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On July 31, Illinois Governor Pat Quinn signed two bills (HB 3863 and HB 153) amending the Illinois Code of Civil Procedure in connection with residential property foreclosures. Among other things, HB 3863 requires certain entities - such as lenders acting in the capacity of a mortgagee in possession of REO - to (i) make a good faith effort to ascertain the identities and addresses of all known occupants of the property, and (ii) notify known occupants that such property has been acquired, as well as provide information about the new ownership and occupants’ rights. HB 3863 becomes effective 90 days after July 31. For a foreclosure action filed on or before the effective date of the amendments, the relevant entities will have an additional 60 days to comply with the new provisions. HB 153 requires any deed executed pursuant to the Mortgage Foreclosure Act (or similar judgment vesting title by a consent foreclosure) to state the grantee’s or mortgagee’s name, the name of a contact person, street and mailing address, and telephone number. HB 153 became effective July 31.
On July 27, North Carolina Governor Beverly Perdue signed SB 1017, an Act enhancing protections available to victims of identity theft. In general, the Act creates new legal obligations for credit reporting agencies (CRAs), creditors, businesses, and credit monitoring services. Under the Act, CRAs must notify a North Carolina consumer that requests a security freeze that such consumer must make separate, individual requests to CRAs regarding a security freeze because a freeze can only be placed on the files of the CRA to which the consumer directs a request. Additionally, the Act mandates that CRAs lower their response times to a consumer’s request to add or remove a freeze. Specifically, for written requests, CRAs must add or remove a freeze within three days. For electronic or telephonic requests, CRAs must add a freeze within 24 hours and must remove a freeze within 15 minutes. With respect to creditors, the Act prohibits any communication about a debt to a CRA during the pendency of a consumer’s application for an award from the North Carolina Crime Victims Compensation Fund. The Act also requires credit monitoring services to notify consumers that they have the right to one free credit report per year before charging the consumer a fee to obtain or monitor the consumer’s credit report on behalf of the consumer. The Act becomes effective October 1, 2009.
On July 10, in a 4-3 decision, the Pennsylvania Commonwealth Court upheld an interpretation of the Pennsylvania Consumer Discount Company Act (CDCA) that applied the law to companies with no physical presence in Pennsylvania. Cash Am. Net of Nev., LLC v. Dep’t of Banking, No. 8 M.D. 2009, 2009 WL 197499 (Pa. Commw. Ct. July 10, 2009). In July 2008, the Pennsylvania Department of Banking (Department) announced that, after more than 70 years of interpreting the requirements of the CDCA to apply only to Pennsylvania persons, all persons making non-mortgage consumer loans to Pennsylvania residents – whether or not those persons had any physical presence in Pennsylvania – would be required to comply with the requirements of the CDCA (reported in InfoBytes, Aug. 1, 2008). The CDCA limits the interest and fees a non-bank company can charge for non-mortgage loans of $25,000 or less. The petitioner, an online payday lender located in Nevada, sued the Department for a declaratory judgment, alleging that the new interpretation was both procedurally improper and substantively incorrect. The Commonwealth Court rejected both arguments. First, the court held that the new interpretation was merely a statement of policy, nonbinding on the courts or even the Department itself. Therefore, the policy did not need to be adopted through the procedures reserved for formal regulations. Second, the court held that the Department’s new interpretation of the reach of the CDCA “is the correct one,” even while acknowledging that “the Department formerly endorsed a contrary interpretation of that section.” Three judges joined in a dissenting opinion, which argued that the Department’s earlier interpretation of the limits of the CDCA was the correct one.
On July 9, Missouri Governor Jay Nixon signed HB 62, an omnibus crime bill containing a provision that requires companies to notify Missouri consumers regarding a security breach of personal information. The provision does not create a private right of action and instead grants the Missouri Attorney General exclusive authority to bring an action (for up to $150,000 per security breach) for an alleged violation of the provision. The provision becomes effective August 28, 2009.
On July 8, Missouri Governor Jay Nixon signed the “Missouri Secure and Fair Enforcement for Mortgage Licensing and Residential Mortgage Brokers Licensing Act” (the Act) (HB 382). Among other things, the Act sets forth a scheme for registering residential mortgage loan originators and substantially amends the regulations applicable to residential mortgage brokers. Under the Act, loan originators must register with the Nationwide Mortgage Licensing System (NMLS) and must satisfy new pre-licensing and continuing education requirements. For residential mortgage brokers, the Act requires licensure via the NMLS. In addition, the Act limits the number of exemptions available to licensure and modifies the method for calculating requisite surety bonds. Finally, the Act increases the amount of civil penalties from $5,000 to $25,000 per violation. The Act became effective July 8, however, the Act’s loan originator licensing provisions do not take effect until July 31, 2010.
