January 2012 – Consumer Financial Services Watch

No More Mister Nice Guy: Indemnification Now Required by FHA Lender Insurance Regulations

Jan 31 2012

By: Phillip L. Schulman, Krista Cooley, Holly Spencer Bunting

To view the complete alert online, click here.

Cordray’s Recess Appointment Continues to Cause Controversy

Jan 25 2012

On January 4, President Obama made several recess appointments, including the appointment of Richard Cordray as the first director of the CFPB. After facing harsh criticism, an Office of Legal Council (OLC) memorandum opinion was released on January 12, justifying the constitutionality of the appointments in question. Read More

FHA’s Lender Insurance Program Will Soon Cost Lenders More Money

Jan 24 2012

By: Krista Cooley, Phillip L. Schulman, Holly Spencer Bunting

FHA mortgagees participating in the Lender Insurance (“LI”) program will be required to indemnify HUD for self-endorsed loans that HUD deems ineligible for FHA insurance based on a final regulation to be published by HUD on January 25, 2012. Since January 1, 2006, FHA mortgagees, with approval from HUD, have been permitted to endorse loans themselves, without first having to send the loans to HUD. The final regulation marks the first time HUD will make significant changes to the LI program, one of which automatically increases LI lenders’ liability for the loans they close and self-endorse. These changes finalize LI regulations proposed by HUD in October 2010 and will take effect on February 24, 2012. Read More

CFPB and FTC Memorandum of Understanding Aims to Coordinate Non-Bank Enforcement and Allow Information-Sharing

Jan 24 2012

By: David I. Monteiro

Over the weekend, the CFPB and the FTC executed a Memorandum of Understanding (“MOU”) between the two agencies that clarifies how they will share information and coordinate efforts with respect to companies and issues that fall under both agencies’ jurisdiction. The document contains few surprises but offers some insight into the steps the agencies are taking to prevent unnecessary duplication and inconsistency. Read More

CFPB Releases “Mortgage Origination Examination Procedures” Governing Banks and Nonbanks – Not a Prelude to a Kiss

Jan 20 2012

By: Jonathan D. Jaffe

The CFPB wants to get to know you – well. But it’s not a prelude to a kiss.

On January 12, 2012, the CFPB released its new Mortgage Origination Examination Procedures Governing Banks and Nonbanks (the “Procedures”). The release of the Procedures follows close on the heels of the CFPB’s October 13, 2011 release of its mortgage servicing examination procedures (see The CFPB Mortgage Servicing Examination Procedures Fail to Harmonize – Isn’t It Ironic? ), and its January 5, 2012 announcement of its nonbank supervision program (see CFPB Officially Launches Nonbank Supervision Program). Read More

MERS and Foreclosure Law in Massachusetts: Culhane v. Aurora Loan Services

Jan 19 2012

By: Andrew C. Glass, Gregory N. Blase, Roger L. Smerage

A Massachusetts federal court recently confirmed MERS’s ability to assign mortgages under Massachusetts law and approved MERS’s practices in doing so.

In Culhane v. Aurora Loan Services, — F. Supp. 2d —-, 2011 WL 5925525 (D. Mass. Nov. 28, 2011), a borrower sued her loan servicer to prevent foreclosure. The court granted summary judgment for the servicer, addressing two principal issues. First, the court examined whether Massachusetts law requires that the same entity hold both the note and mortgage before initiating the foreclosure process. Predicting how the Massachusetts Supreme Judicial Court may rule in a pending appeal, Eaton v. Federal National Mortgage Association, SJC-11041 (argued Oct. 3, 2011), the federal court concluded that under Massachusetts law, the mortgagee must either be the noteholder, or the servicer of the noteholder acting pursuant to authority from the noteholder, to foreclose on property pursuant to the power of sale. Read More

New Obstacles on the Course: State Foreclosure Laws Continue to Complicate Mortgage Loan Servicing

Jan 17 2012

By: Nanci L. Weissgold and Morey E. Barnes Yost

It is no secret that the housing crisis is a drag on the economy for which there appears to be no quick and easy fix. President Obama’s recent announcement that his administration would revise the underutilized Home Affordable Refinance Program (“HARP”) in the hopes of assisting underwater borrowers was the latest federal effort to assist homeowners during the ongoing financial crisis. As has been the case with each previous federal effort, the HARP announcement comes on the heels of ever more inventive – and, for servicers, expensive – state and local legislative initiatives with the same ends.

To view the complete alert online, click here.

Marketing Financial Services through Social Media: Twitter Case May Impact Social Media Platforms

Jan 10 2012

By: Andrew L. Caplan* and David A. Tallman
*Mr. Caplan is not yet admitted to practice; admission to the NY Bar pending.

Litigation making its way through the U.S. District Court for the Northern District of California could have broad implications for the use of social media websites for marketing purposes. The central issue in PhoneDog, LLC v. Kravitz is the extent to which a company can control or limit the use of a social media account created for the company’s benefit but used by an individual employee in that employee’s name. The case illustrates the competing concerns that companies face with respect to social media marketing. Some companies may prefer to allow employees to engage with social media relatively independently in order to mitigate the risk that courts or regulatory authorities will impute employee-generated content to the company or subject the content to substantive regulation. But by doing so, companies may lose the ability to manage key social media relationships. Read More

GSE Loan Repurchase Policies Impede Economic Recovery

Jan 10 2012

By: Laurence E. Platt

The loan repurchase policies of Fannie Mae and Freddie Mac are one of the factors that have exacerbated the U.S. housing crisis and impeded economic recovery, according to two recent releases by notable federal government actors. These reports call into question whether the aggressive repurchase stance of the Federal Housing Finance Agency, as conservator of the GSEs, to reduce short-term losses to U.S. taxpayers instead might work to the long-term detriment of such taxpayers. Lenders reportedly responded by saying: “like, duh!” Read More

Are Valuation Review Standards on the Federal Banking Agencies’ Radar?

Jan 09 2012

By: Nanci L. Weissgold and Kerri M. Smith

Mandated by the Dodd-Frank Act, lenders and appraisal management companies (known as AMCs) are awaiting a series of joint rules addressing appraisal issues. While rules addressing pre-funding reviews of appraisals or evaluations is not a topic specifically required by the January 21, 2013 deadline, the FDIC’s Winter 2011 issue of Supervisory Insights hints that it may be addressed in the joint rule establishing minimum requirements for AMCs’ state registration. This may be a welcome development for regulated banking institutions subject to the revised Interagency Appraisal and Evaluation Guidelines (“Guidelines”). Those Guidelines, issued jointly by the federal banking agencies on December 2, 2010 (and effective on that date), update and replace existing guidance in response to changes in the real estate valuation industry and those mandated by the Dodd-Frank Act.

Archive:January 2012