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Financial Services Law Insights and Observations

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  • Fannie Mae Releases Loan Performance Data

    Lending

    On April 30, Fannie Mae released loan performance data on a portion of its single-family mortgage loans, which includes a subset of Fannie Mae’s 30-year, fully amortizing, full documentation, single-family, conventional fixed-rate mortgages. The initial population is comprised of loans acquired between January 1, 2000 and March 31, 2012 with corresponding monthly performance data as of December 31, 2012. The loan performance data is divided into two files for each acquisition quarter: (i) the “Acquisition file” includes static data at the time of a mortgage loan’s origination and delivery to Fannie Mae; and (ii) the “Performance” file contains monthly performance data of each mortgage loan from the time of Fannie Mae’s acquisition up until its current status as of the previous quarter, until the mortgage loan has been liquidated, or until it has become 180 days or more delinquent. Fannie Mae expects to update the acquisitions data each quarter to include a new quarter of acquired mortgage loans as of the prior year in addition to updated performance data as of the previous quarter. Certain data attributes also will be updated to reflect new terms, if applicable, as a result of a modification.

    Fannie Mae Mortgage Origination

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  • Fannie Mae Announces Miscellaneous Servicing Policy Changes

    Lending

    On May 1, Fannie Mae issued Servicing Guide Announcement SVC-2013-10, which includes numerous servicing policy changes. The announcement informs servicers that they must (i) conduct regular testing of compliance with applicable laws in all jurisdictions in which they service mortgage loans for Fannie Mae, (ii) provide test results to senior management and, upon request, to Fannie Mae, and (iii) maintain evidence of any corrective actions. For eMortgages, the Announcement explains that servicers must obtain special approval to service such mortgages by contacting their Servicing Consultant, Portfolio Manager, or Fannie Mae’s National Servicing Organization’s Servicing Solutions Center. The Announcement also (i) provides new requirements for repayments of escrow deficits and shortages for all conventional loan modifications, (ii) requires servicers to obtain the results of property valuation order requests for the purposes of bidding instructions through HomeSaver Solutions® Network within 7 to 10 calendar days from the date the servicer submits the request, (iii) clarifies delinquency management and default prevention policies outlined in SVC-2012-18, (iv) removes Guide language regarding temporary possession of mortgage notes, and (v) incorporates a recent change to Moody’s rating system.

    Fannie Mae Mortgage Servicing Servicing Guide

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  • HUD Supplements Guidance on FHA Lender Insurance Program

    Lending

    On May 1, HUD issued Mortgagee Letter 2013-12, which updates and replaces another recently issued letter – 2013-10 – on the FHA’s Lender Insurance Program. The letter explains enhancements to that program, which allows high-performing mortgagees to conduct pre-endorsement reviews and insure loans. Those enhancements were implemented by a January 2012 HUD rule. The letter summarizes changes made by that rule, reviews mortgagee eligibility requirements for participation in the Lender Insurance program, and outlines the initial application process. Among other things, the letter also discusses the conditions under which a mortgagee’s lender insurance authority can be terminated or suspended and explains how mortgages with such authority are subject to a revised indemnification policy.

    HUD FHA

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  • North Dakota Amends UCC to Require Electronic Recording

    Fintech

    On April 30, North Dakota enacted HB 1136, which compels the Secretary of State to provide an electronic means for filing any record required to be filed under the state Uniform Commercial Code. The bill also, among other things, directs the Secretary to establish an electronic system and requires electronic filing to obtain or amend certain liens, including repairman’s liens and other non-mortgage liens. The changes become effective August 1, 2015. If the Secretary makes a report to the legislative management and to the information technology committee certifying that the electronic filing system is ready for implementation, these changes will become effective ninety days following the completion of the certificate requirement.

    Electronic Records

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  • California Federal Court Holds Online Purchase Transactions for Shipped Merchandise Not Covered by Song-Beverly Credit Card Act

    Fintech

    On April 30, the U.S. District Court for the Central District of California held that Section 1747.08 of the Song-Beverly Credit Card Act, which prohibits retailers from requiring personal information as a condition to completing credit card transactions, does not apply to online purchase transactions in which the merchandise is shipped or delivered to the customer. Ambers v. Buy.com, No. 13-196, slip op. (C.D. Cal. Apr. 30, 2013). The ruling extends a recent holding by the California Supreme Court in Apple Inc. v. Sup. Ct. Los Angeles, which held that the Song-Beverly provisions do not apply when the item purchased is downloaded via the Internet. In this case, the customer claimed on behalf of a putative class whose claims could total $500 million that Apple created a standard that applies the Song-Beverly protections whenever the retailer has “some mechanism” to verify the customer’s identity. The plaintiff argued that the retailer’s request as part of the purchase transaction for a phone number in addition to the shipping address violated the statutory privacy protection. The court reasoned that as explained in Apple, the state legislature intended to allow retailers to verify that a person making a card purchase is authorized to do so, and stated that the shipping address alone would not work as an anti-fraud mechanism because a person who buys merchandise online may direct shipments to addresses not related to the credit card billing address. As such, the court held that Song-Beverly privacy protection does not apply to online purchases where the merchandise is being shipped or delivered, and granted the retailer’s motion to dismiss.

