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FHFA Proposes Decreased Loan Purchase Limits
On December 16, the FHFA requested public comment on a plan gradually to reduce the maximum size of loans purchased by Fannie Mae and Freddie Mac. The FHFA bases the plan on the uncertain future of Fannie Mae and Freddie Mac and “the desire for private capital to re-enter the market.” The FHFA states that it is considering starting the gradual decrease with approximately a four percent reduction in the maximum loan limit for one-unit properties—for example, from $417,000 to $400,000 in most locations, and from $625,000 to $600,000 for the highest-cost areas. The lower purchase limits would, at the earliest, apply to loans originated after October 1, 2014. The FHFA seeks specific comments on (i) the appropriate advance notice period for any final changes; (ii) the timing of any subsequent adjustments; (iii) whether any such subsequent adjustments should be announced in a multi-year schedule, and, if so, whether they should be based on specific dollar amount reductions or percent changes per year; (iv) whether reductions to the limit for areas that fall between the baseline limit and the high-cost limit should continue to be tied to median house prices or should be proportional to reductions in the baseline limit; and (v) whether loan limits should be set at even multiples of either $1,000 or some other dollar amount. Comments are due no later than March 20, 2014.
Fannie Mae, Freddie Mac Implement New G-Fee Schedule
On December 16, Fannie Mae issued Selling Guide Announcement SEL-2013-09 and Freddie Mac issued Bulletin 2013-26 to implement new guarantee fees (g-fees) for 2014, as recently mandated by the FHFA. The announcements provide updated up-front g-fee grids, which the FHFA claims are needed to better align pricing with the credit risk characteristics of the borrower.
OCC Releases Annual Assessment Schedule
On December 12, the OCC issued Bulletin 2013-37, which informs all national banks, federal savings associations, and federal branches and agencies of foreign banks of fees and assessments charged by the OCC for calendar year 2014. The Bulletin states that, given its increased supervisory responsibilities associated with the Dodd-Frank Act, the OCC has removed the $20 billion asset cap on inflation indexing for all asset brackets and raised the asset cap from $20 billion to $40 billion for application of the surcharge related to lower-rated institutions. Marginal rates of the OCC’s general assessment schedule continue to be indexed based on changes in the Gross Domestic Product Implicit Price Deflator for the previous June-to-June period. The 2014 adjustment will be 1.4 percent, and, given the removal of the asset cap, will apply to all assets. The Bulletin further explains that the assessment schedule continues to include a surcharge for institutions that require increased supervisory resources, and that the OCC will continue to provide a 12 percent reduction on the assessment for nonlead national banks, federal savings associations, or federal branches or agencies of a foreign bank. The new assessments are effective January 1, 2014 and are due March 31, 2014 and September 30, 2014, based on call report information as of December 31, 2013 and June 30, 2014, respectively.
More State AGs File Suits Against Online Payday Lender, Loan Servicers
On December 16, the North Carolina attorney general (AG) filed a lawsuit against an online payday lender, two loan servicers, and a related debt collection company, and the Colorado AG filed suit against the same loan servicers and collection company. The Colorado AG previously filed a separate suit against the lender. In addition, the New Hampshire AG promised to enforce a state banking department order against the same entities targeted in the other state actions. All three actions are parallel to, and were taken in coordination with, a CFPB action filed December 16 purportedly signaling broader pursuit of “regulatory-evasion schemes.” In general, the states are alleging that the lender violated state usury or licensing laws in the online origination of short-term, small dollar loans. The lender asserts that it is a Native American sovereign entity not subject to relevant state laws. The states also allege that a servicer, either in its own name or through a related entity, provided the lender with marketing, web hosting and customer services, collected consumer information, and conducted the loans’ initial underwriting review, and then purchased all loans immediately after origination. The states further allege that either the servicers or a related debt collection company engaged in servicing and collections, and that the totality of the activities violated state lending and licensing laws by, among other things, financing and collecting on illegal payday loans. The state AG suits are similar to suits previously filed by other state attorneys general, including in New York, Georgia, Minnesota, and Virginia.
New Jersey AG Files RMBS Suit
On December 18, New Jersey’s Acting Attorney General John Hoffman announced a lawsuit against a mortgage securitizer and related firms for allegedly violating state securities law by making fraudulent misrepresentations and omissions to promote the sale of RMBS to private investors. Specifically, the suit alleges that the firms misrepresented in the offering documents that mortgages underlying certain securities offered over a 12-month period in 2006-7: (i) were in substantial compliance with the underwriting standards of the originators of the loans; (ii) were originated "in accordance with accepted practices and prudent guidelines;" and (iii) did not have a negative equity. The suit alleges that the firms’ traders warned about the high risks of certain types of loans being securitized. The state claims that after the securities were issued, delinquency rates in the underlying pools increased substantially, and resulted in significantly reduced distributions to investors and write downs in the principal of underlying loans. The New Jersey AG is at least the second state attorney general to file such a suit as part of the federal-state RMBS)Working Group. New York Attorney General Schneiderman filed similar suits under New York law last year.
