InfoBytes Blog

Virginia Governor Signs Bill Amending State Consumer Real Estate Settlement Protection Act

On February 26, Virginia Governor Timothy M. Kaine signed HB 2568, a bill that amends provisions of the state’s code relating to disclosures under the Virginia Consumer Real Estate Settlement Protection Act (the Act). The amendments make explicit that the provisions of the Act cannot be varied by agreement, and that the rights provided by the Act cannot be contractually waived. Further, sellers may not condition the sale of property by requiring the use of a particular settlement agent. The bill becomes effective July 1, 2009.

South Dakota Governor Signs Bill Regarding Real Estate Appraisal

On February 20, South Dakota Governor M. Michael Rounds signed H.B. 1124, a bill that prohibits real estate appraisers and licensed mortgage lenders, mortgage brokers, and mortgage loan originators from “improperly influencing” a real estate appraisal involving a property in which the appraiser or licensee has an interest with regard to (i) a real estate transaction or (ii) the financing of a loan secured by the real estate. The bill defines “improper influence” as (i) the use of coercion, extortion, bribery, (ii) withholding or threatening to withhold an appraisal fee, (iii) conditioning payment of an appraisal fee on the conclusion or valuation to be reached, (iv) requesting that the appraiser provide a predetermined conclusion or valuation, or (v) otherwise impairing the appraiser’s independence and objectivity in creating the appraisal. The bill provides that a real estate appraiser is not improperly influenced by, among other provisions, asking the appraiser to consider additional information in evaluating the conclusion on the appraisal or in requesting additional information about the conclusion reached on an appraisal. The bill becomes effective May 19, 2009.

California Enacts Law Aimed at Preventing Foreclosures

On February 20, California Governor Arnold Swarzenegger signed the California Foreclosure Prevention Act (the Act) into law, which requires a person that files a notice of default to wait six months (versus three months) before filing a notice of sale. The waiting period is extended only if (i) the loan is secured by residential real property and was recorded between January 1, 2003 and January 1, 2008, (ii) the loan is the first mortgage or deed of trust that secures the property, (iii) the property was borrower-occupied and was the borrower’s principal residence at the time of default, and (iv) the notice of default has been filed. The Act exempts mortgage loans serviced by a mortgage loan servicer who has obtained an order of exemption after implementing a comprehensive loan modification program meeting the requirements set forth in the Act. Regulations clarifying the requirements applicable to obtaining an order of exemption are forthcoming, and the Act becomes effective 14 days after the issuance of these regulations. 

State Issues

Pennsylvania Federal Court Holds FCRA Does Not Preempt State Law Defamation Claim

On February 12, the U.S. District Court for the Western District of Pennsylvania held that a company’s failure to conduct a reasonable investigation after receiving notification of possible inaccurate credit reporting could constitute malice under state law, which would not be preempted by the Fair Credit Reporting Act (FCRA). Gagliardi v. Experian Information Solutions, Inc., No. 8-892, 2009 WL 365647 (W.D. Pa. Feb. 12, 2009). In Gagliardi, the plaintiff disputed the defendants’ reporting of certain information on his credit report. The plaintiff subsequently filed suit, alleging various federal and state law claims, including defamation, in connection with the defendants’ alleged failure to conduct a reasonable investigation of the dispute. The court reasoned that Section 1681 of FCRA preempts state defamation claims against a furnisher of information to a credit reporting agency, unless the information provided by the company is false and furnished with malice or a willful intent to injure a consumer. In this case, the court found that the defendants’ failure to conduct a reasonable investigation would constitute “malice” or “willful intent” under FCRA, and that, consequently, the plaintiff’s claims are not preempted by FCRA. The court, however, proceeded to dismiss the claim because the plaintiff failed to identify the claim sufficiently to provide the defendants with fair notice of the ground of the defamation claim. The court dismissed most of the plaintiff’s claims with leave to replead them within 14 days. 

State Issues

Colorado Division of Real Estate Adopts New Rules Regarding Mortgage Brokers

The Colorado Division of Real Estate recently adopted two new rules for mortgage brokers regarding (i) mortgage broker licensing education requirements (Rule 1-4-1), and (ii) dual status disclosure requirements (Rule 7-1-1). Rule 1-4-1 clarifies the education requirements for individual mortgage broker applicants and licensees. Rule 7-1-1 finds that an individual’s dual status (i.e., acting as a mortgage broker and real estate broker in a single transaction) is a material fact that must be disclosed to the borrower. A dual status mortgage broker must complete and submit a disclosure form to the borrower within three business days after receipt of a loan application or any moneys from a borrower. The final text of Rules 1-4-1 and 7-1-1 was published in the February 10, 2009 Colorado Register and both rules became effective March 2, 2009. 

Florida Attorney General Settles Suit Against Mortgage Foreclosure Rescue Services Company

On February 9, Florida Attorney General Bill McCollum reached a settlement with a Florida mortgage foreclosure rescue services company that allegedly collected advance fees for its services, in violation of Florida law. Among other things, the settlement (i) orders the payment of $10,000 to the Attorney General’s “Seniors vs. Crime” program, and (ii) requires the company to refund certain consumers.