Consumer Financial Services Watch – Page 35 – News and developments related to consumer financial services, litigation, and enforcement.

K&L Gates Partner Laurence E. Platt Testifies before the Committee on Senate Banking, Housing, and Urban Affairs

Nov 04 2013

Larry Platt testified at a hearing held by the Senate Banking Committee on Tuesday, October 29, considering standards for mortgage loan servicers, particularly in connection with loss mitigation activities. The hearing was one of several designed to examine housing finance reform and the essentials of a functioning housing finance system in the Committee’s continuing deliberations over the fate of Fannie Mae and Freddie Mac and other provisions in the proposed Housing Finance Reform and Taxpayer Protection Act of 2013. Read More

2014 U.S. News-Best Lawyers® Rankings

Nov 04 2013

For a fourth consecutive year, K&L Gates has been ranked among the top two law firms with the most first-tier rankings in the annual U.S. News-Best Lawyers® “Best Law Firms” survey. Earning more than 200 first-tier rankings in offices and practices across the United States, K&L Gates also received the publication’s national “Law Firm of the Year” distinction, given to only one firm in each national practice area, for Securities Regulation and for Criminal Defense: White Collar. Read More

HUD Extends Foreclosure Timeframes with Mortgagee Letter 2013-38

Nov 01 2013

By: Krista Cooley, Kathryn M. Baugher

On October 28, 2013, with the publication of Mortgagee Letter 2013-38, HUD provided a much-needed update to the schedule of claimable attorney fees and reasonable diligence timeframes for prosecuting a foreclosure on loans insured by the FHA. These updates expressly apply to both forward mortgages and Home Equity Conversion Mortgages (“HECMs”).

As FHA servicers are aware, with respect to foreclosure on FHA-insured loans, HUD sets limits on the attorney fees that servicers can claim and requires servicers to prosecute foreclosure in a specific amount of time, referred to as the “reasonable diligence timeframe.” In light of the substantial changes in state foreclosure requirements in recent years, HUD’s guidance on fees and reasonable diligence timeframes, which was last updated in 2005, presented significant challenges for FHA servicers striving to meet reasonable diligence timeframes and recoup actual attorney fees expended in prosecuting foreclosures in connection with FHA-insured loans. The updates announced in Mortgagee Letter 2013-38 bring welcome increases for both claimable attorney fees and reasonable diligence timeframes in many jurisdictions.

New York Campaign Against Out-of-State Online Lenders Survives a Battle in the SDNY

Nov 01 2013

By: David L. Beam, Christopher Shelton*
*Mr. Shelton is a law clerk and not admitted to the practice of law.

The Internet has been with us for about two decades, and financial service companies have been offering products over the Internet for nearly as long. One would have thought that there would be final resolution by now on the question of whether, and under what circumstances, a state may regulate an online lender with no physical presence in the state. However, this issue continues to be a thorny one.

A recent decision by the United States District Court for the Southern District of New York touches on this issue. In Otoe-Missouria Tribe of Indians v. New York State Department of Financial Services, 2013 U.S. Dist. LEXIS 144656, 2013 WL 5460185 (S.D.N.Y. Sep. 30, 2013), the State of New York successfully argued that it can regulate online loans made by Native American tribes to New York residents. The case primarily involved the question of whether a state could regulate an enterprise owned by a Native American tribe located in another state. But the decision potentially has implications for other situations where a company offers financial services over the Internet. Moreover, it is part of a wider campaign by New York authorities to target online lenders for alleged usury.

