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  • City of Philadelphia’s discriminatory lending lawsuit moves forward

    Lending

    On January 16, a federal judge in the U.S. District Court for the Eastern District of Pennsylvania denied a national bank’s motion to dismiss the City of Philadelphia’s (City) claims that the bank engaged in alleged discriminatory lending practices in violation of the Fair Housing Act (FHA). As previously covered in InfoBytes, the City filed a complaint in May of last year against the bank alleging discrimination under both the disparate treatment and disparate impact theories. The City asserted that the bank’s practice of offering better terms to similarly-situated, non-minority borrowers or refusing to make loans in minority neighborhoods has led to foreclosures and vacant homes, which in turn, has resulted in a suppression of property tax revenue and increased cost of providing services such as police, fire fighting, and other municipal services. In support of its motion to dismiss, the bank argued, among other things, that the City’s claim (i) is time barred; (ii) improperly alleges the disparate impact theory; and (iii) fails to allege proximate cause as required by a recent U.S. Supreme Court ruling (see previous Special Alert here).

    While the court expressed “serious concerns about the viability of the economic injury aspect of the City’s claim with regard to proximate cause,” the court found that the bank “has not met its burden to show why the City’s entire FHA claim should be dismissed.” Consequently, the court held that the case may proceed to discovery beyond the two-year statute of limitations period for FHA violations in order to provide the City an opportunity to prove whether the bank’s policy caused a racial disparity that constituted a violation continuing into the limitations period.

    Lending State Issues Fair Lending Redlining FHA U.S. Supreme Court Disparate Impact Mortgages

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  • Fed terminates foreclosure enforcement actions, fines five banks CMPs

    Lending

    On January 10, the Federal Reserve Board (Fed) announced the termination of ten enforcement actions for legacy mortgage loan servicing and foreclosure processing activities, along with the issuance of more than $35 million in combined civil money penalties (CMPs) against five of the ten banks. Combined with penalties previously assessed against other supervised firms (see previous InfoBytes coverage here), the Fed’s mortgage servicing enforcement actions have totaled approximately $1.1 billion in penalties. The CMPs assessed against the five banks range from $3.5 million to $14 million. 

    According to the Fed, the termination of the ten enforcement actions is a result of “evidence of sustainable improvements in the firms’ oversight and mortgage servicing practices.” Under the terms of the previously issued consent orders, in addition to the CMPs, the banks were required to (i) improve residential mortgage loan servicing oversight, and (ii) correct deficiencies in residential mortgage loan servicing and foreclosure processing for banks with Fed supervised-mortgage servicing subsidiaries.

    The Fed also announced the termination of two related joint enforcement actions (see here and here) with the OCC, FDIC and FHFA (a party to only one of the actions) against key mortgage servicing service providers. According to the announcement, the terminations were a result of proof of “sustainable improvements” in the companies’ foreclosure-related practices.

    Lending Mortgages Mortgage Servicing Foreclosure Enforcement Federal Reserve

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  • U.S. government, national bank parties enter $5 million False Claims Act settlement

    Courts

    On January 5, the U.S. Government reached a $5 million settlement with a national bank and its affiliates (together, the bank parties) to resolve a lawsuit concerning allegations that the bank parties violated the False Claims Act (FCA) by engaging in improper foreclosure-related practices. The settlement is not an admission of liability by the bank parties. Specifically, as previously covered in InfoBytes, the lawsuit primarily alleged that the bank parties knowingly used rubber-stamped surrogate signed endorsements and false mortgage assignments to support false claims for mortgage insurance from the Federal Housing Administration. The lawsuit also asserted a reverse FCA claim alleging that the bank parties made false statements when entering into the 2012 National Mortgage Settlement. The U.S. Government, the bank parties, and the relator who initially brought the suit stipulated to the dismissal with prejudice concerning 39 “Implied Certification and False Statement Claims,” along with all claims brought or that could have been brought by the relator, but without prejudice as to any other claims that could be brought by the U.S. Government. Under the terms of the settlement agreement, the bank parties are required to pay $3.4 million to the U.S. Government—$891,000 of which will be paid to the relator who originally brought the suit. In addition, the bank parties will pay the relator an additional $1.6 million in attorneys’ fees and litigation costs and expenses.

    Courts Foreclosure Mortgage Servicing Mortgages Settlement False Claims Act / FIRREA FHA

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  • Mortgage Servicer Agrees to Pay $45 Million in Nationwide Settlement

    State Issues

    On January 3, a mortgage servicer entered into a $45 million settlement with 49 state attorneys general and the District of Columbia for alleged mortgage servicing delinquencies. The settlement resolves a complaint, filed on the same day in the D.C. District Court, that alleges that between 2009 and 2012 the servicer, among other things, failed to (i) timely and accurately apply payments; (ii) maintain proper documentation to establish standing for foreclosure; (iii) respond to borrower complaints and reasonable requests for assistance; (iv) properly process loan modification applications; and (v) properly oversee third party vendors responsible for foreclosure operations. The $45 million settlement payment includes $30.4 million in restitution to homeowners; $5 million in attorney’s fees and investigative costs and fees payable to the state attorneys general whose offices led the investigation; and almost $9 million in administrative penalties to state mortgage regulators. In addition to the settlement payments, the settlement also requires the mortgage servicer to comply with a set of “Servicing Standards” outlined in the consent judgment and to submit quarterly reports to the state attorneys general Executive Committee for a period of three years.

    In response to the settlement, the mortgage servicer stated that it admits no wrongdoing and is currently using the adopted new Servicing Standards. 

