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7th Circuit: Bank avoids breach of contract claims in HAMP loan modification offer
On April 30, in a split opinion, the U.S. Court of Appeals for the Seventh Circuit issued a decision affirming a district court order holding that a consumer’s claims against a bank failed because the bank never counter-signed the Trial Period Plan (TPP) it offered the consumer in connection with the Home Affordable Mortgage Program (HAMP). According to the opinion, the consumer signed his name to the TPP and returned the TPP to the bank along with what the consumer believed to be the other required documents and the first of this three payments. However, the bank never returned a fully executed copy of the TPP to the consumer. Instead, it sent the consumer multiple notices stating that necessary documentation was still missing. Ultimately, the consumer made all three payments required by the TPP, but never received a permanent modification of his loan. On that basis, the consumer filed suit, alleging breach of contract, fraud, and intentional infliction of emotional distress due to the bank’s alleged failure to honor its loan-modification offer. The district court granted judgment on the pleadings for the bank and denied the plaintiff’s request to amend the complaint, concluding, among other things, that the consumer failed to state a plausible claim for relief.
On appeal, the majority agreed with the district court, holding, among other things, that the bank never actually agreed to modify the consumer’s mortgage under HAMP. Specifically, the majority stated that “[i]f an offer contains a conditional precedent, a contract does not form until the condition is satisfied,” referencing language in which the bank reserved the right not to send the consumer a counter-signed copy of the Trial Period Plan (TPP) if the borrower did not qualify for HAMP relief. Because the TPP never went into effect, it imposed no contractual obligations on the bank.
Michigan regulator issues guidance for financial services sector to comply with stay at home orders
On May 6, the director of Michigan’s Department of Insurance and Financial Services issued Bulletin 2020-23-BT/CF/CU to provide guidance to the financial services industry on compliance with the governor’s stay at home orders. The bulletin reiterates that work by the financial services sector should be done remotely to the fullest extent possible and businesses should take other mitigating measures for non-remote workers. It also clarifies that workers in the real estate industry, as opposed to mortgage companies, are not critical infrastructure workers, and should refer to guidance by the Michigan Department of Licensing and Regulatory Affairs.
Pennsylvania State Department permits live streaming of real estate classes
On May 6, the Pennsylvania Department of State announced that it waived the requirement that real estate professionals attend certain required pre-licensing and continuing education courses in person. Such courses may now be live-streamed.
Pennsylvania State Department extends deadlines for notaries
On May 6, the Pennsylvania Department of State extended deadlines for appointed notaries to get sworn in, record a bond, oath and commission with the Recorder of Deeds, and register their signatures with the Prothonotary’s office. Previously, all such actions were required to occur within 45 days of the appointment. The Department of State provided an additional 30 days.
Federal Reserve issues guidance regarding flood insurance compliance
On May 6, the Federal Reserve issued guidance to state member banks regarding flood insurance compliance in response to Covid-19. The guidance responds to a question regarding the extension of maturities/payments or balloon payments due to Covid-19 as well as a question about the impact of FEMA Bulletin W-20002 on force placement requirements under the Flood Disaster Protection Act and the implementing regulation.
Rhode Island extends Covid-19 executive orders
On May 6, the governor of Rhode Island extended multiple executive orders related to the Covid-19 pandemic until June 5, 2020. These include, among others, orders related to quarantines, remote corporate and shareholder meetings, and unemployment insurance.
California suspends penalties for late payment of property taxes for certain taxpayers
On May 6, California issued an executive order suspending until May 6, 2021, certain provisions of the California Revenue and Taxation code that would impose penalties, costs, or interest for a failure to pay property taxes, provided that certain conditions are satisfied. For example, the property for which the taxes were not paid must either be residential real property occupied by the taxpayer or real property owned and operated by the taxpayer that qualifies as a small business under the Small Business Administration’s regulations. The taxpayer must also demonstrate that the taxpayer has suffered economic hardship, or was otherwise unable to pay in a timely fashion, due to Covid-19 or any local, state, or federal government response to Covid-19.
24 state attorneys general urge changes to the PPP
On May 6, twenty-four state attorneys general sent congressional leadership a letter urging changes to the Paycheck Protection Program (PPP) to ensure that funds are distributed fairly, equitably and efficiently. The letter asserts that while the PPP has helped many small businesses already by “rapidly inject[ing] the initial $349 billion in funding into our struggling economy,” larger, more “well-connected” companies were better able to take advantage of the process and the program “has suffered from a notable lack of transparency, technical savvy, and functionality.” Specifically, the letter argues that due to insufficient guidance to lenders, the first round of funding “left far too many small businesses empty handed.” In order to ensure any additional funding allocated to the program effectively supports small businesses, the letter requests certain issues be addressed by Congress, including, among other things, (i) prohibiting applications from publicly traded companies with access to alternative funding sources; (ii) ensuring lenders do not favor existing, larger, and more lucrative customers over other applicants; (iii) allocating a portion of future funding exclusively for minority-owned small businesses; (iv) improving communication and technical support; (v) adding flexibility to the loan forgiveness requirements to account for the variety of circumstances facing small businesses; and (vi) providing more direct guidance to lenders.
California small business sues nonbank lender over PPP prioritization
On May 6, a small California business filed a proposed class action against a nonbank lender, accusing the lender of a “scheme to enrich itself at the expense of small businesses in connection with the federal government’s Paycheck Protection Program (PPP),” in violation of California’s Unfair Competition Law. In the complaint, the plaintiff alleges she submitted an application for less than $25,000 to the lender on March 28 and received an email response that same day acknowledging receipt of her application. On March 29, the plaintiff received another email from the lender, which asked her to gather documentation and stated that she would receive an invitation to a secure portal in the next “48 business hours.” According to the complaint, however, by April 13, the plaintiff had not yet received a link to the portal, but the lender had sent an email acknowledging the delay. The complaint states that the plaintiff “informed and believes, and on that basis alleges” that the lender “chose to prioritize higher loans that would yield higher fees,” and did not disclose to the public that “it was prioritizing loans not on a first come, first served basis, but on criteria relating to the value of the loan.” The plaintiff alleges she would have chosen a different lender had she known the lender was going to prioritize larger loans. The complaint seeks injunctive relief, restitution, as well as compensatory and punitive damages.
11th Circuit will not rehear en banc city’s Fair Housing Act suit
On April 27, a majority panel for the U.S. Court of Appeals for the Eleventh Circuit denied the City of Miami Gardens’s petition for rehearing en banc after determining that the City “faced an uphill battle” to establish standing to bring a Fair Housing Act lawsuit against a national bank because it mainly relied on “an attenuated theory of injury.” As previously covered by InfoBytes, last July the 11th Circuit dismissed the City’s lawsuit against the bank for lack of standing after concluding, among other things, that the City’s evidence that certain loans may go into foreclosure at some point in the future “does not satisfy the requirement that a threatened injury be ‘imminent, not conjectural or hypothetical,’” and that the City failed to provide evidence that certain foreclosed loans had an effect on property-tax revenues or municipal spending or were issued on discriminatory terms. In explaining their decision to not rehear its 2019 ruling en banc, the majority stated that its decision—that the City failed to satisfy its burden of establishing standing—respects “the concerns and fairness and notice demanded by” both U.S. Supreme Court and 11th Circuit precedent. Two dissenting judges countered, however, that the rehearing should have been granted because, among other things, the 11th Circuit’s dismissal for lack of standing was done sua sponte “even though the City received neither proper notice that it failed to prove standing nor a legitimate opportunity to discover or produce the requisite evidence.”