CFPB Monthly Complaint Report Highlights Issues Related to Mortgages

On April 26, the CFPB issued its latest installment of reports covering consumer complaints. According to this month’s report, the CFPB has, as of April 1, handled more than 859,000 complaints across all products, with mortgage complaints accounting for approximately 223,100, making it the second most-complained about product after debt collection. Key findings from the report include the following: (i) approximately 51% of mortgage-related complaints relate to consumers encountering problems when they were having difficulty making payments, such as facing prolonged loss mitigation review processes and receiving conflicting and confusing foreclosure notifications during loss mitigation assistance review; (ii) consumers facing issues involving transfers of their loan to another servicer without being properly informed of the transfers; (iii) loan servicers allegedly providing confusing and contradictory information regarding reinstatement amounts, charges and fees, and interest rates; (iv) loan servicers delaying the release of insurance claim funds allocated to property damages despite consumers having provided all required documentation; and (v) consumers facing prolonged and confusing loan origination processes, resulting in the loss of favorable interest rates and the expiration of rate locks. Consistent with past reports, this month’s issue lists the top 20 most-complained-about companies for mortgage-related complaints, as well as the top ten most-complained-about companies across all financial products. Finally, with more than 118,000 complaints submitted from the state’s consumers as of April 1, the report identifies California as its geographical spotlight, noting that complaints from the state have “generally followed the national trend.”

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Special Alert: CFPB Plans to Propose TRID Amendments in July

Director Cordray announced yesterday in a letter to industry trade groups that the CFPB has “begun drafting a Notice of Proposed Rulemaking (NPRM) on the Know Before You Owe Rule.” However, contrary to some reports, the proposal is not imminent. Instead, Director Cordray stated that the Bureau “hope[s] to issue the NPRM in late July,” which means that final amendments will likely come late in the year.

In addition, it does not appear that the CFPB is contemplating extensive changes to the rule. Instead, the letter states that the Bureau plans to “incorporat[e] some of the bureau’s existing informal guidance, whether provided through webinar, compliance guide, or otherwise, into the regulation text and commentary” and to address “places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”  Read more…

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CFPB Proposes Amendments to Mortgage Servicing Rules Under RESPA and TILA

On April 26, the CFPB published a proposed rule regarding potential amendments to certain mortgage servicing provisions in RESPA (Regulation X) and TILA (Regulation Z). The recently issued proposed rule reopens the comment period of a December 2014 CFPB proposal that would require mortgage servicers to “provide modified periodic statements under Regulation Z to consumers who have filed for bankruptcy, subject to certain exceptions.” Since the December 2014 proposal, the CFPB has conducted consumer testing of sample periodic statement forms for consumers in bankruptcy. The CFPB is reopening the comment period until May 26, 2016 to “seek comment specifically on the report summarizing consumer testing of sample periodic statement forms for consumers in bankruptcy.”

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Florida Fourth District Court of Appeals Rules in Bank’s Favor in Foreclosure Action Based on an eNote

On April 20, a Florida District Court of Appeals issued an opinion affirming a lower court’s final judgment in favor of a bank (Bank) in a foreclosure action against borrowers who signed a mortgage note electronically (eNote). Rivera v. Wells Fargo Bank, N.A., No. 4D14-2273 (Fla. App. April 20, 2016). In the proceedings below, the Bank had presented a sworn certificate of authentication which articulated, among other things, the Bank’s role as servicer of the eNote for Fannie Mae, and describing the Bank’s practices and systems used for the receipt and storage of authoritative copies of electronic records and for protecting electronic records against alteration. The Bank also provided evidence from the same system records and the records of MERSCORP, Inc., as provided for in the terms of the eNote itself, showing that the eNote was last transferred to Fannie Mae and that the authoritative copy of the eNote was maintained in the Bank’s systems as Fannie Mae’s custodian. On appeal, the borrowers challenged the adequacy of the Bank’s demonstration that the eNote had properly transferred to Fannie Mae, thus challenging the Bank’s standing to enforce the eNote and foreclose the mortgage as Fannie Mae’s authorized representative.  Read more…

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New York Supreme Court Reverses Lower Court’s Ruling in Foreclosure Case; Observes eNote and Transfer History Sufficient under ESIGN

On April 13, the New York Supreme Court, Appellate Division, Second Department issued an opinion reversing a lower court order dismissing a foreclosure action against a borrower who signed a mortgage note electronically (“eNote”). New York Community Bank v. McClendon, 2016 N.Y. Slip Op. 02790 (N.Y. Supp. April 13, 2016). In the proceedings below, the lower court had granted the borrower’s motion to dismiss the foreclosure complaint for lack of standing, accepting the argument that the plaintiff mortgagee lacked standing because it could not produce a chain of valid assignments of the eNote from the original lender to itself. In opposition to the motion to dismiss, the mortgagee had submitted, among other things, a copy of the eNote and a print out of an electronic record of the transfer history of the eNote (“Transfer History”) showing a chain of transfers from the original lender to itself. The court observed that the eNote qualified as a “Transferable Record” under Section 201 of the Electronic Signatures in Global and National Commerce Act (“ESIGN”) and that a person is in “control” of a Transferable Record if “a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.” Citing the UCC, the court further observed that the holder of the eNote would have standing to foreclose and that any person with “control” of the eNote is its holder. After establishing this legal framework, the court concluded that the Transfer History, together with the eNote, were sufficient to establish that the plaintiff mortgagee had control of the eNote under ESIGN and therefore had standing to foreclose as the holder. According to the court, because these rules governing Transferable Records applied to the eNote, the failure of the plaintiff mortgagee to produce proof of assignment was “irrelevant” and the complaint should not have been dismissed for lack of standing.

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