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New York regulator issues guidance for state consumer credit reporting agencies
On June 17, the New York State Department of Financial Services issued guidance to state-regulated consumer credit reporting agencies regarding support for New York consumers impacted by Covid-19. The guidance indicates that all state-regulated consumer credit reporting agencies have agreed to take a number of steps to mitigate consumer harm, including permitting consumers at least one free credit report per month for six months, reminding furnishers of information of the appropriate manner to report accommodations reached pursuant to the CARES Act, and posting on their website a link to a page dedicated to Covid-19 information and updates.
VA extends moratorium on foreclosures due to continued impact of Covid-19
On June 17, the Department of Veterans Affairs extended its moratorium on foreclosures until August 31, 2020, due to the continued negative impact of Covid-19 on veterans (see here for previous coverage). The moratorium prohibits loan servicers from initiating or completing any foreclosure on properties secured by VA-guaranteed loans.
FHA extends foreclosure and eviction moratorium for two more months
On June 17, FHA announced that it will extend its foreclosure and eviction moratorium through August 31, 2020, which applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, excluding legally vacant or abandoned properties (previously discussed here and here). The announcement also reminds servicers of their obligations under the CARES Act.
FHFA: Fannie Mae and Freddie Mac will extend foreclosure and eviction moratorium
On June 17, FHFA announced that Fannie Mae and Freddie Mac will extend their single-family moratorium on foreclosures and evictions until at least August 31, which is currently set to expire on June 30 (previously discussed here). The foreclosure moratorium applies to homeowners with an Enterprise-backed, single-family mortgage.
New York enacts legislation on residential mortgage payment forbearance
On June 17, New York Senate Bill 8243, which relates to the forbearance of residential mortgage payments, was signed into law. Specifically, SB 8243 requires New York regulated institutions to: (1) make applications for forbearance of any payment due on a residential mortgage on property located in New York “widely available to any qualified mortgagor who, during the covered period, is in arrears or on a trial period plan, or who has applied for loss mitigation and demonstrates financial hardship during the covered period;” and (2) grant such forbearance for a period of 180 days to any such qualified mortgagor with an option to extend an additional 180 days. Such forbearances may be backdated to March 7, 2020. SB 8243 also sets forth certain requirements for the mortgage forbearances granted under the law, which includes limitations on credit reporting and charging interest and late fees. The law also provides that adhering to SB 8243 will be a condition precedent to commencing a foreclosure action resulting from a missed payment, which would have otherwise been subject to the law. However, SB 8243 does not apply to, or affect mortgage loans made, insured, or secured by a United States agency or instrumentality, a government sponsored enterprise, or a federal home loan, or the rights and obligations of any lender, issuer, servicer or trustee of such obligations, including servicers for the Government National Mortgage Association.
On the same day, New York Senate Bill 8428, which also relates to the forbearance of residential mortgage loans, was signed into the law. The requirements in SB 8428 are similar to the requirements set forth in SB 8243, except that SB 8428 clarify certain areas of the law including the types of properties subject to the Law, who may receive a forbearance, and when a forbearance extension is warranted. SB 8428 also clarifies that the obligation to grant the forbearance relief required is subject to the regulated institution having sufficient capital and liquidity to meet its obligations and to operate in a safe and sound manner. To the extent a regulated institution determines it is unable to offer relief, it must alert the Department of Financial Institutions within five days of making such a determination.
NYDFS clarifies Final Part 419 mortgage servicer compliance
On June 12, NYDFS issued an industry letter and a set of Frequently Asked Questions (FAQs) to mortgage servicers in response to inquiries regarding the requirements and implementation of 3 NYCRR Part 419 (Final Part 419), which governs the conduct and business practices for mortgage loan servicers operating in New York. Final Part 419 “codifies certain requirements imposed by Regulations X and Z and best practices that have become commonplace since Part 419 was first adopted ten years ago.” The FAQs answer common questions related to topics such as the definition of a servicer, applicability to reverse mortgages, small servicer exemptions, and escrow account analysis requirements for borrowers with loans in forbearance as a result of the Covid-19 pandemic. The industry letter and FAQs also highlight two specific issues concerning the application of Final Part 419 on open-end credit plans or Home Equity Lines of Credit (HELOCs):
- While Final Part 419 applies to HELOCs, NYDFS clarifies that, until further notice, a servicer that furnishes a periodic statement to a borrower in connection with an open-end credit plan or HELOC that “complies with the requirements of 12 CFR § 1026.7(a) is not required to furnish a periodic statement to such borrower pursuant to Part 419.4(c).”