    Credit Cards Song-Beverly Credit Card Act Privacy/Cyber Risk & Data Security

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  • CFPB, FTC Announce Roundtable on Data Integrity in Debt Collection

    Fintech

    On May 1, the FTC and the CFPB announced a roundtable to “examine the flow of consumer data throughout the debt collection process” and discuss (i) the amount of documentation and other information currently available to different types of collectors and at different points in the debt collection process, (ii) the information needed to verify and substantiate debts, (iii) the costs and benefits of providing consumers with additional disclosures about their debts and debt-related rights, and (iv) information issues relating to pleading and judgment in debt collection litigation. The event will be held on June 6, 2013 in Washington, DC and is open to the public.

    CFPB FTC Debt Collection Data Collection / Aggregation Privacy/Cyber Risk & Data Security

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  • CFPB Announces Consumer Advisory Board Meeting

    Consumer Finance

    On May 1, the CFPB announced its next Consumer Advisory Board Meeting, scheduled for May 15, 2013 in Los Angeles, CA. The meeting agenda includes a public session that will feature remarks from CFPB Director Cordray and comments from consumer groups, community and industry representatives, and members of the public.

    CFPB

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  • Government Drops One Claim in Mortgage False Claims Act Case

    Lending

    On April 29, the U.S. Attorney for the Southern District of New York dropped its reverse false claims count in a pending False Claims Act case against a mortgage lender. U.S. v. Wells Fargo Bank, N.A., No. 12-7527. Although the government’s letter does not provide the reasoning behind its decision, during the recent oral argument on the lender’s motion to dismiss, the judge questioned the claim, noting that the obligation to pay at issue is conditional because it depends on an exercise of discretion by the government. The lender’s motion to dismiss remains pending.

    DOJ False Claims Act / FIRREA

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  • CFPB Proposes Financial Education Policies

    Consumer Finance

    On April 30, the CFPB published policy recommendations for advancing K-12 financial education. The paper, “Transforming the Financial Lives of a Generation of Young Americans,” identifies perceived problems for young people in the financial marketplace and reviews current approaches to financial education for the target age groups. The CFPB recommends that state policymakers and educators (i) introduce key financial education concepts early and make a stand-alone financial education course a graduation requirement for high school students, (ii) include personal financial management questions in standardized tests, (iii) provide opportunities throughout the K-12 years to practice money management through innovative, hands-on learning opportunities, (iv) create consistent opportunities and incentives for teachers to take financial education training for use in teaching financial management to their students, and (v) encourage parents and guardians to discuss money management topics at home and provide them with the tools necessary to have conversations about money with their children.

    CFPB Financial Literacy

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  • CFPB Explains Use of Civil Penalty Fund

    Consumer Finance

    On April 26, the CFPB issued a final rule that (i) establishes the governance structure of the Civil Penalty Fund, including the position of Civil Penalty Fund Administrator, (ii) identifies categories of victims who may receive funds and the amounts they may receive, (iii) establishes procedures for allocating funds for payments to victims and for consumer education and financial literacy programs, and for distributing allocated funds to individual victims, (iv) describes the circumstances in which payments to certain victims or classes of victims will be deemed impracticable, and (v) requires the Administrator to issue regular reports. While the CFPB issued the rule without a notice and comment period because the rule is exempt from the Administrative Procedures Act and other rulemaking requirements, it also issued a related proposal in which the CFPB seeks comment on, among other things, (i) whether it should make payments to victims of any type of “activities” for which it has imposed civil penalties, even if no enforcement action imposed a civil penalty for the particular “activities” that harmed the victim, (ii) whether it should limit payments to a share of the civil penalties collected for the particular violations that harmed a consumer, as opposed to using general Civil Penalty Fund dollars, and (iii) alternatives to the allocation procedures to be used when sufficient funds are not available to compensate fully the uncompensated harm of all victims to whom it is practicable to make payments. Comments on the proposal are due within 60 days of its publication in the Federal Register.

    CFPB

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