On August 2, the CFPB released consumer protection principles for mortgage servicers to use as they develop new foreclosure relief solutions in anticipation of Treasury’s Home Affordable Modification Program’s (HAMP) upcoming expiration date (CFPB Principles). The CFPB Principles echo those summarized in FHFA’s, HUD’s, and Treasury’s recently published white paper, “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” As previously covered in InfoBytes, the white paper recommends that future loss mitigation programs promote accessibility, affordability, sustainability, transparency, and accountability. The CFPB Principles address accessibility, affordability, sustainability, and transparency, and cite to separate CFPB mortgage servicing rules for standards concerning accountability. In its press release, the CFPB notes that the four principles “do not establish binding legal requirements but instead are intended to complement ongoing discussions among industry, consumer, groups, and policymakers.”
On August 12, the Ninth Circuit vacated a district court’s summary judgment and held that Nevada Revised Statutes section 116.3116 et seq. (the Statute) violates the Fourteenth Amendment’s Due Process Clause. Bourne Valley Court Trust v. Wells Fargo Bank, No. 15-15233, (9th Cir. Aug. 12, 2016). In a 2-1 decision, the Ninth Circuit held that the Statute’s “opt-in notice scheme” unconstitutionally degraded the mortgage lender’s interest in the property because it required an HOA to alert a mortgage lender of its intention to foreclose only if the lender had affirmatively requested notice.
Foreclosure Law Firms and Title Companies to Pay $1.8 for Violations of Colorado Consumer Protection Laws
On August 3, Colorado AG Cynthia H. Coffman announced that certain Colorado foreclosure law firms and title insurance companies must pay, pursuant to a court order, $1.8 million in penalties to resolve allegations that they participated in a scheme to defraud consumers. According to AG Coffman’s announcement, between 2008 and 2013, the law firms and title companies violated the Colorado Consumer Protection Act (CPA) and the Colorado Fair Debt Collection Practices Act (CFDCPA) by charging “false and misleading costs for title insurance policies” on more than 2,000 foreclosures. The court originally imposed penalties of $2,291,000 for violations of the CPA and $1,374,600 for violations of the CFDCPA, but the penalties were reduced to a combined $1.8 million because of a statutory maximum penalty cap.
On July 25, FHFA, HUD, and Treasury published a white paper titled “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” The paper examines the effect of the 2008 financial crisis on the mortgage servicing industry with a focus on loss mitigation programs. Under the 2009 Making Home Affordable (MHA) program, foreclosure alternatives were established to address the needs of homeowners and to improve the mortgage servicing industry’s loss mitigation practices. According to the paper, between April 2009 and the end of May 2016, 10.5 million modification and mortgage assistance arrangements were completed through government programs and private sector efforts. The paper further notes that, as a result of FHFA’s, HUD’s, and Treasury’s programs, regulatory actions, and private sector initiatives, the mortgage industry is “generally better prepared now to provide assistance to struggling homeowners than it was before the crisis.” The improvement “is due, in part, to the adoption of certain homeowner engagement standards including continuity of contact, solicitation timeframes, and certain notice and appeal processes required by the [CFPB].” At the end of 2016, MHA programs, such as HAMP, will come to a close. Based on the agencies’ collective experience with MHA programs, the paper identifies five guiding principles for loss mitigation programs: (i) accessibility, guaranteeing homeowners a simple process for obtaining mortgage assistance; (ii) affordability, “providing homeowners with meaningful payment relief that addresses the needs of the homeowner, the servicer and the investor, to support long-term performance”; (iii) sustainability, offering long-term solutions intended to resolve delinquency; (iv) transparency, “[e]nsuring that the process to obtain assistance, and the terms of that assistance, are as clear and understandable as possible to homeowners, and that information about options and their utilization is available to the appropriate parties”; and (v) accountability, ensuring sufficient oversight of the process to obtain mortgage assistance.
Recently, the Massachusetts Division of Banks released its annual report for year-end 2015. The report provides a broad overview of the Division’s 2015 efforts related to, among other things, foreclosure relief, cybersecurity protection, mortgage and depository supervision, and corporate transactions. Notable 2015 updates outlined in the report include the Division (i) approving 24 new mortgage companies in 2015, which resulted in 497 mortgage brokers and lenders being licensed to do business in Massachusetts; (ii) expanding its coordination, cooperation, and participation with the CFPB, Multi-state Mortgage Committee, and the New England Regional Mortgage Committee through sharing information in concurrent examinations of non-depository mortgage entities; and (iii) increasing oversight of the financial industry’s information technology environment, including collaborating with the Conference of State Bank Supervisors to host an event for Massachusetts bankers about common cybersecurity situations. The report includes objectives for 2016, including such as implementing and enforcing “consumer protection laws and regulations while providing consumers the information they need to know their rights and make informed financial decisions.”