In Baker v. Bank of America, N.A., No. 5:13-CV-92-F, 2014 U.S. Dist. LEXIS 9578 (E.D.N.C. Jan. 27, 2014), the United States District Court for the Eastern District of North Carolina held that even if a consumer timely exercises his or her right to rescind a loan transaction under the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et. seq. — i.e., during the three-day statutory “cooling-off” period — that exercise does not automatically cause the loan to be rescinded.  Rather, the court held, if a consumer’s notice of rescission is met with silence by the lender, the consumer must also…
Continue Reading Does A Consumer’s Exercise of a Rescission Right Mean that the Loan Is Automatically Rescinded? Perhaps Not, According to One Federal Court, If the Consumer Does Not Also File a Lawsuit for Rescission

The Bureau of Consumer Financial Protection (the “CFPB”) announced April 30 that it is proposing amendments to Regulation Z that will, among other things, permit a creditor that believes in good faith that it has made a qualified mortgage (“QM”) loan and learns afterwards that the loan exceeded the applicable limit on points and fees to refund to the consumer the amount by which the points and fees exceeded the limit, and have the loan retain its QM status.  The proposal would require that the refund be made not later than 120 days following consummation of the loan.  The proposal…
Continue Reading Some QM Relief in Sight? CFPB Proposes Amendment to QM Rule Which Will Permit Creditors to Cure Inadvertent QM Violations Through Refunding Excess Points and Fees

A recent decision issued by the California Court of Appeal will make it more difficult for plaintiffs seeking to avoid foreclosure.  In Rossberg v. Bank of America, N.A., 219 Cal.App.4th 1481 (4th Dist. 2013), the California Court of Appeal affirmed a trial court’s dismissal of plaintiffs’ claims of oral promises to modify a loan.
Continue Reading If It’s Not In Writing, It Didn’t Happen: Oral Promises To Modify A Loan Are Not Enforceable

On January 9, 2014, the Securities and Exchange Commission released its examination priorities for 2014 (the “2014 Exam Priorities Release”), covering a wide range of issues at financial institutions, including investment advisers and investment companies, hedge funds and private equity funds.  The 2014 Exam Priorities Release highlights a number of areas and key risks that the SEC will be monitoring and examining in 2014.  The SEC has identified the following core risk areas for investment advisers:…
Continue Reading SEC Announces 2014 Examination Priorities for Investment Advisers

A unit of Deutsche Bank won dismissal of a suit brought by mortgage bond investors after a New York state appeals court determined the claims for loan repurchase and indemnity were subject to a six-year statute of limitations that began to run when the deal to purchase the loans closed.  This decision may limit new suits by investors who allege that their claims don’t accrue – and that therefore the statute of limitations does not begin to run – until the claim is discovered or the seller of the loan refuses to repurchase it or provide indemnification.
Continue Reading The End Is In Sight? Deutsche Bank Claims Victory In Defense Of A Repurchase Claim Based Upon Statute Of Limitations

The Commissioner of the California Department of Business Oversight on November 22 issued an order directing all DBO licensees (which would include California Finance Lender licensees and residential mortgage lender licensees, among others) to designate a single standard email address for Department communications.
Continue Reading Commissioner of California Department of Business Oversight Issues Order on Designated Point of Contact for Delivery of Emails

The U.S. Court of Appeals for the Sixth Circuit, which covers Michigan, Ohio, Kentucky and Tennessee, held late last month that real estate settlement service providers whose relationships satisfied the Real Estate Settlement Procedures Act ‘s (“RESPA’s”) statutory three-part test for affiliated business arrangements (“AfBAs”) were not also required to satisfy any tests set forth in HUD’s Statement of Policy 1996-2 Regarding Sham Controlled Business Arrangements (the “Policy Statement”).  That three-part test provides a safe harbor from violation by the AfBA of the anti-kickback prohibition set forth in Section 8 of RESPA if (i) the party referring the AfBA to…
Continue Reading Sixth Circuit Holds That Affiliated Business Arrangements Are Not Bound by HUD’s Statement of Policy Regarding Sham AfBAs

The Office of the Comptroller of the Currency published on October 30, 2013 a new Guidance relating to risk management for third party relationships. This Guidance rescinds OCC Bulletin 2001-47, “Third-Party Relationships: Risk Management Principles” and OCC Advisory Letter 2000-9, “Third-Party Risk.” Prior to the formation of the Consumer Financial Protection Bureau, OCC-regulated institutions were subject to the rescinded Guidance and Advisory Letter, and OTS-regulated institutions were subject to Thrift Bulletin 83 (since rescinded), “Interagency Guidance on Weblinking: Identifying Risks and Risk Management Techniques,” but non-bank lenders were not subject to similar requirements with respect to their relationships with third…
Continue Reading OCC Issues New Risk Management Guidance For Third Party Relationships

The Consumer Financial Protection Bureau is considering new rules to govern debt collection practices that could radically change the debt collection regulatory landscape and for the first time include creditors that are collecting their own debt. Third-party debt collectors are currently subject to the Fair Debt Collection Practices Act, but this law does not apply to creditors that originate and collect their own debt.
Continue Reading Is Everybody A Debt Collector? CFPB Proposes New Rules That Could Subject Creditors That Collect On Their Own Debts To New Debt Collection Rules

On August 15 the Consumer Financial Protection Bureau released updates to its examination procedures in connection with the new mortgage regulations that were issued in January. These updates offer valuable guidance on how the CFPB will conduct examinations for compliance with the Truth in Lending Act and the Real Estate Settlement Procedures Act.
Continue Reading CFPB Releases Exam Procedure Updates For TILA and RESPA

On May 29, 2013, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending its Ability to Repay/Qualified Mortgage (ATR/QM) rule, originally issued on January 10, 2013.
The final rule addresses the following:

• Removes compensation to individual loan originator employees from the calculation of the points and fees limit for purposes of both the QM and Home Ownership and Equity Protection Act (HOEPA) rule;
• Establishes a new smaller creditor portfolio QM;
• Loosens requirements for smaller creditors originating balloon loan QMs for two years; and
• Establishes new exemptions from the ability to repay requirements for credit extended under Emergency Economic

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Continue Reading CFPB Amends Ability-To-Repay/Qualified Mortgage Regulations To Exclude Creditor’s Payment Of Compensation To Loan Originator Employees From Calculation Of Points and Fees

On May 17, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued a consent order to Paul Taylor Homes Limited, Paul Taylor Corp. and Paul Taylor individually (altogether “Taylor”) based on the CFPB’s findings that Taylor entered into a sham joint venture arrangement with Benchmark Bank that resulted in Taylor receiving compensation for referrals in violation of Section 8 of RESPA. According to the CFPB’s findings, the joint venture had no employees (all work was done on behalf of the joint venture by an employee of Benchmark Bank), did not have its own office space, did not advertise to the public,…
Continue Reading CFPB Issues Consent Order To Taylor Homes Based On Sham Joint Venture Arrangement

In Pfeiffer v. Countrywide Home Loans, — Cal.Rptr.3d —-, 2012 WL 6216039 (Dec. 13, 2012), mortgage borrowers filed a damages claim against a trustee for violating the federal Fair Debt Collection Practices Act (“FDCPA”) and an injunction claim against a lender to halt a foreclosure they claimed was wrongful. The trial court sustained the defendants’ demurrer to both claims without leave to amend. The California Court of Appeal affirmed as to the first claim, but reversed as to the second.
Continue Reading California Court Holds That Borrowers May Enjoin A Foreclosure If A Lender Fails To Meet Servicing Guidelines