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HUD Issues Guidance Regarding Occupied Conveyance Procedures
On March 16, HUD issued Mortgagee Letter 2012-6 to provide updated guidance for complying with the Protecting Tenants at Foreclosure Act of 2009 (PTFA). The Mortgagee Letter revises the information required in a Notice to Occupant of Pending Acquisition and provides updated sample letters and forms. The Mortgagee Letter also provides guidance regarding (i) reasonable diligence in obtaining possession of the property under PTFA, (ii) rent collection under bona fide leases and tenancies, and (iii) reimbursement for preservation and protection costs due to PTFA compliance.
FTC Releases Survey on Consumer Reporting Agencies and FACTA
On March 12, the FTC released the results of a survey conducted to gauge consumer experiences in dealing with consumer reporting agencies (CRAs) following an identity theft. While the survey indicates that the majority of consumers were satisfied with their experiences, many consumers were unaware of their rights under the Fair and Accurate Credit Transactions Act (FACTA) before contacting a CRA. In response to concerns raised by consumers in the survey, the report recommends that (i) CRAs make it easier for consumers to reach a live person and (ii) the CFPB use its examination and rulemaking authority, and the FTC employ its enforcement authority, to address CRAs’ practice of attempting to sell identity theft products to consumers reporting identify thefts.
Utah Limits Time for Deficiency Actions Following a Short Sale
On March 8, Utah enacted Senate Bill 42 to limit the time within which lenders can bring an action to recover a deficiency following a short sale. Lenders now have only three months following a short sale to file a deficiency action against a borrower to recover the balance of the debt. Prior to passage of SB 42, lenders had six years to bring such actions. This law became effective March 8, 2012.
Facebook's Forum-Selection Clause Enforceable Against Plaintiff Minors
On March 8, the U.S. District Court for the Southern District of Illinois ruled that minors who used Facebook are bound by the forum-selection clause contained in the website’s terms of service, to which they agreed when they signed up for Facebook. E.K.D. v. Facebook Inc., No. 11-461 (S.D. Ill. Mar. 8, 2012). The plaintiffs, a group of minors suing Facebook for improperly using their images in advertising, argued that because they were minors when they signed up, the forum selection clause could not be enforced. The court rejected this argument, holding that under California contract law the minor plaintiffs could not void the forum selection because they continued to use and benefit from Facebook after agreeing to the terms of service. The court further held that transferring the case to the Northern District of California would not unduly burden the plaintiffs and was permitted by 28 U.S.C § 1404.
Freddie Mac Publishes Revisions to Selling Requirements
On March 15, Freddie Mac published Single-Family Seller/Servicer Guide Bulletin 2012-8, which (i) updates mortgage eligibility and credit underwriting requirements Borrower Funds and Mortgage Credit Certificates for Borrower qualification, (ii) revises Forms 16SF and 1107SF regarding warehouse lender agreements and facilities, (iii) eliminates certain requirements for document custodians on Form 1034A, and (iv) updates certain delivery requirements under the Uniform Loan Delivery Dataset and clarifies delivery requirements for certain refinances under HARP.
Washington Expands Servicemember Protections
On March 7, Washington Governor Christine Gregoire signed Senate Bill 5627 which expands protection for members of the state National Guard. The law expands the definition of “military service” to include servicemembers called to service by the governor for more than thirty consecutive days. This change is designed to provide National Guard members activated by the governor the same protections already provided under state law to servicemembers called to federal service by the President or the Secretary of Defense. This law becomes effective June 7, 2012.
FDIC Warns Bank Directors and Officers Regarding Copying and Removal of Institution Information
On March 19, the FDIC issued Financial Institution Letter FIL-14-2012, which warns bank directors and officers that financial institution records belong exclusively to the institution, and supervisory records are the property of the FDIC. As such, directors and officers of failing institutions who make and remove copies of institution and supervisory records for “personal use” in preparing for anticipated litigation or enforcement activity (i) are breaching their fiduciary duty, (ii) are engaging in an unsafe and unsound banking practice, and (iii) may be violating the institution’s information security program. Personal use includes use by directors or officers to defend themselves against administrative, civil, and criminal proceedings or lawsuits based on actions taken in their official capacity. The Financial Institution Letter also reminds outside counsel to financial institutions that their legal and ethical obligations are only to the institution, and not to an institution’s directors or officers. The FDIC threatens bank directors and officers, and outside counsel with legal action for knowing or reckless violations of law or breach of fiduciary duty. In 2011, in a case in which the FDIC sued a law firm for having accepted copies of bank records from a bank prior to its closing to preserve for the defense of bank directors, BuckleySandler prepared an amicus brief for the American Association of Bank Directors asserting the right of bank directors to have free access to bank records that they need to defend themselves against administrative, civil, and criminal proceedings or suits.
FRB Releases Study on Use of Mobile Financial Services
On March 14, the Federal Rserve Board (FRB) released the results of a survey on the use of mobile financial services in the U.S. The findings, as summarized in the FRB release and report, include: (i) one in five Americans with mobile phones used their mobile phone to access financial accounts last year; (ii) mobile banking is poised to expand further over the next year, with usage possibly increasing to one in three mobile phone users by 2013, (iii) mobile banking use is highly correlated with age, (iv) underbanked consumers were relatively heavy users of mobile services, and widening use of mobile technology can expand access to financial servicers for underserved populations, (v) reviewing account balances was the most common activity, followed by account transfers, and (vi) consumers with mobile devices that do not use mobile banking cited either a lack of need or security concerns.
FHFA Issues Final Rule on Private Transfer Fees
On March 15, the Federal Housing Finance Agency (FHFA) issued a final rule to limit the ability of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to deal in mortgages on properties encumbered by certain types of private transfer fee covenants and in certain types of related securities. The rule generally applies, with some exceptions, only prospectively to private transfer fee covenants created on or after the date of publication of the proposed rule, Feb. 8, 2011, and regulated entities must comply with the rule by July 16, 2012. The final rule largely mirrors the proposed rule, though the FHFA did make some changes in response to comments. For example, as described more fully in Section IV of the final rule, (i) certain changes ensure that the rule clearly restricts any activity dealing in mortgages on property encumbered by private transfer fee covenant, (ii) the exception for fees imposed by a court judgment, order or decree was removed, and (iii) the rule now will not apply to private transfer fee covenants imposed pursuant to a litigation settlement agreement or an agreement approved by a government body before February 8, 2011.
SEC moves to files amended complaint in FCPA enforcement action
On March 14, Fannie Mae followed its March 6 promise to update lender-placed insurance (LPI) requirements, by issuing Servicing Guide Announcement SVC-2012-4. The announcement details policy amendments and clarifications regarding the (i) use of LPI, (ii) coverage requirements, (iii) deductibles, (iv) carrier eligibility requirements, and (v) allowable reimbursable expenses. The Announcement also provides additional guidance to servicers for submitting property insurance claims and remitting outstanding insurance funds to Fannie Mae. The LPI updates will be published as a new section in Part II, Chapter 6 of the Servicing Guide, and servicers are required to implement the amended requirements by June 1, 2012. Additionally, on March 14, Fannie Mae announced the release of its 2012 Servicing Guide. According to SVC-2012-3, the new Guide incorporates all announcements issued through September 2, 2011. The new Guide does not include policies related to the servicing of reverse mortgages, which now form a new Servicing Manual. In addition, the new Guide includes certain policy clarifications regarding lender relationships and other miscellaneous issues.