On April 5, Maine Governor Paul LePage signed into law LD 1389, which expedites foreclosures on properties determined by a court to be abandoned by shortening the redemption period from 90 to 45 days. The bill also shortens the period of time within which an action can be filed to challenge the validity of a governmental taking of real property for nonpayment of property taxes from 15 to five years after the expiration of the redemption period. This shorter challenge period applies where the tax lien is recorded after October 13, 2014. The law takes effect 90 days after the legislative session adjourns.
On April 17, the CFPB issued a guide to completing the disclosure forms required by its November 2013 TILA-RESPA integrated disclosures rule, which generally applies to transactions for which a creditor or broker receives an application on or after August 1, 2015. The guide provides instructions for completing the Loan Estimate and Closing Disclosure and highlights common situations that may arise when completing the forms. The CFPB states in addition to serving as a resource to creditors, the guide also may assist settlement service providers, software providers, and other service providers. The disclosure forms guide follows the release last month of a small entity compliance guide, which summarizes the rule and highlights issues that small creditors, and their partners or service providers, might find helpful to consider when implementing the rule.
On April 15, Fannie Mae issued Selling Guide Announcement SEL 2014-03, which includes numerous selling policy updates. Based on a comprehensive review of its current requirements, the announcement provides a series of new or updated property eligibility and appraisal requirements, which must be implemented no later than August 1, 2014. The announcement also states that Fannie Mae is retiring its two-step ARM mortgage, as well as standard ARM plans 1030 and 1031. For mortgage loans with notes dated on or after October 15, 2014 where the lender is registered with MERS, Fannie Mae will also require the use of a new rider to modify the standard security instruments in Montana, Oregon, and Washington. The announcement includes numerous additional miscellaneous policy updates, and notes again the recent publication of the Selling Guide on Fannie Mae’s corporate website.
On March 31, Washington Governor Jay Inslee signed into law HB 2723, which amends the foreclosure mediation process established by the 2011 Foreclosure Fairness Act. The bill, which takes effect June 12, 2014, amends the meet-and-confer process to (i) require that notice of pre-foreclosure options a beneficiary or authorized agent is required to send to the borrower must be sent by first-class registered or certified mail, return receipt requested; (ii) require that in-person meetings must be held in the county where the property is located, unless the parties agree otherwise; and (iii) amend the “foreclosure loss mitigation form” to add options for describing or explaining meet-and-confer efforts. The bill also alters mediation provisions to (i) allow mediation upon agreement of the parties, even if the borrower failed to elect mediation in the required timeframe; (ii) require beneficiaries to disclose any investor restriction that prohibits the beneficiary from implementing a modification and not just the portion or excerpt of a pooling and servicing agreement that includes such a prohibition; and (iii) require mediation to take place in the county where the property is located.
On March 26, Iowa Governor Terry Branstad signed into law HF 2324, which revises the state’s mortgage and consumer credit statutes to align with federal law. The bill amends the current $25,000 loan ceiling applicable to certain consumer credit transactions and replaces it with a “threshold amount” that incorporates by reference limits established under federal Truth in Lending Act. The bill also adopts the federal definition of “points and fees” for mortgage transactions and provides that if a loan is extended with points and fees higher than those specified under federal law the loan is subject to state law, including monetary limits on loan origination or processing and broker fees, a limit on the types of permissible lender charges, and a limit on fees relating to payment of interest reduction fees in exchange for a lower rate of interest. The bill also amends the definition of “finance charge” in the state’s consumer credit code to include an initial charge imposed by a financial institution for an overdrawn account. Finally, the bill adds a new section that allows banks to include in their consumer credit contracts over $25,000 a provision that a consumer is responsible for reasonable attorney fees if the bank is the prevailing party in a lawsuit arising from the transaction. The changes take effect July 1, 2014.