Connecticut Bill Creates Restrictions for Nonprime Home Loans, High Cost Home Loans; Establishes Residential Mortgage Fraud as Criminal Offense
On July 7, Connecticut Governor M. Jodi Rell signed SB 949, “An Act Concerning Mortgage Practices.” The bill, among other things, establishes residential mortgage fraud as a criminal offense in Connecticut. The bill also amends the definition of “nonprime home loans” and prohibits or restricts a lender from offering nonprime home loans with certain terms and conditions (i.e., negative amortization, default rate increases, excessive late fees and acceleration clauses). Finally, under the bill, a high cost home loan cannot provide for an increase in the interest rate after default or provide for default charges in excess of five per cent of the amount in default. The bill becomes effective October 1, 2009.
On July 1, California SB 1461, a bill that amends the advertising rules for companies licensed with the California Department of Real Estate, becomes effective. The bill applies to all residential and commercial mortgage companies licensed with the California Department of Real Estate. Pursuant to the bill, such entities must disclose the applicable license number on certain solicitations intended to be the “first point of contact” with consumers (e.g., business cards, stationary, and other materials designed to solicit the creation of a professional relationship between the licensee and a consumer). The bill clarifies that “first point of contact” excludes electronic media or print advertisements and “for sale” signs.
Several states recently amended applicable state law to reflect compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). Texas, Connecticut, Nevada, and South Carolina all enacted legislation that implements the SAFE Act by providing for the licensing of all mortgage loan originators under the Nationwide Mortgage Licensing System. In addition to technical amendments, the bills prescribe loan originator requirements relating to licensing, prior and continuing education, testing, minimum net worth, and surety bond coverage. Connecticut SB 948 also, among other things, requires lenders to enter into a previously optional foreclosure mediation program with borrowers after July 1, 2009. Unless the mediation period is not required, is unavailable, has expired, or has been otherwise terminated, no judgment of strict foreclosure or foreclosure by sale can be entered prior to July 1, 2010. Most provisions of Connecticut SB 948 become effective July 31, 2009, with licensure required by April 1, 2010. South Carolina SB 673 becomes effective January 1, 2010, except that the definition of “mortgage loan originator” does not include an individual servicing a mortgage loan until July 31, 2011. Texas HB 10 becomes effective September 1, 2009. Nevada AB 523 became effective June 8, 2009, with licensure required by October 1, 2009.
Arizona, Delaware, and Hawaii each recently passed bills reflecting compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires states to implement a sufficient regulatory system for licensing and supervising mortgage loan originators. Arizona HB 2143, Delaware SB 73, and Hawaii SB 1218 (which was enacted over the veto of Hawaii Governor Linda Lingle) each require mortgage loan originators to (i) submit to fingerprinting for the purpose of a criminal history background check, (ii) complete at least twenty hours of pre-licensing education, (iii) receive a passing score on a qualified written test developed by the Nationwide Mortgage Licensing System, and (iv) complete at least eight hours of annual continuing education. Arizona HB 2143 also amends certain definitions and exemptions applicable to the licensing of mortgage loan originators. Licensure under all three bills is required as early as July 31, 2010.
On June 29, Pennsylvania Governor Edward G. Rendell signed SB 170 and HB 985 to amend Pennsylvania mortgage law. SB 170 prohibits a mortgage broker or mortgage originator from being or designating the sole recipient of communications from a lender or servicer to a consumer. HB 985 prohibits mortgage companies from bringing a cause of action for damages against employees who report illegal activity or take part in an investigation, hearing or inquiry against the company. Both bills become effective August 28, 2009.
- Buckley Webcast: Privacy and cybersecurity outlook for 2022
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Hank Asbill to discuss white collar ethics issues at the Stetson Law Review Symposium
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
- Jonice Gray Tucker to discuss “Small business & regulation: How fair lending has evolved & where it is heading?” at the Consumer Bankers Association Live program
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek
- Max Bonici to discuss “Fintech-bank partnerships and potential enforcement” at the 2022 ABA Spring Meetings
- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting