March 2012 – Consumer Financial Services Watch

Vendor Management Standards in the Global Foreclosure Settlement

Mar 28 2012

The alleged failure of servicers to adequately supervise the activities of their foreclosure and loss mitigation vendors and other service providers is one of the central criticisms levelled by federal and state regulators against residential mortgage servicers. The regulators assert that skyrocketing foreclosure volumes caused key vendors – including foreclosure firms, bankruptcy attorneys, and document custodians – to take shortcuts. Moreover, with respect to the management and execution of legal documents, regulators assert that servicers failed to adequately supervise the activities of their foreclosure and loss mitigation vendors and other service providers. According to the regulators, servicers were not sufficiently equipped to track the movement of original documents, verify that affidavits and declarations filed in foreclosure and bankruptcy proceedings were factually accurate and correctly executed, or ensure that the vendors otherwise performed their services in compliance with applicable law. Read More

Joining the Conversation: The Perils and Possibilities of Social Media for Financial Services Companies

Mar 28 2012

By: David A. Tallman, Lori L. Schneider

As consumers integrate the Internet and social media into their daily lives, they not only expect financial institutions to maintain an active online presence, but increasingly demand to receive financial products and services over the Internet and on mobile devices. The rise of online interactivity offers financial institutions unprecedented opportunities to foster customer loyalty, expand brand awareness, educate their clients or potential clients and market products and services. But at the same time, the use of social media in such a highly regulated industry raises a host of unique – and often unanticipated – risks and responsibilities that courts, regulators, and financial institutions have only just begun to address.

To view details and register for the webinar, click here.

Global Servicing Settlement Requires Single Points of Contact (“SPOCs”)

By: Kristie D. Kully

The servicing standards imposed on the five largest mortgage loan servicers by the recent global settlement agreement with state and federal regulators, described here, continue to pile on the “SPOC” requirements. “SPOC” stands for a single point of contact – a knowledgeable and accessible person a troubled borrower may contact to receive information and assistance in the loss mitigation, loan modification, and foreclosure process. SPOCs may do little to resolve the foreclosure documentation irregularities that sparked state and federal regulators to initiate their investigation. However, they have been touted as key to the efforts for national servicing standards, and are an inevitable adjunct to the global settlement agreement.

Global Foreclosure Settlement Servicing Standards: Customer Complaint Provisions

Mar 20 2012

By: Melanie Hibbs Brody

In many financial service relationships, dissatisfied customers can solve ongoing customer service deficiencies by simply taking their business to a competing provider. Mortgage borrowers, however, are generally stuck with the company that services their loan, unless they are willing and able to refinance. This inability to “fire” loan servicers for poor performance, combined with the fact that mortgage servicing errors can cause serious harm – up to and including the loss of a home – has motivated government officials to impose loan servicing complaint resolution requirements whenever an opportunity arises. Read More

How the Global Foreclosure Settlement Agreement Impacts Servicing Fees

Mar 19 2012

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

As scrutiny of default servicing practices provided significant impetus for the recently announced global foreclosure settlement agreement (the “Agreement”), it is no surprise that the Agreement prescribes extensive standards to resolve issues with these practices. Based upon the Servicing Standards announced as part of the Agreement, one major area of focus will be the fees that mortgage loan servicers charge in connection with servicing loans. Read More

New SAFE Act Examination Guidelines for State Regulated Entities: Spring Cleaning May Be Required

Mar 12 2012

By: Nanci L. Weissgold

The Multistate Mortgage Committee’s (“MMC”) new SAFE Act Examination Guidelines (“SEGs” or “Guidelines”) leave little doubt that nondepository institutions should expect more detailed and intrusive examinations of their mortgage loan originator (“MLO”) hires and policies by state regulators. The MMC, a 10 state representative body formed under the CSBS/AARMR Nationwide Cooperative Protocol and Agreement for Mortgage Supervision, is responsible for developing a process for multistate mortgage examinations. Although created under the guise of multistate examinations, the intent of the MMC is to provide state regulators with a uniform examination process to determine SAFE Act compliance and to provide those same tools to in-house compliance and audit departments. Read More

Global Foreclosure Settlement: The Success of Herding Cats

Mar 12 2012

By: Laurence E. Platt, Michael J. Missal

Whether one thinks the terms of the historic federal-state civil loan servicing settlement are too much, too little or about right, two conclusions are indisputable. First, an incredible amount of good faith effort from all concerned contributed to the final settlement—simply synchronizing the differing interests of the various governmental and private parties in over a year of negotiations seemed to require a computer program. Second, while the settlement terms are likely to contribute to the future housing recovery, the federal and state governments appear intent to continue to pursue enforcement actions for prior conduct.

To view the complete alert online, click here.

K&L Gates Files Federal Pro Bono Action to Challenge Foreclosure Rescue Scheme

Mar 12 2012

By: Paul F. Hancock, Carol Elder Bruce, John L. Longstreth, Melissa S. Malpass

On March 6, 2012, K&L Gates LLP filed a federal lawsuit challenging an allegedly discriminatory and otherwise unlawful foreclosure rescue scam targeted to Hispanic homeowners in Northern Virginia. The National and Washington Lawyers’ Committees for Civil Rights are co-counsel with us in this pro bono effort.

To view the complete alert online, click here.

FDIC Issues a Quick Guide for Consumers on Credit, Debit, and Prepaid Cards

Mar 08 2012

By: Andrew L. Caplan*
*Mr. Caplan is admitted to practice in NY (not admitted in DC); supervised by Nanci Weissgold, a member of the DC bar

As Gertrude Stein once wrote, “a rose is a rose is a rose.” However, as indicated in a recent Federal Deposit Insurance Corporation (“FDIC”) consumer guide, a card is not a card is not a card.

On March 5, 2012, the FDIC issued A Quick Guide for Consumers on Credit, Debit, and Prepaid Cards (“the Guide”) to help consumers appreciate the differences among credit cards, debit cards, and prepaid cards. As indicated in a recent FDIC press release, “[t]he guide is intended to help consumers who routinely use cards to pay for goods and services but who don’t always understand the differences in how these cards work or the applicable consumer protections.”

CFPB Plans Small Business Review Panel for Combined RESPA and TILA Disclosures and Hints at Possible Regulatory Changes

Mar 05 2012

By: Holly Spencer Bunting

If you are on the edge of your seat waiting for the combined RESPA/TILA proposed regulations and disclosure forms, we have our first glimpse into the changes being contemplated by the Consumer Financial Protection Bureau (“CFPB” or “Bureau”). On February 21, 2012, the CFPB announced its plan, in accordance with the Small Business Regulatory Enforcement Fairness Act, to solicit feedback from a group of small business mortgage and settlement companies that will be directly impacted by new and combined RESPA and TILA disclosure forms. In addition to describing the purpose and process for a Small Business Review Panel (“Panel”), and publishing a list of questions and issues for small business representatives to discuss at the upcoming Panel, the Bureau released an outline of the proposals currently under consideration for combined RESPA and TILA regulations. At this point, the outline is a list of issues that will allow the CFPB to measure whether the regulations under development could have a significant economic impact on a substantial number of small entities, but it gives us a first glance at the changes that could be coming for mortgage disclosures under RESPA and TILA. Read More

Archive:March 2012