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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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  • Virginia district judge holds RESPA early intervention requirements confer private right of action


    On February 20, a judge for the U.S. District Court for the Western District of Virginia ruled that the early intervention requirements of RESPA allow for a private right of action to pursue claims against loan servicers. According to the opinion, consumers filed a complaint against a mortgage servicer for allegedly violating RESPA’s early intervention requirements under Regulation X, Section 1024.39, which require the servicer to “establish or make good faith efforts to establish live contact with a delinquent borrower not later than the 36th day of the borrower’s delinquency” and promptly inform the borrower of potential loss mitigation options. The servicer filed a motion to dismiss the action for failure to state a claim, arguing that Section 1024.39 does not provide a private right of action. In denying the motion to dismiss, the court concluded that the CFPB adopted Section 1024.39 pursuant to Section 6 of RESPA, which expressly provides a private right of action and therefore, Section 1024.39 had been intended to convey a private right of action as well.

    Courts RESPA Mortgages State Issues Mortgage Servicing

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  • House passes bill that would effectively overturn Madden; others amend RESPA disclosure requirements and adjust points and fees definitions under TILA

    Federal Issues

    On February 14, in a bipartisan vote of 245-171, the House passed H.R. 3299, the “Protecting Consumers Access to Credit Act of 2017,” to codify the “valid-when-made” doctrine and ensure that a bank loan that was valid as to its maximum rate of interest in accordance with federal law at the time the loan was made shall remain valid with respect to that rate, regardless of whether the bank subsequently sells or assigns the loan to a third party. As previously covered in InfoBytes, this regulatory reform bill would effectively overturn the 2015 decision in Madden v. Midland Funding, LLC, which ruled that debt buyers cannot use their relationship with a national bank to preempt state usury limits. Relatedly, the Senate Banking Committee is considering a separate measure, S. 1642.

    The same day, in a separate bipartisan vote of 271-145, the House approved H.R. 3978, the “TRID Improvement Act of 2017,” which would amend the Real Estate Settlement Procedures Act of 1974 (RESPA) to modify disclosure requirements applicable to mortgage loan transactions. Specifically, the bill states that “disclosed charges for any title insurance premium shall be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by either state regulation or the title company rate filings.”

    Finally, last week on February 8, the House voted 280-131 to pass H.R. 1153, the “Mortgage Choice Act of 2017,” to adjust definitions of points and fees in connection with mortgage transactions under the Truth in Lending Act (TILA). Specifically, the bill states that “neither escrow charges for insurance nor affiliated title charges shall be considered ‘points and fees’ for purposes of determining whether a mortgage is a ‘high-cost mortgage.’” On February 12, the bill was received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs.

    Federal Issues Federal Legislation U.S. House Usury Lending RESPA TILA Mortgages Disclosures Madden

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  • CFPB Updates Guide to TRID Forms

    Agency Rule-Making & Guidance

    On December 6, the CFPB published an updated version of the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure Forms. The updated guide reflects the amendments issued by the CFPB on July 7 of this year (previously covered by a Buckley Sandler Special Alert). These include changes resolving a number of significant ambiguities that generated concerns about the liability of lenders and purchasers of mortgage loans.

    Agency Rule-Making & Guidance CFPB TRID TILA RESPA

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  • Senate Banking Committee Approves Financial Regulatory Relief Bill

    Federal Issues

    On December 5, the Senate Banking Committee approved bill S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, which would alter certain financial regulations under the Dodd-Frank Act of 2010. While not as sweeping as previous legislative relief proposals (see previous InfoBytes coverage on House Financial CHOICE Act of 2017), the bill was introduced and passed the Committee with bipartisan support. The bill’s highlights include, among other things:

    • Consumer Access to Credit. The bill deems mortgage loans held in portfolios by insured institutions with less than $10 billion in assets to be “qualified mortgages” under TILA, and removes the three-day waiting period for TILA-RESPA Integrated Disclosures if the second credit offer is a lower rate. The bill also instructs the CFPB to provide “clearer, authoritative guidance” on certain issues such as the applicability of TRID to mortgage assumptions and construction-to-permanent loans. Additionally, the bill eases appraisal requirements on certain mortgage loans and exempts small depository institutions with low mortgage originations from certain HMDA disclosure requirements.
    • Regulatory Relief for Certain Institutions. The bill exempts community banks from Section 13 of the Bank Holding Company Act if they have, “[i] less than $10 billion in total consolidated assets, and [ii] total trading assets and trading liabilities that are not more than five percent of total consolidated assets” – effectively allowing for exempt banks to engage in the trading of, or holding ownership interests in, hedge funds or private equity funds. Additionally, the bill raises the threshold of the Federal Reserve’s Small Bank Holding Company Policy Statement and the qualification for certain banks to have an 18-month examination cycle from $1 billion to $3 billion.
    • Protections for Consumers. Included in an adopted “manager’s amendment,” the bill requires credit bureaus to provide consumers unlimited free security freezes and unfreezes. The bill also limits certain medical debt information that can be included on veterans’ credit reports.
    • Changes for Bank Holding Companies. The bill raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion.

    The bill now moves to the Senate, which is not expected to take up the package before the end of this year.

    Federal Issues Senate Banking Committee Dodd-Frank Federal Legislation TILA RESPA TRID Federal Reserve OCC FDIC Mortgages HMDA Credit Reporting Agency

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  • CFPB Issues Consent Order for Steering to Real Estate Settlement Services Provider

    Consumer Finance

    On September 27, the CFPB issued a consent order against a real estate settlement services provider for allegedly steering consumers to a title insurer owned in part by three of its executives without disclosing its affiliated business interests, as required by RESPA. According to the consent order, the company received money “beyond the commission it would normally have been entitled to collect” due to an agreement or understanding that it would refer its business to the title insurer, but it did not make the disclosures of the affiliate relationships required by RESPA to over 7,000 consumers. The CFPB’s order requires the company to pay up to $1.25 million in redress to affected consumers and to implement policies and procedures to ensure proper disclosure of applicable referrals to consumers in the future.

    Consumer Finance CFPB Enforcement RESPA Mortgage Origination

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  • Illinois Governor Enacts Amendments to Predatory Lending Database Article

    State Issues

    On September 15, Illinois Governor Bruce Rauner signed into law amendments to the state’s Residential Real Property Disclosure Act to change provisions under its Predatory Lending Database Article. Public Act 100-0509 sets forth the following changes, among others: (i) certificates of compliance or certificates of exemption must now contain at least “one of the borrower’s names on the mortgage loan and the property index number for the subject property”; (ii) amends the definitions of “counseling” by removing the reference to “telephone counseling” and “originator” to reference “mortgage loan originator”; (iii) eliminates the requirement that originators shall provide information regarding affiliated or third party service providers or monies received from a broker or originator for inclusion in the predatory lending database; and (iv) provides additions to the information that must be collected and submitted by the title insurance company or closing agent for inclusion in the predatory lending database, such as a detailed list of all notices provided to the borrower at closing, including information in connection with the Integrated Closing Disclosure and the Integrated Loan Estimate Disclosure required under TILA-RESPA. The amendments took effect September 15, 2017.

    State Issues State Legislation Anti-Predatory Lending Mortgages TRID TILA RESPA GFE Mortgage Origination

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  • CFPB Issues Summary of Changes and Clarifications to 2017 TILA-RESPA Rule

    Agency Rule-Making & Guidance

    On August 30, the CFPB released “2017 TILA-RESPA Rule: Detailed Summary of Changes and Clarifications” to assist the mortgage industry in implementing the disclosure requirements of the CFPB’s recently finalized TILA-RESPA Rule. The summary provides an in-depth outline of modifications to the rule, and explains and corrects certain provisions.

