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  • Iowa Adds AG Data Breach Notice Requirement

    Privacy, Cyber Risk & Data Security

    On April 3, Iowa Governor Terry Branstad signed SF 2259, which amends the state’s data breach notice law to add a requirement that businesses that experience a data breach notify the state attorney general’s office within five days of discovering or being notified of the breach. Previously, state law required that businesses notify only consumers after discovery or notification. Several existing exemptions to the consumer notice requirement, including for businesses subject to Title V of the Gramm-Leach-Bliley Act, also apply to the attorney general notice requirement. SF 2259 also amends (i) the definition of “breach of security” to cover personal information maintained in any medium that was transferred to that medium from computerized form, e.g., printed records originally maintained in electronic form; and (ii) the definition of “personal information” to include encrypted, redacted, or otherwise protected data. The changes take effect July 1, 2014.

    State Attorney General Privacy/Cyber Risk & Data Security

  • FHFA, City Of Chicago Resolve Dispute Over Vacant Property Ordinance

    Lending

    On April 3, the U.S. District Court for the Northern District of Illinois approved an order of dismissal and memorandum of understanding jointly entered by the FHFA and the City of Chicago to end more than two years of litigation over a city ordinance that requires mortgagees to register vacant properties and pay a $500 registration fee per property. The ordinance also imposes maintenance and other obligations—whether the property has been foreclosed upon or not—with fines for noncompliance. In 2011, the FHFA sued the city, objecting that the ordinance would have improperly covered the activities of Fannie Mae, Freddie Mac, and their agents. In August 2013, the court held that Fannie Mae and Freddie Mac are exempt from the ordinance, and the FHFA subsequently sought to clarify the scope of the court’s order and asked the court for declaratory and monetary relief. The parties now have agreed to a memorandum of understanding pursuant to which the city will not enforce the ordinance against Fannie Mae, Freddie Mac, or their agents for as long as the GSEs remain under federal conservatorship. The FHFA agreed that Fannie Mae and Freddie Mac will voluntarily register their vacant properties with the city, and the FHFA agreed not to try to recover fees and penalties already paid to the city under the ordinance.

    Freddie Mac Fannie Mae Mortgage Servicing FHFA

  • Fannie Mae Updates Modification Policies

    Lending

    On March 28, Fannie Mae issued Servicing Guide Announcement SVC-2014-05, which provides, as recently promised, updated guidance regarding standard and streamlined modification programs. The announcement informs servicers that, by July 1, 2014, for mortgage loans with a pre-modified mark-to-market loan-to-value ratio less than 80%, servicers must ensure that borrowers satisfy all eligibility requirements for a Fannie Mae standard or streamlined modification. The announcement details the specific steps servicers must take to calculate the terms of the trial period plan. It also provides information for servicers to use in determining the appropriate information to include in an evaluation notice or solicitation letter, and informs servicers that if a borrower is eligible for a trial period plan with more than one amortization term, the borrower may choose an amortization term but the trial period plan notice must inform the borrower that he or she will not be able to change the amortization term after the first payment is received. The announcement states that if a mortgage loan becomes 60 or more days delinquent within 12 months of the modification effective date, the servicer must not approve another modification. Finally, Fannie Mae states that if the first trial period plan payment submitted by a borrower does not correspond to an amortization term payment offered in the plan, the servicer must use the shortest amortization term provided in the plan that is covered by the borrower’s actual payment to determine the amortization term and monthly payment obligation.

    Fannie Mae Mortgage Servicing Mortgage Modification Servicing Guide

  • Utah Amends Mortgage Licensing Act

    Lending

    On April 1, Utah enacted SB 332, which amends the Utah Residential Mortgage Practices and Licensing Act, the Real Estate Licensing and Practices Act, and the Real Estate Appraiser Licensing and Certification Act to establish a procedure for the voluntary surrender of a license issued under each of those acts. The bill clarifies the scope of what it means to be engaged in the business of residential mortgage loans under the Utah Residential Mortgage Practices and Licensing Act, and includes numerous other amendments to the other two Acts. The changes take effect May 13 2014.

    Mortgage Licensing Mortgage Origination Insurance Licensing

  • SDNY Certifies Interlocutory Appeal In Lender-Placed Insurance Dispute

    Consumer Finance

    On April 3, the U.S. District Court for the Southern District of New York certified an interlocutory appeal of an order denying a motion to dismiss filed by a group of insurers facing class allegations of unlawful lender-placed insurance practices. Rothstein v. GMAC Mortgage, LLC, No. 12-3412, 2014 WL 1329132 (S.D.N.Y. Apr. 3, 2014). In declining to dismiss the case, the court held, among other things, that the filed rate doctrine did not bar borrowers' claims because the doctrine applies only where the challenged rate is one imposed directly by an insurer, and does not apply to lender-placed insurance where a third-party—the lender or servicer—acquires the insurance at a filed rate and bills the borrower for the costs. On the insurers’ motion for interlocutory appeal, the court held that the issue of whether the filed rate doctrine applies is a question of law that could be dispositive and for which there is substantial ground for a difference of opinion, and that the potential to avoid protracted litigation warranted certification for appeal. BuckleySandler represents the insurers in this action.

