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  • Special Alert: HUD, DOJ sign MOU on mortgage False Claims Act violations

    Agency Rule-Making & Guidance

    On October 28, HUD and DOJ announced a long-awaited Memorandum of Understanding (MOU), which provides prudential guidance concerning the application of the False Claims Act to matters involving alleged noncompliance with FHA guidelines. The announcement was made by HUD Secretary Dr. Benjamin S. Carson at the Mortgage Bankers Association’s Annual Conference, and both agencies issued releases shortly after Carson’s comments. The intention, HUD noted, is to bring greater clarity to regulatory expectations within the FHA program and ease banks’ worries about facing future penalties for mortgage-lending errors.

    * * *

    Click here to read the full special alert.

    If you have any questions about the HUD/DOJ Memorandum of Understanding or other related issues, please visit our Mortgages or False Claims Act & FIRREA practice pages, or contact a Buckley attorney with whom you have worked in the past.

    Agency Rule-Making & Guidance Special Alerts HUD DOJ False Claims Act / FIRREA FHA Mortgages

  • GSEs publish updated URLA

    Federal Issues

    On October 23, Fannie Mae and Freddie Mac (GSEs) published the updated and redesigned Uniform Residential Loan Application (URLA), which reflects revisions announced in August at the direction of the FHFA, including the removal of the language preference question. (Previous InfoBytes coverage here.) The updated static URLA form and supporting materials can be accessed on Fannie Mae’s URLA web page. The announcement also states that the GSEs are on track to publish their updated automated underwriting system specifications and supporting documents next month and anticipate announcing the updated implementation timeline and mandate prior to year-end. Although the GSEs retired the dynamic version, an interactive PDF version of the redesigned URLA will be released in early 2020.

    Federal Issues Fannie Mae Freddie Mac GSE URLA Mortgages

  • NYDFS to investigate deed fraud and deception targeting homeowners

    State Issues

    On October 22, the New York governor directed NYDFS to investigate instances of alleged mortgage deed fraud and deceptive practices targeting homeowners in Brooklyn. In addition to the investigation, the governor also directed NYDFS to “dispatch the Department's Foreclosure Relief Unit to provide assistance to homeowners who believe they may have been a victim of deed fraud or unfair, deceptive, or abusive practices in regard to the sale or attempted purchase of their home.”

    As previously covered by InfoBytes, the governor recently signed a package of bills intended to increase consumer homeowner protections. Specifically, A 5615 amended state law related to distressed home loans to extend consumer protections for homes in default and foreclosure by, among other things, (i) providing homeowners additional time to cancel a covered contract with a purchaser; (ii) preventing distressed property consultants from inducing the consumer to transfer the deed to the consultant or anyone else; and (iii) allowing consumers to void contracts, deeds, or other agreements material to the consumer’s property where an individual was convicted of or pled guilty to making false statements in connection with that agreement.

    State Issues Mortgages State Legislation State Regulators NYDFS Consumer Protection

  • Democratic Senators rebuke FHFA’s changes to URLA

    Federal Issues

    On October 16, 19 Democratic Senators wrote to FHFA Director, Mark Calabria, requesting the agency to reconsider its decision to remove the language preference question and housing counseling agency information from the redesigned Uniform Residential Loan Application (URLA), which was originally set to take effect on February 1, 2020. As previously covered by InfoBytes, in August, Fannie Mae and Freddie Mac (GSEs) announced, at the direction of the FHFA, that mandatory use of the redesigned URLA will no longer begin on February 1, 2020. Additionally, the GSE’s noted that FHFA is requiring the removal of the language preference question. The question, along with the home ownership education and housing counseling question, will now be a part of a separate voluntary consumer information form. In response, the Senators argue that the decision to remove the language preference question is arbitrary and could leave “loan servicers without basic communication information about their borrowers” as a voluntary information form may not be used or may not travel with the loan documents. The Senators assert that the language information is “vital” to policymakers and the planned revisions to the URLA were “an important step toward increasing language access throughout the mortgage market.” The letter requests that Director Calabria respond to their concerns by November 18.

