2012 – Page 4 – Consumer Financial Services Watch

Force-Placed Insurance Standards in the Global Foreclosure Settlement

Apr 20 2012

Force-placing insurance could be a hazardous practice if not done appropriately. The Consumer Financial Protection Bureau (“CFPB”) has made force-placed insurance a main focus of its desired mortgage servicing reforms and new rules on the issue are expected to be released by the CFPB as soon as this week. This is in addition to high-profile investigations into force-placed insurance by New York and California. Therefore, it should be no surprise that a significant section of the March 2012 Global Foreclosure Settlement lays out new force-placed insurance standards for parties to the settlement agreement. Read More

Tenants’ Rights under the Global Foreclosure Settlement Agreement

Apr 12 2012

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

Buried deep in the 40-plus pages of “Servicing Standards” that are part of the recently announced global foreclosure settlement agreement (the “Agreement”) are two bullets on a topic that could impact thousands: tenants’ rights.

Specifically, the Agreement requires subject servicers to: (1) comply with all applicable state and federal laws governing the rights of tenants living in foreclosed residential properties; and (2) develop and implement written policies and procedures to ensure compliance with such laws. Read More

CFPB Issues First “Bulletin” Regarding TILA’s Loan Originator Compensation Rule

Apr 10 2012

By: Jonathan D. Jaffe

The CFPB issued its first pronouncement—which it refers to as a Bulletin—regarding the Truth in Lending Act’s (“TILA”) loan originator compensation rule (the “LO Comp Rule”). The Bulletin is noteworthy for at least two reasons: the CFPB took a practical approach to resolve the issue, and the CFPB announced that it anticipates issuing a proposed rule for public comment in the near future on the loan origination provisions in the Dodd-Frank Act. Read More

National Mortgage Foreclosure Settlement Tackles “Dual Tracking” of Foreclosure and Loan Modification

Apr 05 2012

By: Stephanie C. Robinson, Kerri M. Smith

At what point is it appropriate after a borrower defaults to initiate foreclosure proceedings? As soon as the borrower defaults? Few, if any, servicers follow this rule. During a review of loss mitigation options? During a trial modification? Servicers long have felt that the extraordinary delays in completing foreclosures based on some state laws weigh in favor of starting the foreclosure process as soon as possible. Of course, the servicer always can call off the foreclosure if the loss mitigation option succeeds, but a decision to delay the initiation of foreclosures can result in investor claims. On the other hand, borrowers who think they are in the running for a loan modification often are angry and dismayed when the foreclosure notice arrives. The national foreclosure settlement between the country’s five largest residential mortgage loan servicers and the federal government and 49 state attorneys general places a number of restrictions on the controversial but common practice of “dual tracking” foreclosures and loan modifications. Read More

Protecting the Protectors – the Global Settlement Agreements’ SCRA Provisions

Apr 03 2012

By: Jonathan D. Jaffe

Given the reported violations of the provisions of the Servicemembers Civil Relief Act (“SCRA”) by some servicers, and the attendant enforcement and civil actions against those servicers, state and federal regulators clearly felt compelled to impose significant SCRA-related requirements on the nation’s five largest residential mortgage loan servicers (the “Servicers”) in the recent global settlement agreements (the “Agreements”) entered into between those regulators and Servicers, described here. Read More

BIGGER! BOLDER! BETTER? The NMLS Expands to License More Consumer Financial Services – Mortgage Finance Licensees Will Need to Amend Their Account Records

Apr 03 2012

By: Costas A. Avrakotos

The idea was first floated, then floundered, moved forward with few fans and fleeting fanfare, secured a firm foothold, found a favorable following, was force-fed by federal law, and now four years since its formation, it is poised to forever change the way that consumer financial services will be licensed and regulated by the states. Beginning next month, the Nationwide Mortgage Licensing System (the “NMLS” or the “System”) will go through a metamorphosis, and eventually emerge as the System through which most, if not all, state licenses for consumer financial services will be applied for, processed and renewed.

To view the complete alert online, click here.

Vendor Management Standards in the Global Foreclosure Settlement

Mar 28 2012

By: David A. Tallman

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.

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