June 2019 – Consumer Financial Services Watch

DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges

Jun 27 2019

By Andrew C. Glass, Gregory N. Blase, and Daniel S. Cohen

For the past six months, the mortgage lending industry has reported receiving conflicting messages from the Department of Housing and Urban Development (“HUD”) and the Federal Housing Administration (“FHA”) regarding Deferred Action for Childhood Arrivals (“DACA”) recipients’ eligibility for FHA-insured mortgages. In December 2018, Senators Robert Menendez (D-NJ), Cory Booker (D-NJ), and Catherine Cortez Masto (D-NV) asked HUD to clarify whether it has “developed a policy regarding DACA recipients’ eligibility for FHA-insured mortgage loans.” If not, the senators requested HUD to “promptly provide clear and written guidance to FHA-approved lenders clarifying” that DACA recipients are not ineligible for FHA insurance simply because of their DACA status. [1] In response, HUD issued a letter explaining that is has “not implemented any policy changes” with respect to “FHA’s eligibility requirements” for non-U.S. citizens who are lawful residents. HUD reiterated that “non-U.S. citizens without lawful residency are ineligible for FHA financing.” [2] In early 2019, Fannie Mae issued a guide regarding “non-citizen borrower eligibility,” explaining that mortgages provided to DACA recipients are eligible to be purchased by Fannie Mae because DACA recipients are lawful nonpermanent residents because they have a valid Employment Authorization Document number. [3] During congressional testimony in April, HUD Secretary Ben Carson seemingly clarified that DACA recipients are eligible for FHA-insured mortgages. The secretary commented that “plenty of DACA recipients … have FHA mortgages,” and that he would be surprised if lenders received statements to the contrary from HUD staff.

“Any Defendant” Does Not Really Mean “Any Defendant”

Jun 18 2019

The U.S. Supreme Court Limits Parties Entitled to Seek Removal of Class Action Claims Under CAFA

Authors: Ryan M. Tosi, Scott G. Ofrias

In a recent decision addressing federal court jurisdiction, the U.S. Supreme Court held that third-party counterclaim defendants cannot remove class action claims to federal court, holding that they are not “defendants” entitled to remove the action from state court to federal court under either the general removal statute, [1] or the federal Class Action Fairness Act (“CAFA”). [2] In a 5-4 decision in the matter of Home Depot U.S.A., Inc. v. Jackson, [3] the Court concluded that only a party sued by the original plaintiff is entitled to remove, and that CAFA’s expansion of removal authority to “any defendant” does not apply to third-party defendants that are not parties to the original action.

Ninth Circuit U-Turns And Approves Nationwide Class Settlement In Automobile Class Action Involving Potential Variations In States’ Laws

Jun 12 2019

Authors: Brian M. Forbes, Robert W. Sparkes, III, Matthew N. Lowe

In a recent 8-3 en banc decision, the Ninth Circuit affirmed the approval of an estimated $210 million class action settlement in In re Hyundai and Kia Fuel Economy Litigation. The Hyundai decision is significant because it reversed an earlier, controversial decision by a three-judge panel of the Ninth Circuit, which rejected the nationwide settlement because the district court failed to “rigorously analyze potential differences in state consumer protection laws” before certifying the class for settlement. The Ninth Circuit’s en banc decision offers some clarity for both plaintiffs and defendants attempting to settle class action litigation in the Ninth Circuit, especially those involving proposed nationwide classes.

Archive:June 2019