June 2014 – Consumer Financial Services Watch

Inspector General Urges FHFA to Consider Suing Servicers, Force-Placed Insurers

Jun 30 2014

By: Nanci L. Weissgold, Kerri M. Smith, * Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

On June 25, 2014, the inspector general of the Federal Housing Finance Agency (FHFA) issued a report on force-placed insurance with only one recommendation: FHFA should consider suing servicers and force-placed insurers for hundreds of millions of dollars in allegedly “excessive” force-placed insurance premiums.

As we discussed in a recent blog post, “force-placed” or “lender-placed” insurance is an area of increasing controversy, with Fannie Mae and Freddie Mac rolling out new restrictions on perceived conflicts of interest between insurers and the servicers that bring them business. The inspector general noted these reforms going forward, but believes that FHFA should also assess how to pursue perceived past abuses. Read More

Recent Force-Placed Insurance Initiatives by FHFA & CFPB Suggest Divergent Priorities

Jun 12 2014

By: Nanci L. Weissgold, *Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

Force-placed insurance is under continuing scrutiny by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). However, each agency’s focus is slightly different. FHFA, perhaps galvanized by a New York enforcement action, has focused on conflicts of interest between servicers and insurers. The CFPB has focused on erroneous placing of insurance and excessive charges. Read More

K&L Gates Invitation: Distinguished Speaker Program – Michael Turner (R-OH)

Jun 11 2014

Date: Tuesday, June 24, 2014
Time: 8:30 a.m. EDT
Location: K&L Gates, 1601 K Street NW, Washington, D.C. 20006

K&L Gates is pleased to invite you to our June 24th Distinguished Speaker breakfast with Congressman Michael Turner (R-OH).

Congressman Turner was first elected in November 2002 and currently represents Ohio’s 10th Congressional District. The 10th District is located in southwest Ohio and includes Montgomery and Greene counties and part of Fayette County. Congressman Turner is an attorney and, before being elected to Congress, was in private practice and corporate law for 13 years. He also served as the mayor of Dayton between 1994-2002.

Congressman Turner is a long-time member of the House Armed Services Committee, where he serves as the chairman of the Tactical Air and Land Forces Subcommittee. He is also a senior member of the House Oversight and Government Reform Committee.

Congressman Turner holds a BA in political science from Ohio Northern University, a law degree from Case Western University School of Law, and a MBA from the University of Dayton.

To attend, please click here to register by 5:00 p.m. EDT, Monday, June 23.

This event is not a fundraiser. To maintain the informality of this event, it is strictly off the record.

Commonwealth of Massachusetts v. FHFA: Fremont Meets The Federal Government

Jun 05 2014

By: Irene C. Freidel

On June 2, 2014, the Commonwealth of Massachusetts sued the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac in state court, under Massachusetts’ consumer protection statute (“Chapter 93A”) to force them to sell foreclosed properties to non-profit organizations at fair market value, so that the properties can then be re-sold or leased back to the former homeowner. See Commonwealth of Massachusetts v. Federal Housing Finance Agency, et al., C.A. No. 14-1763 (June 2, 2014). Among other things, the lawsuit seeks a declaration that the GSEs’ current anti-fraud guidelines violate Massachusetts foreclosure law (M.G.L. c. 244, § 35C(h)), an order requiring property sales to non-profits in specific transactions, an injunction to prevent the GSEs from refusing to adhere to Massachusetts law, and an award of penalties of up to $5,000 for each transaction that the court determines constituted an unfair and deceptive practice under state law. The lawsuit follows a series of communications between the Massachusetts Attorney General and FHFA beginning in 2012 in which the state has demanded that FHFA direct the GSEs to change their anti-fraud “arms-length” requirements that apply to short sales and REO transactions. Read More

K&L Gates Webinar: Mortgage Loan Servicers and Affiliated Service Providers – What are the Rules?

Jun 05 2014

By: Holly Spencer Bunting, Kristie D. Kully, Kerri M. Smith, Nanci L. Weissgold

No one said it was going to be easy to be a servicer of residential mortgage loans.

The current scrutiny of servicing practices is at a fever pitch. Recently, one focus of federal and state officials has been on enforcing the broad array of laws, regulations, and other requirements applicable to a servicer’s engagement of affiliated service providers. In particular, regulators are increasingly interested in the reliance by servicers upon affiliated service providers, and the perception that the servicer may have conflicts of interest or is self-dealing. In fact, regulators such as New York State Department of Financial Services Superintendent Benjamin Lawsky are becoming significant obstacles to the transfer of mortgage servicing rights in certain cases, probing into compliance failures in past servicing practices and potential conflicts of interest with affiliated service providers. Read More

Nanci Weissgold to speak at an IMF Webinar: New Scrutiny: Nonbank Supervision and Enforcement

Jun 04 2014

Nanci L. Weissgold will participate as a speaker in the IMF Webinar: New Scrutiny: Nonbank Supervision and Enforcement on June 24, 2014. To to learn more about current and future state and federal actions and register for the webinar, please click here.

K&L Gates Webinar: Cyber-Attacks: Insurance Coverage for Cyber Risks and Realities

Jun 04 2014

Recently, some of the world’s most-sophisticated corporate giants have fallen victim to some of the largest data breaches in history. It is clear that cyberattacks are on the rise with unprecedented frequency, sophistication, and scale. They are pervasive across all industries and geographical boundaries.

The problem of cyber risk is exacerbated not only by increasingly sophisticated cyber criminals and evolving malware, but also by the trend in outsourcing data handling, processing, and/or storage to third-party vendors, including “cloud” providers, and by the simple reality of the modern business world, which is full of portable devices that may facilitate the loss of sensitive information. Read More

CFPB Widens RESPA Enforcement to Focus on Affiliated Business Arrangement Disclosures

Jun 03 2014

By: Holly Spencer Bunting, Anaxet Y. Jones

The CFPB once again has taken aim at affiliated business arrangements (“AfBAs”), only this time, it is targeting AfBA disclosures. In prior enforcement actions, the CFPB focused on the validity of the AfBA, bringing actions against alleged “sham” AfBAs. However, in its most recent enforcement action, the CFPB entered into a consent order with a real estate brokerage company, alleging that it referred consumers to its affiliate, but failed to provide an adequate AfBA disclosure. The CFPB also alleged that the brokerage company improperly required the use of its affiliate title insurance agency.

K&L Gates Legal Insight: Winding the Removal Clock: The Second Circuit Clarifies the Deadline for Removal Under the Class Action Fairness Act

Jun 02 2014

By: Robert W. Sparkes, III, Brian M. Forbes

When faced with a state court lawsuit, a critical consideration for any defendant is the forum in which to litigate – whether to remain in state court or, if possible, remove the case to federal court. In the case of a putative class action, proceeding in state court under state rules of procedure and other local influences could have significant impact on how the case proceeds. As such, a defendant must first consider whether the claims are removable, and, if removable, what deadline applies to the notice of removal. In assessing the timeliness of removal, a defendant should first look to the statutory deadlines set forth in 28 U.S.C. § 1446(b) (“Section 1446(b)”). However, as the United States Court of Appeals for the Second Circuit recently explained in Cutrone v. Mortgage Electronic Registration Systems, Inc., the provisions of Section 1446(b) do not provide all of the answers.

To read the full alert, click here.

Archive:June 2014