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  • California reinstates provisions of Homeowner Bill of Rights

    State Issues

    On September 14, the California governor signed SB 818, which permanently reinstates and amends certain provisions of California’s Homeowner Bill of Rights (HBOR), which expired on January 1, 2018. The revised and restored provisions of the HBOR, among other things, require entities that foreclosed on more than 175 first lien mortgages and deeds of trust on owner-occupied residences during the prior reporting year to: (i) stop foreclosure proceedings if a complete loan modification application is submitted and pending, a homeowner is in compliance with a foreclosure prevention alternative, or an appeal of a loan modification denial is pending; (ii) include in the notice of default a specified declaration regarding contact with a borrower; (iii) send a written notice of a loan modification denial, specifying the reasons for the denial and providing foreclosure prevention alternatives; (iv) assign a single point of contact to any borrower who requests foreclosure prevention assistance; (v) not charge fees in conjunction with applications for foreclosure prevention alternatives; and (vi) honor loss mitigation alternatives following servicing transfers. The legislation also adds a legislative intent clause that emphasizes that any amendment, addition, or repeal of an HBOR section will not have the effect to release, extinguish, or change any liability under a previous section that was in effect at the time of an action.

    State Issues State Legislation Mortgages Consumer Protection Mortgage Servicing Mortgage Modification

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  • Fannie Mae, Freddie Mac update servicing guides

    Federal Issues

    On September 18, Fannie Mae issued SVC-2018-06, which updates the Servicing Guide to include, among other things, changes to reduce servicer costs and risks and simplify certain loan modification options. Updates include: (i) relieving servicers of the responsibility for paying property taxes and ground rents on acquired properties, effective October 1, and co-op fees on properties acquired on or after October 1; (ii) effective immediately, removing the requirement for servicers to receive Fannie Mae approval when modifying a Texas Constitution Section 50(a)(6) loan under the Cap and Extend Modification for Disaster Relief policy (does not apply to reverse mortgages); (iii) clarifying servicing and subservicing transfer requirements, effectively immediately (iv) revising evaluation notices and solicitation letters, in alignment with Freddie Mac (described below), that take effect immediately but must be implemented by January 1, 2019; (v) adjusting maximum allowable foreclosure attorney fees for certain loans secured by properties in New Mexico and Hawaii for matters active as of September 18; and (vi) consolidating and aligning policies related to project liability and fidelity insurance to be implemented no later than January 1, 2019.

    On the same day, Freddie Mac released Guide Bulletin 2018-14 announcing, among other things, servicing updates concerning (i) revised borrower evaluation notices and solicitation letters that take effect immediately but must be implemented by January 1, 2019; (ii) a new temporary servicer reimbursement process effective for property inspections related to insurance loss settlements conducted on or after September 1; (iii) changes to the Servicer Success Scorecard, effective July 1, 2019; and (iv) reporting requirements for third-party foreclosure sale redemptions, effective December 1.

    Federal Issues Fannie Mae Freddie Mac Mortgage Servicing Mortgages

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  • Fannie Mae updates Reverse Mortgage Loan Servicing Manual

    Federal Issues

    On September 18, Fannie Mae updated the Reverse Mortgage Loan Servicing Manual with changes related to a servicer’s responsibilities for paying escrow-related expenses for certain properties in Fannie Mae’s REO inventory. According to RVS-2018-03, Fannie Mae will now pay property taxes for all acquired proprieties in REO inventory and servicers are no longer required, except when directed by Fannie Mae, to pay co-op fees and assessments or ground rents for certain properties in REO inventory. The update applies to all property taxes and ground rents for all acquired properties effective on October 1, and applies to co-op fees and assessments for all acquired properties with a foreclosure sale or mortgage release date occurring on or after October 1.

    Federal Issues Fannie Mae Reverse Mortgages Mortgage Servicing Mortgages

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  • CFPB issues summer 2018 Supervisory Highlights

    Federal Issues

    On September 6, the CFPB released its summer 2018 Supervisory Highlights, which outlines its supervisory and oversight actions in the areas of auto loan servicing, credit card account management, debt collection, mortgage servicing, payday lending, and small business lending. The findings of the report cover examinations that generally were completed between December 2017 and May 2018. Highlights of the examination findings include:

    • Auto loan servicing. The Bureau determined that billing statements showing “paid-ahead” status after insurance proceeds from a total vehicle loss were applied, where consumers were treated as late if they failed to pay the next month, were deceptive. The Bureau also found that servicers unfairly repossessed vehicles after the repossession should have been canceled because the account was not coded correctly, or because an agreement with consumer was reached.
    • Credit card account management. The Bureau found that companies failed to reevaluate accounts for eligibility for a rate reduction under Regulation Z or failed to appropriately reduce annual percentage rates.
    • Debt collection. The Bureau found that debt collectors failed to mail debt verifications to consumers before engaging in continued debt collection, activities as required by the FDCPA.
    • Mortgage servicing. The Bureau found that mortgage servicers delayed processing permanent modifications after consumers successfully completed their trial modifications, resulting in accrued interest and fees that would not otherwise have accrued, which the Bureau determined was an unfair act or practice.
    • Payday lending. The Bureau found that companies threatened to repossess consumer vehicles, notwithstanding that they generally did not  actually do so or have a business relationship with an entity capable of doing so, which the Bureau determined was a deceptive practice. The Bureau also found that companies did not obtain valid preauthorized EFT authorizations for debits initiated using debit card numbers or ACH credentials provided for other purposes, in violation of Regulation E.
    • Small business lending. The Bureau found that some institutions collect and maintain only limited data on small business lending decisions, which it determined could impede the institution’s ability to monitor ECOA risk. The Bureau noted positive exam findings including, (i) active oversight of an entity’s CMS framework; (ii) maintaining records of policy and procedure updates; and (iii) self-conducted semi-annual ECOA risk assessments, which included small business lending.

    The report notes that in response to most examination findings, the companies have already remediated or have plans to remediate affected consumers and implement corrective actions, such as new policies in procedures.

    Finally, the report highlights, among other things, (i) two recent enforcement actions that were a result of supervisory activity (covered by InfoBytes here and here); (ii) recent updates to the mortgage servicing rule and TILA-RESPA integrated disclosure rule (covered by InfoBytes here and here); and (iii) HMDA implementation updates (covered by InfoBytes here).

    Federal Issues CFPB Auto Finance Payday Lending Debt Collection Mortgage Servicing Credit Cards Supervision Examination

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  • 6th Circuit holds that failing to report a trial modification plan can constitute incomplete reporting under FCRA

    Courts

    On August 23, the U.S. Court of Appeals for the 6th Circuit held that a borrower met the requirements necessary for a Fair Credit Reporting Act (FCRA) claim to proceed when two mortgage servicers failed to report the existence of a trial modification plan when reporting the borrower was delinquent to reporting agencies. In 2014, a borrower brought an action against three credit reporting agencies and two mortgage servicers alleging, among other claims, violations of the FCRA due to payments being reported as past due while successfully making payments under a trial modification plan (also referred to as a Trial Period Plan, or “TPP”) and working towards a permanent modification. Regarding the FCRA claim, the 6th Circuit reversed the lower court’s decision granting the servicers’ motion for summary judgment, finding that the borrower met the statutory requirements for an FCRA claim because failing to report the existence of a TPP can constitute “incomplete reporting” in violation of the statute. The 6th Circuit rejected the servicers’ argument that the Home Affordable Modification Program guidelines “encouraged, but did not require” that they report a TPP. The court acknowledged this distinction but noted that “[r]eporting that [a borrower] was delinquent on his loan payments without reporting the TPP implies a much greater degree of financial irresponsibility than was present here.” The court remanded the case to the district court to determine whether the servicers conducted a reasonable investigation after the borrower disputed the reporting.

    Courts Sixth Circuit Mortgages Loss Mitigation Mortgage Servicing Credit Report Credit Reporting Agency FCRA HAMP Consumer Finance

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  • Fannie Mae updates Servicing Guide with streamlined mortgage insurance claims processing

    Federal Issues

    On August 15, Fannie Mae issued SVC-2018-05, which updates the Servicing Guide to include, among other things, a streamlined mortgage insurance (MI) claims process with certain mortgage insurers to “reduce the operational burden and cost associated with the process for servicers.” While servicers will continue to submit claims in accordance with the MI policy, participating mortgage insurers will now process all claims using an algorithm named the “MI Factor.” Effective October 1, claims settled using the MI Factor will not be subject to the curtailment billing process and servicers will not be required to submit supplemental claim submissions and claim appeals to the mortgage insurer. Fannie Mae also updated its Servicing Guide to include (i) clarification of the servicer’s responsibilities for addressing urgent property conditions; (ii) policy reminders regarding insured loss repay inspection reimbursements; and (iii) notification thresholds and timing requirements regarding the transfer of default-related matters between law firms within a single state.

    Federal Issues Fannie Mae Servicing Guide Mortgage Insurance Mortgage Servicing

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  • 7th Circuit says inspection company that left door hangers is not a debt collector

    Courts

    On August 10, the U.S. Court of Appeals for the 7th Circuit affirmed a lower court’s ruling that a company (defendant) that performed inspections for a mortgage servicer is not a “debt collector” under the Fair Debt Collection Practices Act (FDCPA) and was not liable for claims brought by a putative class of homeowners. According to the opinion, the defendant entered into a contract with the mortgage servicer to perform inspections to determine whether properties were still occupied for homes with defaulted mortgage payments of 45 days or more if the servicer was unable to contact the homeowner directly. When performing the inspections, the defendants left door hangers on the plaintiffs’ properties containing instructions to contact the mortgage servicer, which the plaintiffs claimed violated the FDCPA's disclosure requirements, including the requirement to disclose the creditor’s name, the amount owed, and that the debtor can dispute the debt. However, the lower court ruled—and the appellate court affirmed—that the defendant was not a “debt collector” for purposes of the FDCPA. The court found that the activities did not constitute direct debt collection because the door hangers did not demand payment and did not reference the underlying debt. The court also held that the defendant was not engaged in “indirect” debt collection, agreeing with the characterization of the lower court that the activities were more akin to those of a “messenger” than those of an “indirect” debt collector.

    Courts Seventh Circuit Appellate Mortgages Mortgage Servicing Debt Collection

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  • Fannie Mae, Freddie Mac issue forbearance relief to homeowners affected by California wildfires

    Federal Issues

    On August 8, Freddie Mac extended its disaster relief options to homeowners affected by ongoing California wildfires who have access to federal individual assistance programs in FEMA-declared disaster areas. The relief suspends foreclosures by providing forbearance for up to 12 months. Penalties and late fees will also be waived. Freddie Mac also reminded servicers to consider borrowers who work in eligible disaster areas but have homes outside the affected area for standard relief policies. Moreover, servicers may leverage Freddie Mac forbearance programs to provide immediate mortgage relief to those affected by the wildfires in areas where FEMA has not made individual assistance available.

    On August 7, Fannie Mae issued a notice to mortgage servicers reminding them that homeowners impacted by the California wildfires are eligible to stop making mortgage payments for up to 12 months, during which time late fees will not be incurred nor delinquencies reported to the credit bureaus. Furthermore, servicers may immediately suspend or reduce mortgage payments for up to 90 days without any contact with homeowners believed to have been affected by the wildfires. Additionally, foreclosures and other legal proceedings must be suspended for impacted homeowners.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues Fannie Mae Mortgages Mortgage Servicing Disaster Relief

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  • Washington state updates mortgage provisions of Consumer Loan Act

    State Issues

    On July 24, the Washington Department of Financial Institutions adopted new mortgage-related provisions of the state’s Consumer Loan Act (CLA). In addition to technical changes and certain definition modifications, the rulemaking, among other things, (i) adds a requirement that if electronic records are stored using a closed service, the service must be located in the U.S. or its territories; (ii) prohibits certain servicing activities, such as receiving payments and collection activities, from being conducted outside the U.S. or its territories; and (iii) requires servicers to maintain a compliance management system with the functionalities that are described in the CFPB’s Supervision and Examination Manual. The rulemaking is effective September 1.

    State Issues State Regulators Mortgages Mortgage Servicing Compliance Examination CFPB

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  • Fannie Mae and Freddie Mac issue disaster relief policy reminders and updates

    Federal Issues

    On July 18, Fannie Mae, in Lender Letter LL-2018-04, and Freddie Mac, in an industry letter released the same day, reminded servicers of requirements that continue to be in effect for servicing mortgages impacted by eligible disasters. Specifically, Fannie Mae provides information on (i) reimbursements related to insured loss repair inspection costs; (ii) disaster-impacted inspections; (iii) the Extend Modification for Disaster Relief policy—developed in conjunction with Freddie Mac for post-disaster forbearance mortgage loan modifications; and (iv) the disbursement of hazard loss draft proceeds. Freddie Mac also reminds servicers of property inspection reimbursement requirements and changes to insurance loss settlement distributions.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues Fannie Mae Freddie Mac Disaster Relief Mortgage Servicing

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