On April 3, the U.S. District Court for the Northern District of Illinois approved an order of dismissal and memorandum of understanding jointly entered by the FHFA and the City of Chicago to end more than two years of litigation over a city ordinance that requires mortgagees to register vacant properties and pay a $500 registration fee per property. The ordinance also imposes maintenance and other obligations—whether the property has been foreclosed upon or not—with fines for noncompliance. In 2011, the FHFA sued the city, objecting that the ordinance would have improperly covered the activities of Fannie Mae, Freddie Mac, and their agents. In August 2013, the court held that Fannie Mae and Freddie Mac are exempt from the ordinance, and the FHFA subsequently sought to clarify the scope of the court’s order and asked the court for declaratory and monetary relief. The parties now have agreed to a memorandum of understanding pursuant to which the city will not enforce the ordinance against Fannie Mae, Freddie Mac, or their agents for as long as the GSEs remain under federal conservatorship. The FHFA agreed that Fannie Mae and Freddie Mac will voluntarily register their vacant properties with the city, and the FHFA agreed not to try to recover fees and penalties already paid to the city under the ordinance.
On March 28, Fannie Mae issued Servicing Guide Announcement SVC-2014-05, which provides, as recently promised, updated guidance regarding standard and streamlined modification programs. The announcement informs servicers that, by July 1, 2014, for mortgage loans with a pre-modified mark-to-market loan-to-value ratio less than 80%, servicers must ensure that borrowers satisfy all eligibility requirements for a Fannie Mae standard or streamlined modification. The announcement details the specific steps servicers must take to calculate the terms of the trial period plan. It also provides information for servicers to use in determining the appropriate information to include in an evaluation notice or solicitation letter, and informs servicers that if a borrower is eligible for a trial period plan with more than one amortization term, the borrower may choose an amortization term but the trial period plan notice must inform the borrower that he or she will not be able to change the amortization term after the first payment is received. The announcement states that if a mortgage loan becomes 60 or more days delinquent within 12 months of the modification effective date, the servicer must not approve another modification. Finally, Fannie Mae states that if the first trial period plan payment submitted by a borrower does not correspond to an amortization term payment offered in the plan, the servicer must use the shortest amortization term provided in the plan that is covered by the borrower’s actual payment to determine the amortization term and monthly payment obligation.
On April 1, Utah enacted SB 332, which amends the Utah Residential Mortgage Practices and Licensing Act, the Real Estate Licensing and Practices Act, and the Real Estate Appraiser Licensing and Certification Act to establish a procedure for the voluntary surrender of a license issued under each of those acts. The bill clarifies the scope of what it means to be engaged in the business of residential mortgage loans under the Utah Residential Mortgage Practices and Licensing Act, and includes numerous other amendments to the other two Acts. The changes take effect May 13 2014.
On April 3, the U.S. District Court for the Southern District of New York certified an interlocutory appeal of an order denying a motion to dismiss filed by a group of insurers facing class allegations of unlawful lender-placed insurance practices. Rothstein v. GMAC Mortgage, LLC, No. 12-3412, 2014 WL 1329132 (S.D.N.Y. Apr. 3, 2014). In declining to dismiss the case, the court held, among other things, that the filed rate doctrine did not bar borrowers’ claims because the doctrine applies only where the challenged rate is one imposed directly by an insurer, and does not apply to lender-placed insurance where a third-party—the lender or servicer—acquires the insurance at a filed rate and bills the borrower for the costs. On the insurers’ motion for interlocutory appeal, the court held that the issue of whether the filed rate doctrine applies is a question of law that could be dispositive and for which there is substantial ground for a difference of opinion, and that the potential to avoid protracted litigation warranted certification for appeal. BuckleySandler represents the insurers in this action.
On March 28, Fannie Mae notified servicers that, effective May 1, 2014, it will begin issuing warning letters and assessing compensatory fees to servicers that fail to submit Fannie Mae investor reporting system reports on a timely basis or that fail to use the correct data and formats. Alternatively, Fannie Mae reserves the right to issue an indemnification demand to any servicer that breaches these servicing requirements. Currently, Fannie Mae sends a Failed Business Rules report to servicers who fail to meet these requirements. After May 1, a servicer may be assessed: (i) greater of $250 or $50 per mortgage loan, up to a maximum of $5,000, for the first instance of late or inaccurate reporting; (ii) greater of $500 or $50 per mortgage loan, up to a maximum of $10,000, for the second instance of late or inaccurate reporting, if it occurs within one year of the first instance; and (iii) greater of $1000 or $50 per mortgage loan, up to a maximum of $15,000, for each subsequent instance of late or inaccurate reporting within one year of the most recent previous instance.
