In Gilbert v. Residential Funding LLC, the U.S. Court of Appeals for the 4th Circuit became the first federal appellate court to rule that a borrower only needs to send notice of rescission within the three-year period to exercise a valid right to rescind. In this case, the borrowers are appealing a district court’s dismissal of their claim that Deutsche Bank Trust Company Americas, as trustee for Residential Accredit Loans, Inc., Residential Funding LLC and GMAC Mortgage LLC, violated various consumer protection laws in connection with a refinance mortgage the borrowers secured...

Industry and legal concerns that enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act made substantial changes to the federal preemption landscape are “much ado about nothing,” according to two legal scholars at the law firm Barnett Sivon & Natter PC in Washington, DC. In a scholarly work scheduled for publication in the Virginia Law and Business Review this fall, the pair addresses the view of some commentators that the Dodd-Frank Act changed the standard used to determine if a state law is preempted. Some have felt that state law is only preempted if the law...

Kansas. Judge Robert Berger of the U.S. Bankruptcy Court for the District of Kansas ruled in three decisions late last month that a mortgage naming Mortgage Electronic Registration Systems, Inc., as mortgagee is valid and enforceable, upholding MERS’ role as agent for its members. Judge Berger’s rulings in In re Van Nostrand, In re Huerter and In re Wilkinson found that there was no splitting of the mortgage and note because MERS held the mortgage on behalf of the note owner. “The MERS system has been scrutinized and analyzed by other courts, and, provided MERS can produce a complete...

The massive legal action initiated by the Federal Housing Finance Agency last summer against many of the nation’s biggest lenders has survived its first legal challenge relatively unscathed following a federal judge’s rejection of the defendant’s motion to dismiss. Judge Denise Cote of the U.S. District Court for the Southern District of New York last week denied UBS Americas’ motion to dismiss on statute of limitations grounds. The ruling permits the FHFA to proceed full steam ahead with its claim that UBS violated federal securities laws by misleading Fannie Mae and Freddie Mac into purchasing $6.4...

The Federal Housing Finance Agency’s non-agency mortgage-backed security repurchase claims against UBS can proceed, according to a ruling last week by U.S. District Judge Denise Cote in Manhattan federal court. The decision could also be applied to the other 16 lawsuits the FHFA filed against non-agency MBS issuers. Among other issues, the ruling refuted claims ... [Includes two briefs]

Deutsche Bank and its mortgage subsidiary MortgageIT this week agreed to pay $202 million to settle civil claims that they engaged in a decade of misconduct and deception to qualify risky mortgage loans for FHA insurance. The civil fraud lawsuit was brought against the two companies by the Department of Justice as a result of a referral from the Department of Housing and Urban Development. Filed in May last year, the government lawsuit sought damages and civil penalties under the False Claims Act. The suit alleges that MortgageIT, which Deutsche Bank acquired in 2007, used its authority as a direct endorsement lender (DEL) to ...

Bank of America’s pending $8.5 billion settlement with non-agency MBS investors appeared to gather some momentum last week following a BofA-favorable ruling by a New York state court. New York State Supreme Court Justice Barbara Kapnick ruled the case will move forward under Article 77 rather than a broader plenary action sought by investors opposed to the amount of the settlement. The proposed settlement reached last June with 22 institutional investors would resolve BofA’s liability related to non-agency MBS issued by Countrywide. Supporters of the settlement, including the trustee, Bank of New York Mellon...

Even as the still-regenerating Home Affordable Refinance Program is already proving itself to be a boon for banks’ bottom lines, participants of an exclusive Inside Mortgage Finance webinar last week said so far there’s little indication borrowers are disadvantaged because there are currently fewer new lenders originating HARP 2.0 as same servicers. Since January, one month after the revised program took effect, lenders have reported intense interest and a more significant uptick in new refinance applications.

Ally Financial announced a deadline for borrowers seeking a modification under the $25 billion multistate servicing settlement finalized in February. In a financial filing last week, Ally wrote, “We are committed to providing loan modifications to all eligible borrowers who accept a modification offer within three months of the solicitation. We have also agreed to provide loan modifications to borrowers who accept a modification offer within six months of the solicitation, unless and until total borrower relief provided exceeds $250 million.” Of the five banks in the settlement, Ally is on the...

The Consumer Financial Protection Bureau must structure the definition of a “qualified mortgage” under its forthcoming ability-to-repay rule as a legal safe harbor with clear, well-defined standards if regulators want to make sure that qualified borrowers across the credit spectrum maintain access to affordable financing, representatives of the financial services, home building and real estate industries said. Writing to the CFPB late last week, a group of 23 trade associations said, “Structuring the QM as a safe harbor and focusing litigation and enforcement activity on...