    State Issues State AG Mortgage Servicing Mortgages

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  • District Court Allows Government to Intervene in False Claims Act Litigation

    Courts

    On January 3, the District Court for the Southern District of Florida granted the U.S. Government’s motion to intervene in a False Claims Act (FCA) lawsuit against a national bank. The lawsuit, filed by a foreclosure attorney and relator, alleges that the national bank submitted false claims in violation of the FCA in two ways. First, the lawsuit alleges that the national bank knowingly used rubber-stamped surrogate signed endorsements and false mortgage assignments to support false claims for mortgage insurance from FHA. Second, the lawsuit asserts a reverse FCA claim alleging that the national bank made false statements when entering into the 2012 National Mortgage Settlement. On December 21, the U.S. Government requested to intervene to assist in “effectuating and formalizing” a proposed settlement between the relator and the national bank that would resolve the matter.

    Courts False Claims Act / FIRREA Mortgage Servicing Mortgages Foreclosure National Mortgage Servicing Settlement

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  • International Bank Settles With California AG for $125 Million for RMBS Misrepresentations

    State Issues

    On December 22, the California Attorney General announced a $125 million settlement with an international bank to resolve allegations of misrepresentations while selling residential mortgage-backed securities to California’s public employee and teacher pension funds. According to Attorney General Xavier Becerra’s office, an investigation found that descriptions of the RMBS “failed to accurately disclose the true characteristics of many of the underlying mortgages” to the state investors. Additionally, the international bank allegedly failed to adequately perform due diligence checks to remove poor quality loans from the investment pool, leading to millions of dollars of loss to the pension funds.

    State Issues State AG RMBS Settlement Mortgages

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  • Ohio Governor Signs Residential Mortgage Lending Act

    Lending

    On December 22, Ohio Governor John Kasich signed legislation enacting amendments to the state’s residential mortgage lending act. HB 199, among other things, (i) updates certain definitions, such as modifying the definition of “nationwide mortgage licensing system and registry” to broadly include “persons providing non-depository financial services”; (ii) provides limits on the application of the current law to “unsecured loans and loans secured by other than residential real estate”; and (iii) updates requirements for applicants registering for mortgage loan originator licenses. The amended act becomes effective 90 days after being signed into law.

    Lending State Issues State Legislation Mortgage Lenders Mortgages Debt Collection

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  • CFPB Releases HMDA Tools; Updates HMDA Asset Threshold

    Federal Issues

    On December 27, the CFPB announced the launch of a HMDA Check Digit Tool and a Rate Spread Calculator to assist financial institutions in the calculation of data field values required for reporting HMDA data. According to the CFPB, the HMDA Check Digit Tool and the Rate Spread Calculator will remain available to financial institutions throughout the 2018 collection period and beyond. As previously covered by InfoBytes, new HMDA data collection and reporting requirements under the amendments to Regulation C became effective January 1, 2018.

    Also on December 27, the CFPB published a final rule increasing the asset-size exemption threshold under HMDA for financial institutions. As of January 1, 2018, banks, savings associations, and credit unions with assets of $45 million or less as of December 31, 2017 are exempt from collecting data in 2018. Regulation C requires the CFPB to adjust the asset threshold based on the year-to-year change in the average of the CPI–W (not seasonally adjusted) for each 12-month period ending in November, rounded to the nearest million. During the 12-month period ending in November 2017, the CPI–W increased by 2.1 percent, resulting in an increase in the threshold from $44 million to $45 million.

    Federal Issues CFPB HMDA Mortgages

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  • FHFA Requests Input on GSE Credit Score Requirements; Releases 2018 Scorecard

    Federal Issues

    On December 20, the Federal Housing Financial Agency (FHFA) announced a Request for Input (RFI) seeking feedback from interested parties regarding how Fannie Mae and Freddie Mac (the GSEs) should update their current credit score requirements. Specifically, the GSEs plan to stop using the Classic FICO credit score model and to replace it with one of four options. These options include (i) requiring the use of either the FICO 9 credit score model or the VantageScore 3.0 credit score model; (ii) requiring the use of both the FICO 9 and the VantageScore 3.0 credit score models; (iii) allowing lenders to choose between either the FICO 9 or the VantageScore 3.0 credit score models; or (iv) allowing lenders to deliver multiple scores through a waterfall approach that would establish a primary and a secondary score. The FHFA’s RFI asks interested parties to provide feedback on these options by responding to 22 questions outlined in the RFI by February 20.

    On December 21, FHFA released the 2018 Scorecard outlining specific conservatorship priorities for the GSEs and their joint venture, Common Securitization Solutions, LLC (CSS). The 2018 Scorecard continues to identify many of the priorities outlined in the 2017 Scorecard. In addition, the 2018 Scorecard highlights the FHFA’s focus on gathering information to support its assessment of single-family rental strategies and extends the timeline for implementation of the Single Security Initiative on the Common Securitization Platform to the second quarter of 2019.

    Federal Issues Mortgages Fannie Mae Freddie Mac Credit Scores CRA

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  • Fannie and Freddie Extend Foreclosure Suspension for Puerto Rico and U.S. Virgin Islands

    Federal Issues

    On December 20, Fannie Mae, in Lender Letter LL-2017-11, and Freddie Mac, in Guide Bulletin 2017-29, extended the suspension of foreclosure sales through March 31, 2018 of mortgaged properties in FEMA-declared disaster areas in Puerto Rico and the U.S. Virgin Islands due to Hurricanes Irma and Maria. The extension does not apply to any other jurisdictions similarly designated.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Fannie Mae Freddie Mac Mortgages Foreclosure

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