- Because the requirements of 3 NYCRR §419.7 governing delinquencies and loss mitigation efforts currently only apply to open-end credit plans or HELOCs that are in first lien positions, NYDFS states it will not apply these provisions to open-end credit plans or HELOCs that are not in a first lien position.
NYDFS states that it “will continue to monitor the application of these two interpretations and their impact on consumers and may revisit them at a later date.” Final Part 419, as extended, is effective June 15.
North Carolina Secretary of State issues requirements for remote notarizations
The North Carolina Secretary of State has issued requirements and FAQs for remote video notarizations, which are permissible under North Carolina’s emergency video notarization law from May 2 until August 1. The requirements specify, among other things, the identification and recordkeeping requirements for remote notarizations using video conference technology.
Federal Reserve Board’s Secondary Market Corporate Credit Facility to purchase corporate bonds
On June 15, the Federal Reserve Board announced that the Secondary Market Corporate Credit Facility (SMCCF) (previously covered here) will begin buying a diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers. The intent is to create a bond portfolio that tracks the composition of the broad, diverse universe of secondary market bonds that are eligible for the program. The announcement included a revised term sheet and updated FAQs for the SMCCF.
Federal Reserve Board resumes examinations for all banks
On June 15, the Federal Reserve Board announced the resumption of examination activities for all banks. Back in March, the board scaled back its examination activities in light of Covid-19 (previously covered here). The announcement anticipates that the board will continue to conduct exams offsite until conditions improve.
California Court of Appeal: FTC Holder Rule preempts state law authorizing recovery of certain attorney fees
On June 9, the California Court of Appeal for the First Appellate District affirmed a trial court’s judgment in favor of a bank (defendant), holding that the FTC’s Holder Rule preempts California Civil Code section 1459.5, which authorizes a plaintiff to recover attorney fees on a Holder Rule claim even if it results in a total recovery that exceeds the amount the plaintiff paid under the contract. According to the court, the plaintiff sued the defendant (who was assigned the vehicle credit sale contract) after he discovered that the seller failed to disclose that the vehicle had been in a major collision, thus reducing its value. The parties settled for a sum equal to the vehicle’s purchase price, and the plaintiff filed a motion for attorney fees. The trial court denied the motion, determining that the plaintiff was not entitled to fees under a holding in Lafferty v. Wells Fargo Bank, which stated that a debtor cannot recover damages and attorney fees for a Holder Rule claim that collectively exceed the amount paid by the debtor under the contract. The plaintiff appealed.
The Court of Appeal agreed with the trial court, determining that it did not need to resolve the parties’ dispute as to whether Lafferty correctly construed the Holder Rule’s limitation on recovery because the FTC’s construction of the Holder Rule is entitled to deference. The Court of Appeal referenced the FTC’s 2019 confirmation of the Holder Rule (Rule Confirmation), after Lafferty issued, which addressed, among other things, several comments related to whether the Holder Rule’s “limitation on recovery to ‘amounts paid by the debtor’ allows or should allow consumers to recover attorneys’ fees above that cap.” The FTC provided the following statement within the Rule Confirmation: “We conclude that if a federal or state law separately provides for recovery of attorneys’ fees independent of claims or defenses arising from the seller’s misconduct, nothing in the Rule limits such recovery. Conversely, if the holder’s liability for fees is based on claims against the seller that are persevered by the Holder Rule Notice, the payment that the consumer may recover from the holder—including any recovery based on attorneys’ fees—cannot exceed the amount the consumer paid under the contract.”