    Topics covered by the summary include:

    • “Effective date and mandatory compliance date”;
    • “Coverage,” specifically with respect to cooperative units, trusts, and housing assistance loans;
    • “Good faith requirement (i.e., tolerances) and revised disclosures”;
    • “Shopping for settlement services”;
    • “Disclosure of principal reductions (also known as principal curtailments)”;
    • “Total of payments disclosure”;
    • “Simultaneous subordinate lien loans”;
    • “Construction loans”;
    • “Use of positive and negative numbers for certain disclosures in the Loan Estimate and Closing Disclosure”;
    • “Rounding”;
    • “Calculating cash to close”;
    • “Disclosure of payoffs of existing liens, and unsecured debt”;
    • “Disclosure of estimated value when no sales price or appraised value”;
    • “Separation of consumer and seller information on Closing Disclosures”;
    • “Other disclosures in the Loan Estimate”;
    • “Other disclosures in the Closing Disclosure”; and
    • “Other minor changes” (including correcting typographical errors).

    In addition to the summary, the CFPB also provided additional reference materials to help industry participants to comply with the rule. The rule becomes effective on October 10.

    Agency Rule-Making & Guidance CFPB RESPA TILA TRID Mortgages

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  • Mortgage Company, Real Estate Services Companies Reach $17 Million Class Action Settlement for Alleged RESPA Violations


    On August 25, a national mortgage company and a real estate services family of companies (Defendants) together entered into a $17 million settlement to end a putative class action lawsuit accusing them of arranging kickbacks for unlawful referrals of title services in violation of the Real Estate Settlement Procedures Act (RESPA). The complaint, filed in 2015 in the U.S. District Court for the Central District of California, accused Defendants—along with various affiliates—of violating RESPA by allegedly facilitating the exchange of unlawful referral fees and kickbacks through an affiliated business arrangement, while also directing various banks to refer title insurance and other settlement services to a subsidiary in the real estate services family of companies without informing customers of the relationship between the entities. According to a memorandum in support of the motion seeking preliminary approval of the settlement, the real estate services family of companies was “obligated to refer their customers exclusively to [the mortgage company] for mortgage loans, and, in return, [the mortgage company] was required to refer all settlement services back to [the real estate services enterprise’s] subsidiaries.” While a federal judge dismissed the first and second amended complaints “on the basis that Plaintiffs failed to plead sufficient facts for equitable tolling of RESPA’s one-year statute of limitations,” the same judge denied Defendants’ motion to dismiss a third amended complaint because “Defendants’ contention regarding equitable tolling for the statute of limitations was ‘better resolved in either a motion for summary judgment or trial.’” A fourth amended complaint, filed in July 2017, amended certain claims and added additional class plaintiffs, well after settlement discussions had started.

    A stipulation of settlement was filed alongside the motion for preliminary approval, in which Defendants continued “to deny each and all of the claims and contentions alleged in the [a]ction . . . [but] have concluded that the further conduct of the [a]ction against them would be protracted and expensive.” Furthermore, the stipulation noted that “substantial amounts of time, energy and resources have been and, unless this [s]ettlement is made, will continue to be devoted to the defense of the claims asserted in the [a]ction.” The proposed settlement class consists of more than 32,000 transactions related to borrowers who closed on mortgage loans originated by the mortgage company between approximately November 2014 through November 2015, and who paid any title, escrow or closing related charges to the real estate services companies. The proposed settlement stipulates that Defendants must pay $17 million into a settlement fund to be used to provide cash payments to class members, as well as a portion that will go towards class counsel attorney fees and litigation expenses pending court approval.

    Courts Class Action Kickback Settlement RESPA

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  • Amendments and Proposal to TRID Rule Published in Federal Register, Comments Due October 10

    Agency Rule-Making & Guidance

    As previously reported in a Special Alert, the CFPB issued amendments to its TILA/RESPA Integrated Disclosure rule, which importantly included a concurrent proposal to address the “black hole” issue that prevents creditors from resetting tolerances using the Closing Disclosure except in very limited circumstances. On August 11, the Bureau published the amendments in a final rule and the proposal in the Federal Register. The final rule takes effect October 10, 2017 with mandatory compliance by October 1, 2018. Comments on the proposal are due October 10, 2017.

    Agency Rule-Making & Guidance CFPB TRID RESPA TILA Federal Register

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