for servicers to conduct borrower interviews for FHA-insured forward and home equity conversion mortgages (HECM) when performing early default interventions for borrowers in danger of foreclosure.
- FHA is waiving the $5,000 property charge payment arrearages cap for HECM borrowers who are behind on their property charge payments.
- FHA is waiving the requirement for servicers to obtain a physical signature on an occupancy certification from a HECM borrower.
Illinois regulator releases educational one pager on Covid-19 relief
In January, the Illinois Department of Financial and Professional Regulation issued a one-pager setting forth eviction, mortgage, and student loan information for consumers. The flyer addresses the eviction moratorium, forbearance of mortgage payments, and student loan borrower relief.
Colorado amends and extends executive order setting forth tenant protections
On January 29 , the Colorado governor issued Executive Order 2021-029 amending and extending Executive Order 2020-307, which set forth certain tenant protections. Executive Order 2020-307 prohibits a landlord, mobile home park owner, property management entity, and others from charging a fee or penalty against a tenant or mobile home owner for failure to timely pay rent. Executive Order 2021-029 extends the moratorium on late fees until 30 days after January 29, 2021, unless extended further by executive order.
California governor signs legislation extending tenant protections
On January 29, the California governor signed SB 91, which provides relief to tenants and small property owners, and extends the eviction moratorium established under AB 3088 (previously discussed here), which is set to expire at the end of January. Among other things, under SB 91, a housing provider and similar entities are prohibited from using an alleged Covid-19 rental debt as a negative factor for evaluating a prospective housing application. In addition, the bill would prohibit a person from selling or assigning unpaid rental debt or charging or increasing fees related to late payment of Covid-19 rent. The bill also extends other eviction protections to July 1, 2021.
VA extends Covid-19 foreclosure and eviction moratorium
On January 29, the Department of Veterans Affairs issued Circular 26-21-2, which further extends foreclosure and eviction relief for borrowers affected by Covid-19 (previously covered here). Specifically, all properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans but currently in the VA’s REO (real estate owned) portfolio, are subject to a moratorium on foreclosure and eviction through March 31, 2021. With the exception of abandoned or vacant property, the moratorium applies to the initiation of foreclosures, the completion of foreclosures in process, and evictions.
Bank subsidiary to pay $604 million for RMBS defects
On January 25, the Supreme Court of the State of New York ordered an investment bank subsidiary (defendant) to pay nearly $604 million, plus pre-judgment contractual interest, to an insurance company (plaintiff) for allegedly breaching the representations and warranties contained in a pooling and servicing agreement (PSA) for mortgages contained in the residential mortgage-backed securities (RMBS) it sold in 2007. According to the November 2020 post-trial order, the plaintiff issued irrevocable insurance policies that “unconditionally guaranteed payment of principal and interest to certificate holders of the RMBS transactions.” After the 2008 financial crisis, 51 percent of the original loan balances of the related mortgages held in the insured trust defaulted, and in July 2009, the plaintiff began to send mortgage repurchase demand letters to the defendants. Following the defendant’s refusal to repurchase the loans, the plaintiff subsequently commenced the action, alleging that the defendant breached the representations and warranties contained in the PSA. At trial, the trial court concluded that the plaintiff “convincingly proved” that “more than half of the securitized loans were materially non-conforming” and should be awarded compensation for its losses, as the plaintiff “did not assume the risk of loss that [the non-confirming loans] posed.” However, the court further determined that the plaintiff could not recover damages that were not “directly attributable to the materially non-confirming loans.” After directing the parties to file letters addressing remaining issues before the entry of monetary judgment, the court determined that the repurchase date for determining damages should be 90 days after the repurchase trigger (the date of notice from plaintiff) and not the date of breach. Therefore, based on a repurchase date of October 28, 2009, the court ordered the defendant to pay nearly $604 million in damages to the plaintiff.
Court revives RESPA kickback suit
On January 26, the U.S. District Court for the District of Maryland granted plaintiffs’ motion for reconsideration and relief stemming from a 2020 dismissal order, which previously dismissed RESPA claims in a kickback suit. The case originally alleged a mortgage lender entered into an arrangement with a settlement service company to trade referrals for kickbacks, which resulted in the plaintiffs being overcharged for their settlement services. In 2020, the court granted the defendant’s motion to dismiss, finding that the alleged payments fell under RESPA’s safe harbor provision permitting compensation to be paid for services performed. In re-opening the case, the court acknowledged that the dismissal of the case was premised on two “clear” errors with respect to RESPA’s safe harbor provision. First, the court noted that it previously misconstrued that the settlement service company was the recipient of the alleged kickbacks, when in actuality, the lender received the kickbacks. Second, the court determined that the plaintiffs were correct in asserting that the court failed to consider allegations in their amended complaint that the lender did not render any services to the settlement service company to warrant the payments it received. The court concluded it had made an error by “concluding that the alleged kickback payments were protected under RESPA’s safe harbor provision.” The court also revived the plaintiffs’ Racketeer Influenced and Corrupt Organizations Act claims after determining they were plausibly pled.
Maryland regulator extends foreclosure restrictions
On January 28, the Maryland commissioner of financial regulation issued guidance that extends the “re-start date” for the initiation of residential foreclosures to March 1, 2021. The guidance is issued pursuant to the Maryland governor’s executive order 20-12-17-02, which amended and restated previous executive orders covered here, and here.
North Carolina extends eviction protections through March 31
On January 27, the governor of North Carolina issued Executive Order No. 191 extending the limitations on residential evictions, consistent with the framework set forth in the federal CDC Order, through March 31.
HUD issues Mortgagee Letter regarding temporary statutory authority to insure operating loss loans under Section 223(d)
On January 15, the U.S. Department of Housing and Urban Development issued Mortgagee Letter 2021-1 to implement its temporary statutory authority to insure operating loss loans under Section 223(d) of the National Housing Act in order to mitigate the Covid-related temporary reduction of revenue of healthcare facilities. The Mortgagee Letter sets forth requirements for the supplemental loans for hospitals and residential care facilities. The Mortgagee Letter is effective for applications for insurance submitted for which firm commitments are issued no later than September 30, 2021. HUD also is imposing an application receipt deadline of Monday, August 30, 2021 to account for statutory time constraints and processing times. HUD noted that additional guidance is forthcoming.