Wisconsin Revises Mortgage Satisfaction Requirements
On December 12, Wisconsin enacted SB 290, which repealed an existing law governing mortgage satisfaction requirements and adopted provisions similar to the Uniform Residential Mortgage Satisfaction Act (URMSA). Effective immediately, state law allows the recording of an affidavit of satisfaction of a security instrument to be used as another mortgage satisfaction option for mortgages on residential real property. Under this option, upon or at any time after full performance or payment as provided in a payoff statement by the residential property owner, a satisfaction agent authorized by the owner may give the secured creditor notice that the satisfaction agent may record an affidavit of satisfaction of the security instrument. The bill specifies the information that must be contained in the notice that is sent to the secured creditor, including, for example, that the satisfaction agent has reasonable grounds to believe that the property is residential real property and that the secured creditor has received full payment or payment as provided in a payoff statement. It also sets out the right of a settlement agent or a person who is obligated under a security instrument to request a payoff statement from a secured creditor. In addition, among other things, the bill (i) specifies the information that the payoff statement must contain, and provides for penalties against a secured creditor for not sending a timely payoff statement that substantially complies with the content requirements in the bill; (ii) provides for the recording of a document of rescission, which rescinds an erroneously recorded satisfaction or affidavit of satisfaction, keeping the security instrument in force; and (iii) increases from $100 to $1000 the property transfer fee exemption threshold.
Georgia Amends Mortgage Loan Origination, Licensing Regulations
Recently, Georgia amended certain regulations related to mortgage loan originations, originators, and brokers. Effective November 29, 2013, borrowers are required to pay to the Department of Banking a $10 per loan fee if a loan is secured by a deed to secure debt, security deed, mortgage, security instrument, deed of trust, modification of a security deed, or other form or modification of a security interest. Further, any person who acts as the collecting agent at a closing of a mortgage loan transaction is liable for payment of the $10 fee, and the remittance of any such fees after the date on which they are due will subject the person to a late payment fee of $100 for each due date missed. The filing of a fee statement after the date on which it is due, even if no $10 fees were collected by the collecting agent during the applicable reporting period, will subject the person to a late filing fee of $100 for each due date missed. If the Department finds that a person has not, through negligence or otherwise, submitted $10 fees within six months of the due date, it may impose an additional $100 fine for failure to remit fees. Repeated failures to submit $10 fees may be grounds for revocation of license. In addition, the regulation amends the definition of "branch manager to require that an individual be a licensed mortgage loan originator to be approved as a branch manager, and requires an affidavit verifying the lawful presence of every natural person that submits an application for a license as a mortgage broker or mortgage lender or a registration on behalf of an individual or company. Among other things, the rules also require applicants, registrants, and licensed mortgage brokers and mortgage lenders to keep the information on the NMLSR current and to make amendments within 10 days of the events necessitating change and adds an administrative fine of $1,000 per occurrence for failing to timely update information on the NMLSR.
Massachusetts Releases FAQs For New Loan Servicing, Collection Rules
On December 18, the Massachusetts Division of Banks published a short set of frequently-asked-questions related to new regulations intended to parallel and supplement mortgage servicing requirements promulgated by the CFPB and included in National Mortgage Servicing Settlement.
Italy's High Court Upholds Acquittal of Google Executives In Video Privacy Case
On December 17, Italy’s highest court, the Italian Supreme Court of Cassation, issued a landmark ruling upholding the acquittal of three Google senior executives by the Milan Court of Appeals. Initially, an Italian trial court convicted the executives of criminal violations of Italy’s privacy laws for allegedly allowing a controversial video to be uploaded to the precursor to YouTube by a user of the service without first screening the video. The Milan Court of Appeals rejected prosecutors’ contention that the company should be responsible for prescreening user-provided content, and agreed with the executives that requiring prescreening for such content would not only infringe on users’ freedom of expression, but would undermine websites’ functionality. The Court of Cassation will issue a written statement of its reasoning early next year. BuckleySandler attorneys Samuel Buffone and Ann Wiles represented two of the three Google executives.
New York Appellate Court Resolves Trial Court Split Over Statute Of Limitations For Repurchase Suits
On December 19, the Supreme Court of New York, Appellate Division, held that the statute of limitations on claims related to mortgage repurchase obligations begins to run as of the date of closing of the loan purchase agreement. Ace Securities Corp v. DB Structured Prods., Inc., No. 650980/12, 2013 WL 6670379 (N.Y. App. Div. Dec. 19, 2013). The decision resolves a split at the trial court level that resulted from diverging opinions issued earlier this year, in which one court held that the clock on claims by trustees that a securitizer breached its contract by failing to repurchase began to run on the date the representations were made (i.e. the date the pooling and servicing agreement closed), while another court held that the statute did not begin to run until the securitizers improperly rejected the trustee’s repurchase demand, i.e. the breach is the failure to comply, not the date of the representation. On appeal of the latter holding, the court rejected the trustee’s and investors’ argument that the statute does not begin to run until the lender refused to cure or repurchase the defective loans, and held that the claims accrued on the closing date of the pooling and servicing agreement, at which time any alleged breach of the representations and warranties contained therein occurred.