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  • Florida judge rules borrower failed to establish RESPA private right of action


    On February 20, a federal judge for the U.S. District Court for the Southern District of Florida issued an opinion and order against a borrower after a two-day bench trial, finding that the borrower failed to establish a private right of action for any of her alleged RESPA violations. According to the opinion, one of the defendants, a mortgage company, initiated foreclosure proceedings against the borrower for failing to pay required insurance and tax associated with her reverse mortgage. During this period, the mortgage company purchased force-placed insurance through an insurance intermediary company to protect its collateral for the reverse mortgage. When the borrower later brought the account current, the mortgage company dismissed the foreclosure complaint. However, the borrower filed a suit against the mortgage company for failing to “advance insurance premiums on her behalf through an escrow account” and against the second defendant, an insurance company, for procuring a policy that “tortiously interfered” with her business relationship with the mortgage company. Specifically, the borrower alleged the procedure used to obtain the force-placed rates violated Florida Insurance Code Section 626.916, and were, therefore, “not bona fide and reasonable under RESPA.”

    However, the judge ruled that none of the borrower’s claims created a private right of action under RESPA, and furthermore, the borrower could not “bootstrap Section 626.916 through another cause of action.” Additionally, the judge noted that counsel for the borrower was unable to provide case law authority to support the “proposition that [the borrower’s] RESPA claim could be premised on a Florida statue which lacked a private right of action.” Concerning the borrower’s allegations of tortious interference against the insurance company, the judge concluded that the claim failed to show that the insurance company “intentionally or unjustifiably” interfered with her relationship with the mortgage company.

    Courts State Issues RESPA Mortgages Reverse Mortgages Foreclosure Force-placed Insurance

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  • Cordray Speaks at Consumer Advisory Board Meeting

    Consumer Finance

    On November 2, CFPB Director Richard Cordray delivered prepared remarks at the Consumer Advisory Board (CAB) Meeting in Tampa, Florida addressing, among other things, the new rule (Rule) covering payday loans and certain other installment products (previously covered by a Buckley Sandler Special Alert). Cordray indicated that the Rule is intended to reform a market where many borrowers end up rolling over their loans multiple times, incur fees, and have trouble ultimately paying off their original balance. Cordray encouraged the CAB to discuss the Rule, noting the Bureau previously received over 1.4 million public comments on the proposal. Cordray also touched on topics regarding (i) financial security of older consumers, including reverse mortgages; (ii) complexities with delivering products to consumers with limited English proficiency ; and (iii) the Bureau’s September report, “Financial Well-Being in America,” which discussed the results of a nationwide survey measuring individual financial well-being.

    Consumer Finance CFPB Payday Lending Reverse Mortgages

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  • CFPB Consumer Advisory Board Public Meeting Notice

    Consumer Finance

    The CFPB Consumer Advisory Board will host a public meeting on Thursday, November 2, at 10:00am EST in Tampa, Florida. According to the notice, published in the Federal Register on October 17, the board will discuss Know Before You Owe: Reverse Mortgages; financial well-being; trends and themes; and payday, vehicle title, and certain high-cost installment loans.

    Attendees must RSVP by noon, November 1, to

    Consumer Finance CFPB Reverse Mortgages Payday Lending

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  • Oregon Enacts Law Regulating Residential Mortgage Loan Servicers

    State Issues

    On August 2, Oregon Governor Kate Brown signed into law the Mortgage Loan Servicer Practices Act (SB 98), which places certain residential mortgage loan servicers under the supervision of the state’s Department of Consumer and Business Services (DCBS) and requires them to comply with a range of requirements. Among other things, the law gives licensing, examination, investigation, and enforcement authority to the DCBS, and requires applicable residential mortgage loan servicers to: (i) obtain and renew a license through the DCBS if they “directly or indirectly service a residential mortgage loan” in Oregon; (ii) maintain “sufficient liquidity, operating reserves and tangible net worth”; (iii) notify the DCBS in writing before certain operational changes occur; and (iv) comply with a range of consumer protection, antifraud, and recordkeeping requirements, including those related to borrower communications, payment processing, and fee assessments. The law becomes operative on January 1, 2018, and applies “to service transactions for residential mortgage loans that occur on or after” that date.

    State Issues State Legislation Reverse Mortgages Lending Mortgage Servicing

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  • DOJ Enters $89 Million Settlement with Texas-Based Bank in False Claims Act Matter


    On May 16, the U.S. Department of Justice (DOJ) announced that a Texas-based bank (Bank) agreed to settle the DOJ’s allegations that it violated the False Claims Act and FIRREA by wrongfully seeking payments from a federally insured reverse mortgage program. To protect lenders, HUD provides mortgage insurance through a program administered by the Federal Housing Administration (FHA) on reverse mortgage loans, in which seniors borrow money against the equity they have in their homes. The DOJ alleged that the Bank sought to obtain insurance payments for interest from the FHA despite failing to properly disclose on the filed insurance claim forms that the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings. As a result, from approximately 2011 to 2016, the mortgagees on the relevant reverse mortgage loans serviced by Bank “allegedly obtained additional interest that they were not entitled to receive.” The Bank agreed to pay more than $89 million to resolve the allegations, of which $1.6 million will be paid to the individual who filed the lawsuit under the whistleblower provisions of FIRREA.