Affiliated Business Arrangements Remain a Target for the CFPB under RESPA

Oct 30 2013

By: Holly Spencer Bunting

After announcing two RESPA consent orders in June 2013 targeting affiliated business arrangements (“AfBAs”), the CFPB is again taking aim at AfBAs. In a lawsuit filed in federal district court in Kentucky, the CFPB alleges that a law firm and three of its attorney principals gave impermissible referral fees to owners and managers of real estate and mortgage brokerage companies through profit distributions made by title insurance AfBAs owned by the attorneys and the real estate and mortgage brokerage companies. Because the CFPB alleges these AfBAs were not structured according to RESPA’s requirements, the CFPB is seeking to disgorge all monies received by the attorneys related to settlement services provided in connection with referrals, including profit distributions from the AfBAs. Read More

Federal Regulators Alleviate Fair Lending Concerns Regarding QM Origination

Oct 23 2013

By: Stephanie C. Robinson, Andrew L. Caplan

Recognizing that many creditors will be inclined to originate only “qualified mortgages” (“QM loans”) when the CFPB’s ability-to-repay rule takes effect in January, five federal regulators yesterday announced that a creditor’s decision to offer only QM loans will not elevate the creditor’s fair lending risk, absent other factors. Read More

Mortgage Servicers: Don’t Forget ECOA’s Valuation Rule

Oct 21 2013

By: Nanci L. Weissgold, Kerri M. Smith

Mortgage loan servicers are toiling away at executing all the new servicing requirements in the CFPB’s Regulation Z and Regulation X amendments by the January 10, 2014 deadline. Given this overwhelming task, it is understandable that some servicers may not be as familiar with the CFPB’s ECOA Valuation Rule amending Regulation B. The Rule, which imposes an obligation to furnish a copy of valuations to borrowers of first-lien loans and to provide notice to borrowers of this right, may apply to a servicer’s loss mitigation efforts.

HUD Issues QM Proposal for Comment: There is a “There” There

Oct 07 2013

By: Phillip L. Schulman, Jonathan D. Jaffe, Krista Cooley, Andrew L. Caplan

This week, the United States Department of Housing and Urban Development (“HUD”) weighed in on its proposed version of a Federal Housing Administration (“FHA”) Qualified Mortgage (“QM”). Although the Consumer Financial Protection Bureau (“CFPB”) rules gave FHA-insured loans QM status on a temporary basis until 2021 (subject to certain conditions, discussed below), it looks like HUD wanted to get its version finalized by January 2014, when the CFPB’s QM rules take effect. As discussed more fully in this alert, HUD’s proposed QM Rule (the “HUD Proposed Rule”) would give QM status to all single family, forward FHA-insured loans. Title II insured loans, however, would be required to meet the CFPB’s 3% limit for points and fees.

In an attempt to expedite synchronization of the HUD QM definition with implementation of the CFPB Final Rule, HUD shortened the usual 60-day comment period to 30 days. As such, comments on this proposal are due by Wednesday, October 30, 2013.

To read the full alert, click here.

Report Elder Abuse to Authorities, Federal Regulators Tell Financial Institutions

Oct 01 2013

By: David L. Beam, *Anjali Garg

*Ms. Garg is a law clerk and not admitted to the practice of law.

Federal privacy laws do not prohibit a financial institution from reporting suspected elder abuse to the authorities. That’s the key takeaway from a new interagency guidance issued by seven federal regulatory agencies on September 23. Read More

Rulemaking Dictating Loan Terms Is Coalescing Around the CFPB’s Qualified Mortgage Standard, but the Future of Loans Outside of This Standard Remains in Question

Sep 18 2013

By: Laurence E. Platt, Stanley V. Ragalevsky, Sean P. Mahoney

Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) government regulation has been pushing the mortgage banking industry toward homogenized residential mortgage loans with characteristics that the government considers “safe.” While this sounds simple enough, it has become complicated with at least three rulemaking processes dictating potentially different standards for residential mortgage loans:

• the “qualified mortgage” or “QM” definition in the Ability-to-Repay and Qualified Mortgage Standards rule (the “ATR Rule”) promulgated by the Consumer Financial Protection Bureau (“CFPB”) under Section 129C of the Truth in Lending Act;

• the “qualified residential mortgage” or “QRM” definition under the securitization risk retention rules (the “Risk Retention Reproposal”) reproposed by a consortium of regulatory and housing agencies under Section 941 of the Dodd-Frank Act; and

• the revised bank capital rules promulgated by bank regulators in accordance with Basel III (the “Basel III Rules”).

To read the full alert, click here.