On March 31, South Dakota enacted SB 68, becoming the 30th jurisdiction to adopt the Uniform Real Property Electronic Recording Act (URPERA) with the enactment. URPERA, promulgated by the Uniform Law Commission in 2004, gives county clerks and recorders the legal authority to prepare for electronic recording of real property instruments. Among other things, SB 68 (i) establishes that, for any law requiring that a document be an original as a condition for recording, an electronic document satisfying certain specific conditions will qualify; (ii) establishes an electronic recording commission to adopt uniform standards to implement procedures for recording electronic documents with the register of deeds; and (iii) requires the register of deeds to comply with standards set by the commission, including accepting electronic documents for recording. The law takes effect July 1, 2014.
The CFPB announced today that it will hold a forum on the mortgage closing process. The event will take place at the CFPB’s headquarters in Washington, DC at 1:30 p.m. on April 23, 2014. It will be open to members of the public who RSVP and also will be available through a live stream on the CFPB’s website. Consistent with its past practice, the CFPB has not provided advance details about the specific topics to be addressed or the participants. The event is likely to review the feedback the CFPB received in response to a January 2014 request for information about consumer “pain points” associated with the mortgage closing process, an initiative the CFPB first revealed in November 2013 in conjunction with the release of the final rule combining mortgage disclosures under TILA and RESPA. We plan to attend the event and will provide an update later this month.
On March 31 the CFPB published its Consumer Response Annual Report, providing a review of the CFPB’s complaint process and a description of complaints received during January 1 through December 31, 2013. According to the report the Bureau received approximately 163,700 complaints in 2013. Mortgage complaints outpaced all others (37%), followed by complaints regarding debt collection (19%), bank accounts (12%), and credit cards (10%). Complaints related to consumer loans, student loans, payday loans, money transfers, and “other” each comprised 3% or less of the total. The report also breaks down the types of complaints for each category and summarizes companies’ responses. The majority of closed complaints for all categories were resolved with an explanation by the company, i.e. without monetary or other relief, and companies responded to complaints in a timely fashion 99% of the time, or better. The report also stated that the CFPB “continues to evaluate, among other things, the release of consumer narratives, the potential for normalization of the data to make comparisons easier, and the expansion of functionality to improve user experience.”
House Republicans Urge FHFA Not To Direct GSEs To Start Contributing To Affordable Housing Funds Established By HERA
On April 2, House Financial Services Committee Chairman Jeb Hensarling (R-TX), joined by Congressmen Scott Garrett (R-NJ) and Ed Royce (R-CA), urged FHFA Director Mel Watt to continue the FHFA’s five-year-old policy of suspending contributions to the Affordable Housing Trust Fund and the Capital Magnet Fund. These two funds were established in the Housing and Economic Recovery Act (HERA) to direct a percentage of GSE profits into affordable housing using a mechanism that would be off-budget and thus not subject to the Congressional appropriations process. In January, more than 30 Democratic Senators pressed Mr. Watt to change course and lift the suspension. Given that the federal government owns $189 billion in outstanding senior preferred shares, the Republican House members believe that lifting the suspension would divert money from Fannie Mae and Freddie Mac that could be used to compensate taxpayers. They added that funding the affordable housing programs would violate the “letter and spirit of the Housing and Economic Recovery Act,” and would be premature given ongoing congressional deliberations over broader housing finance reform.
On March 27, Washington Governor Jay Inslee signed SB 2171, which amends the Washington Service Member’s Civil Relief Act (WSCRA) to provide that a violation of the federal Servicemembers Civil Relief Act is a violation of the WSCRA and applies in proper cases in all Washington courts. The bill also provides a private right of action for servicemembers or their dependents to enforce the WSCRA, and grants the state attorney general civil litigating authority, with penalties of up to $55,000 for a first violation and up to $110,000 for each subsequent violation. The changes take effect on June 12, 2014.