    Class Action Force-placed Insurance SDNY

  • Fannie Mae To Begin Assessing Fees For Late, Inaccurate Reporting

    Lending

    On March 28, Fannie Mae notified servicers that, effective May 1, 2014, it will begin issuing warning letters and assessing compensatory fees to servicers that fail to submit Fannie Mae investor reporting system reports on a timely basis or that fail to use the correct data and formats. Alternatively, Fannie Mae reserves the right to issue an indemnification demand to any servicer that breaches these servicing requirements. Currently, Fannie Mae sends a Failed Business Rules report to servicers who fail to meet these requirements. After May 1, a servicer may be assessed: (i) greater of $250 or $50 per mortgage loan, up to a maximum of $5,000, for the first instance of late or inaccurate reporting; (ii) greater of $500 or $50 per mortgage loan, up to a maximum of $10,000, for the second instance of late or inaccurate reporting, if it occurs within one year of the first instance; and (iii) greater of $1000 or $50 per mortgage loan, up to a maximum of $15,000, for each subsequent instance of late or inaccurate reporting within one year of the most recent previous instance.

    Fannie Mae Mortgage Servicing

  • South Dakota Adopts Uniform Real Property Electronic Reporting Act

    Fintech

    On March 31, South Dakota enacted SB 68, becoming the 30th jurisdiction to adopt the Uniform Real Property Electronic Recording Act (URPERA) with the enactment. URPERA, promulgated by the Uniform Law Commission in 2004, gives county clerks and recorders the legal authority to prepare for electronic recording of real property instruments. Among other things, SB 68 (i) establishes that, for any law requiring that a document be an original as a condition for recording, an electronic document satisfying certain specific conditions will qualify; (ii) establishes an electronic recording commission to adopt uniform standards to implement procedures for recording electronic documents with the register of deeds; and (iii) requires the register of deeds to comply with standards set by the commission, including accepting electronic documents for recording. The law takes effect July 1, 2014.

    Electronic Signatures Electronic Records

  • Ninth Circuit Holds National Bank Is Resident Only Where Headquartered

    Consumer Finance

    On March 27, the U.S. Court of Appeals for the Ninth Circuit reversed the district court’s remand for lack of diversity, holding that a national bank is a citizen only of the state where it is headquartered. Rouse v. Wachovia Mortg., FSB, No. 12-55278, 2014 WL 1243869 (9th Cir. Mar. 27, 2014). In this case, a federal district court in California remanded to state court a suit brought by two California mortgage borrowers alleging state law violations against a national bank, holding that a national bank is a citizen of both the state where its principle place of business is located and where the bank is headquartered—in this case California and South Dakota, respectively—and that because the borrowers are California citizens, the district court lacked jurisdiction. The Ninth Circuit disagreed, finding that the statutory scheme governing nationally chartered banks, which the court described as sparse and ambiguous, deemed national banks citizens of the state where their main offices are located. Unlike the district court, the Ninth Circuit found no congressional intention to provide for jurisdictional parity between nationally chartered and state-chartered banks. The Ninth Circuit thus reversed the district court, finding perfect diversity between the plaintiffs, citizens of California, and the defendant national bank, a citizen of South Dakota.

    Mortgage Origination

  • Idaho Bill Regulates Payday Loan Terms

    Consumer Finance

    On March 26, Idaho enacted SB 1314, which, among other things, prohibits payday lenders from making a loan that exceeds 25% of the borrower’s gross monthly income at the time the loan is made. The bill provides a safe harbor for lenders if the borrower presents evidence of gross monthly income or represents in writing that the payday loan does not exceed 25% of the borrower's gross monthly income. The bill also requires lenders to, upon request, allow borrowers to enter into extended repayment plans. Lenders cannot charge any additional fees related to such plans, but lenders are not required to enter into an extended plan with a borrower more than one time in any 12-month period. Finally, the bill requires specific written disclosures and prohibits payday lenders from presenting a borrower’s check to a depository institution more than two times. The changes take effect July 1, 2014.

    Payday Lending Ability To Repay

  • Debt Settlement Firm Pleads Guilty In CFPB's First Criminal Referral

    Consumer Finance

    On April 8 the U.S. Attorney for the Southern District of New York announced that a debt settlement company and its owner pled guilty to fraud charges, resolving the first criminal case referred to the DOJ by the CFPB. The DOJ alleged that from 2009 through May 2013, the company systematically exploited and defrauded over 1,200 customers with credit card debt by charging them for debt settlement services the company never provided. The DOJ claimed that the company (i) lied about and/or concealed its fees, and falsely assured customers that fees would be substantially less than those the company eventually charged; (ii) deceived customers by fraudulently and falsely promising that the company could significantly lower borrower debts when, for the majority of its customers, the company allegedly did little or no work and failed to achieve any reduction in debt; and (iii) sent prospective customers solicitation letters falsely suggesting that the agency was acting on behalf of or in connection with a federal governmental program. The company’s owner pled guilty to one count of conspiracy to commit mail and wire fraud, and one count of conspiracy to commit wire fraud, and faces a maximum sentence of 10 years in prison. The company pled guilty to one count of conspiracy to commit mail and wire fraud, and faces a fine of up to twice the gross pecuniary gain derived from the offense, and up to five years' probation. The defendants also entered into a stipulation of settlement of a civil forfeiture action and consented to the entry of a permanent injunction barring them from providing, directly or indirectly, any debt relief or mortgage relief services in the future. The CFPB subsequently dismissed its parallel civil suit.

    CFPB DOJ Financial Crimes SDNY Debt Settlement

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