    Federal Issues FHFA U.S. Senate URLA Mortgages GSE Fannie Mae Freddie Mac

  • State AGs urge CFPB to reconsider proposed changes to HMDA

    State Issues

    On October 15, a coalition of 13 state attorneys general submitted a comment letter in response to the CFPB’s Advance Notice of Proposed Rulemaking issued last May seeking information on the costs and benefits of reporting certain data points under HMDA. (Previously covered by InfoBytes here.) In the comment letter, the AGs argue, among other things, that the proposed rule would reduce transparency and “undermine the ability of local public officials to investigate unfair and discriminatory mortgage lending practices.” The AGs assert that the Bureau’s proposal to limit the data financial institutions are required to report to the CFPB under HMDA will open the door for financial institutions to engage in discriminatory lending, pointing to the 2018 national HMDA loan-level data released on August 30 (InfoBytes coverage here), which, according to the AGs, show “disturbing trends” that demonstrate the additional data fields are helping to achieve HMDA’s objectives. Specifically, the AGs cite to (i) disparities in manufactured home lending; (ii) racial and ethnic data that points to potential disparities in lending; (iii) the importance of collecting all data on denial reasons; (iv) loan pricing data as an indicator of fair lending; and (v) the importance of collecting debt-to-income and combined loan-to-value ratios.

    The New York AG’s office also sent a second letter the same day in response to a Notice of Proposed Rulemaking (NPRM) issued last May by the Bureau that would permanently raise coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules. (Previously covered by InfoBytes here.) The AG’s office argues that increasing the reporting threshold “would exempt thousands of lenders from reporting data” and would “inhibit the ability of communities and state and local law enforcement to ensure fair mortgage lending in New York and elsewhere, and violate the Administrative Procedure Act” since it fails to consider the full cost of the proposed rule on the states. Specifically, the AG’s office contends that the NPRM will (i) exempt a large number of depository institutions leading to significance loss of data on a local level; (ii) leave discriminatory lending in the rural and multifamily lending markets unchecked; and (iii) guarantee predatory lending if the threshold for open-end reporting is permanently set at 200 loans.

    State Issues State Attorney General CFPB Mortgages HMDA Fair Lending

  • California: Mortgage debt now included under Rosenthal Fair Debt Collection Practices Act

    State Issues

    On October 7, California’s governor signed SB 187, which amends the state’s Rosenthal Fair Debt Collection Practices Act and provides that consumer debt under the act now includes mortgage debt. SB 187 also removes the exception for an attorney or counselor at law from the definition of debt collector, and makes other nonsubstantive changes. The amendments take effect January 1, 2020.

    State Issues State Legislation Debt Collection Mortgages

  • FDIC, VA issue disaster relief guidance

    Federal Issues

    On October 10, the FDIC issued Financial Institution Letter FIL-56-2019 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Texas affected by Tropical Storm Imelda. In the letter, the FDIC encourages institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to borrowers affected by the severe weather. Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.

    Separately on October 8, the Department of Veterans Affairs (VA) issued Circular 26-19-27 to encourage mortgagees to provide relief for VA borrowers affected by Hurricane Dorian. Among other forms of assistance, the Circular encourages loan holders and servicers to (i) extend forbearances to borrowers in distress as a result of the disaster; (ii) establish a 90-day moratorium from the disaster date on initiating new foreclosures on affected loans; (iii) waive late charges on affected loans; and (iv) suspend credit reporting. The Circular will be rescinded October 1, 2020. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues FDIC Disaster Relief Mortgages

  • CFPB temporarily extends threshold for open-end HMDA reporting

    Agency Rule-Making & Guidance

    On October 10, the CFPB issued a final rule extending the current temporary threshold of 500 open-end lines of credit under the HMDA rules for reporting data to January 1, 2022. As previously covered by InfoBytes, the CFPB temporarily increased the threshold for open-end lines of credit from 100 loans to 500 loans for calendar years 2018 and 2019. In May 2019, the Bureau proposed to extend that temporary threshold to January 1, 2022 and then permanently lower the threshold to 200 open-end lines of credit after that date (covered by InfoBytes here). The Bureau then reopened the comment period for the May 2019 proposed rule with respect to the permanent open-end and closed-end coverage thresholds (covered by InfoBytes here) and now intends to issue a final rule addressing the permanent threshold at a later date. The Bureau also intends to address the other closed-end aspects of the May 2019 proposed rule at a later date.