    Lending Reverse Mortgages Enforcement False Claims Act / FIRREA Whistleblower

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  • Mortgage Companies Penalized for Deceptive Reverse Mortgage Ads; Must Take Corrective Action


    On December 7, the CFPB announced that it had entered into consent orders with three reverse mortgage companies to settle claims that their advertisements for those mortgages were deceptive under the Mortgage Acts and Practices Advertising Rule. The alleged misconduct included deceptive advertising campaigns that misrepresented, among other things: (i) the risk of losing home and the right to remain in the home; (ii) expected costs and mortgage payments; (iii) government affiliations of the mortgage company; and (iv) the effectiveness of a reverse mortgage credit product to eliminate debt.

    The consent orders require the companies to make clear and prominent disclosures in their reverse mortgage advertisements and implement systems to ensure they are following all laws. One of the three firms also cannot imply affiliation with the government and must maintain complete and accurate records. In addition, the consent orders impose civil penalties ranging from $65,000 up to $400,000.

    Courts Mortgages Consumer Finance CFPB Reverse Mortgages Mortgage Advertising

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  • CFPB Releases Supervisory Highlights Report for Fall 2016

    Federal Issues

    On October 31, the CFPB released the 13th Edition of its Supervisory Highlights Report, covering the period May through August of this year. The report shares recent supervisory observations in the areas of automobile loan origination, automobile loan servicing, debt collection, mortgage origination, mortgage servicing, student loan servicing, and fair lending. The report found that the CFPB’s recent supervisory actions returned more than $11 million to approximately 225,000 consumers. The Bureau also set forth new examination procedures for reverse mortgage servicing, student loan servicing, and the Military Lending Act.

    Federal Issues Consumer Finance CFPB Mortgage Origination Student Lending Debt Collection Reverse Mortgages Military Lending Act

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  • FHA Proposes Revisions to Reverse Mortgage Program


    On May 18, HUD announced that the FHA proposed a new rule that is intended to “strengthen” its Home Equity Conversion Mortgage (HECM) Program by reinforcing reforms that have taken place in the past two years, and by adding new consumer protections. New revisions to the HECM program outlined in the proposed rule include, but are not limited to, (i) ensuring that required HECM counseling occurs before a mortgage contract is signed; (ii) amending the definition of “property charges” to include utilities as a borrower responsibility; (iii) capping lifetime interest rate adjustments for adjustable interest rate products at 5%; (iv) requiring as a condition of eligibility for loan assignment that the HECM mortgage be in lien status prior to homeowners association and condo association liens; and (v) creating a “cash for keys” program to “incentivize parties with legal authority to dispose of a property that serves as the security for a HECM to complete a deed in lieu of foreclosure more quickly.” Comments on the proposal are due by Monday, July 18, 2016.

    HUD Reverse Mortgages FHA

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  • Mortgage Banking Firm Settles with DOJ for Participation in Fraudulent Reimbursement Scheme


    On September 4, the DOJ announced a settlement of more than $29 million with a Florida-based mortgage banking firm in connection with violations of the False Claims Act. The firm’s subsidiaries participated in HUD’s Home Equity Conversion Mortgages (HECM) program, which insures reverse mortgage loans by reimbursing lenders that are unable to recoup the full amount of a reverse mortgage loan once the loan becomes due and payable. HUD will reimburse sales commissions paid to real estate agents in connection with the liquidation of foreclosed properties, but will not reimburse fees paid to real estate agents for referrals of loans to be liquidated. According to the DOJ, from July 2010 to October 2014, the firm used straw companies to split commissions with real estate agents, and then later submitted claims to HUD for reimbursement of the full commission amount. Additionally, from August 2009 to March 2015, the firm encouraged its subsidiaries to submit false debenture interest claims to HUD. Specifically, the subsidiaries neglected to disclose that they had failed to meet certain required regulatory deadlines and were therefore not entitled to interest payments. The DOJ stated that the settlement “represents a significant milestone in [the DOJ’s] long standing campaign against mortgage fraud.”

    HUD Reverse Mortgages DOJ

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  • Illinois Governor Signs Reverse Mortgage Act

    Consumer Finance

    On August 10, Illinois Governor Bruce Rauner signed into law Senate Bill 1440, the Reverse Mortgage Act which provides new consumer protections for borrowers with respect to reverse mortgage loan transactions. Among other things, the legislation establishes a regulatory framework to govern reverse mortgage loan transactions made within the state including provisions that (i) require lenders to provide certain mortgage disclosures to potential borrowers; and (ii) implement a three-day “cooling off” period in which a potential borrower can rescind the loan. The Act also grants the Illinois Attorney General sole enforcement authority to pursue any violations of the Reverse Mortgage Act, which would constitute as an unlawful practice under the state’s Consumer Fraud and Deceptive Business Practices Act. The law becomes effective January 1, 2016.

    Reverse Mortgages

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