    The final rule adopts the temporary extension of the 500 open-end lines of credit until January 1, 2022, and incorporates, with minor adjustments, the interpretive and procedural rule issued in August 2018 (2018 Rule), which implemented and clarified that the HMDA amendments included in Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here). The final rule is effective January 1, 2022.

    Agency Rule-Making & Guidance CFPB HMDA Mortgages

  • VA completes funding fee refund initiative

    Federal Issues

    On October 8, the Department of Veterans Affairs (VA) announced that it completed its home loan funding fee refund initiative, returning more than $400 million to VA borrowers. As previously covered by InfoBytes, in June the VA Office of the Inspector General (OIG) issued a report concluding that the VA improperly charged exempt veterans VA home loan funding fees. The OIG recommended that the VA develop a plan to, among other things, identify exempt veterans who were inappropriately charged funding fees and issue refunds. The VA reviewed nearly 20 years of loan originations, and identified 130,000 loans for potential refunds. VA notes that most fees were charged correctly, except for veterans whose exemption status changed after the closing of their loan. VA also announced changes to its program, in order to provide veterans with “the most up-to-date information possible on a Veteran’s funding fee exemption status,” including (i) enhancements to communications to veterans regarding the loan funding fee; (ii) new policy guidance directing lenders to inquire about a veteran’s disability claim status during the underwriting process; (iii) instructing lenders to obtain an updated Certificate of Eligibility for a veteran within three days of closing, if there was a disability claim pending; (iv) and procedural changes to ensure regulator internal oversight of funding fee activities.

    Federal Issues Department of Veterans Affairs OIG Mortgages Military Lending

  • District Court: New York’s interest on escrow law not preempted by National Bank Act

    Courts

    On September 30, the U.S. District Court for the Eastern District of New York held that the National Bank Act (NBA) does not preempt a New York law requiring interest on mortgage escrow accounts. According to the opinion, plaintiffs brought a pair of putative class actions against a national bank seeking interest on funds deposited into their mortgage escrow accounts, as required by New York General Obligation Law § 5-601. The bank moved to dismiss both complaints, arguing that the NBA preempts the state law. The district court disagreed, concluding that the plaintiffs’ claims for breach of contract can proceed, while dismissing the others. The court concluded there is “clear evidence that Congress intended mortgage escrow accounts, even those administered by national banks, to be subject to some measure of consumer protection regulation.” As for the OCC’s 2004 preemption regulation, the court determined that there is no evidence that “at this time, the agency gave any thought whatsoever to the specific question raised in this case, which is whether the NBA preempts escrow interest laws,” citing to and agreeing with the U.S. Court of Appeals for the Ninth Circuit’s decision in Lusnak v. Bank of America (which held that a national bank must comply with a California law that requires mortgage lenders to pay interest on mortgage escrow accounts, previously covered by InfoBytes here). Lastly, the court applied the preemption standard from the 1996 Supreme Court decision in Barnett Bank of Marion County v. Nelson, and found that the law does not “significantly interfere” with the banks’ power to administer mortgage escrow accounts, noting that it only “requires the Bank to pay interest on the comparatively small sums” deposited into the accounts and does not “bar the creation of mortgage escrow accounts, or subject them to state visitorial control, or otherwise limit the terms of their use.”

    Courts State Issues National Bank Act Escrow Preemption Ninth Circuit Appellate U.S. Supreme Court Mortgages

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