Separate lawsuits against major banks were dismissed last week, providing some insight on how lenders and servicers can defend against claims brought by consumer advocates under the False Claims Act and allegations of redlining and reverse redlining. In 2013, Advocates for Basic Legal Equality alleged that U.S. Bank’s servicing practices violated the FCA. U.S. District Court Judge Jack Zouhary dismissed the lawsuit, noting that the claims were barred by the “public disclosure doctrine.” Larry Platt, a partner at the law firm of K&L Gates, said...

In a ruling that may impact future fair-lending class actions, a federal district court judge in Manhattan has denied class certification in a lawsuit brought by the American Civil Liberties Union and National Consumer Law Center against global investment bank Morgan Stanley. Filed in October 2012, the suit was brought on behalf of African American borrowers in Detroit who obtained subprime loans from New Century Mortgage, a now-defunct originator that sold the loans to secondary-market purchasers, including Morgan Stanley, which then securitized them. New Century originated...

CFPB Director Richard Cordray tried to reassure attendees at the National Association of Realtors’ trade expo last week that the impact of the bureau’s pending integrated disclosure rule isn’t going to be as dramatic as many fear – particularly the concern that the three-day disclosure requirement is going to delay loan closings. “The timing of the closing date is not going to change based on any problems you discover with the home on the final walk-through, even matters that may change some of the sales terms or require seller’s credits,” Cordray said. On the contrary, the bureau “listened carefully to your concerns” and limited the reasons for closing delays to only three narrow sets of circumstances. They are: any increases to ...

The CFPB sued Ohio-based Nationwide Biweekly Administration, Loan Payment Administration, and their owner, Daniel Lipsky, in federal district court last week, accusing them of misrepresenting the interest savings consumers will achieve through a biweekly mortgage payment program called the “Interest Minimizer” and misleading consumers about the cost of the program. Under the program, consumers who enroll send Nationwide half their monthly mortgage payment every two weeks, effectively making one additional monthly payment per year. According to the bureau, Nationwide charges consumers a setup fee of up to $995 to enroll in the program and charges consumers between $84 and $101 in payment processing fees each year they remain enrolled. According to the bureau’s complaint, the defendants made misrepresentations about the ...

The CFPB has launched a public inquiry into student loan servicing practices that create repayment challenges, hurdles for distressed borrowers, and economic incentives that may affect the quality of service. The bureau said it has observed that many borrowers are experiencing significant student debt stress. “Consumers have complained about billing problems associated with payment posting, prepayments and partial payments,” it said. The CFPB has also heard from distressed borrowers that student loan servicers aren’t being very useful in helping them avoid defaults and delinquencies. “Distressed borrowers complain that they are given the runaround when they ask for help, they have a hard time getting straight answers from servicing staff, and that the staff is untrained or unequipped to deal with ...

The CFPB recently announced it brought an enforcement action against Sprint and Verizon, alleging illegal “cramming” of hundreds of millions of dollars in unauthorized third party charges on customers’ mobile phone accounts. Under the terms of proposed consent orders, which are pending court approval, the pair will provide $120 million in consumer refunds, as well as pay $38 million in federal and state fines. The problem stemmed from the alleged failure on the part of Sprint and Verizon to properly monitor their outsourced processing of payments to third party vendors for digital purchases. “The lack of oversight by Sprint and Verizon allowed the vendors to have nearly unfettered access to consumers’ wireless accounts,” said the CFPB. “The billing systems for ...

CFPB May Review Lender-Paid MI. Pricing on lender-paid mortgage insurance policies has come down over the past several months, apparently spurring the CFPB to take a look at what’s going on behind the curtain. Citing industry officials who claim to have knowledge of the situation, Inside Mortgage Finance, an affiliated publication, reported late last week that the powerful consumer regulator may focus on whether there is some kind of quid pro quo going on between lenders and mortgage insurers. In particular, the CFPB is interested in the discounting of LPMI in exchange for a lender sending more of its MI business to an insurer and whether such a practice violates the Real Estate Settlement Procedures Act, the newsletter reported. In ...

The Department of Agriculture’s Rural Housing Service has issued a final rule creating a certified loan-application packaging process for the agency single-family loan guaranteed housing program.Published in the April 29 Federal Register, the rule also establishes standards for packagers of loan applications, who are independent from RHS but play a key role in providing Section 502 rural home loan programs to potential homeowners. The final rule will take effect on July 28, 2015. Specifically, the rule addresses the weaknesses in RHS’ loan-application process and integrates the lessons learned from a loan-packaging pilot launched in 2010. The packager gathers and submits the information needed for RHS to determine whether a loan applicant is eligible for ...

The Blackstone Group’s bid to acquire VA lender PMAC Mortgage, Chino Hills, CA, appears to have stalled. Talks between the two companies are now on hold and neither firm has commented. An industry source suggested that cash might not be the issue but a “clash of corporate cultures. PMAC Lending Services, which acquired Residential Financial Corp. last year, was ranked 61st on Inside FHA/VA Lending’s top 100 VA lenders in 2014. The company reported $328.2 million in total VA originations last year, reporting an 18.5 percent increase in the fourth quarter from the previous quarter and a 182.1 percent spike in loan volume year-over-year. It accounted for 0.3 percent of the VA market. Blackstone is a global investment firm with nearly $300 billion in assets under management. Last year, the company announced the hiring of 15,000 U.S. veterans across its portfolio companies in ...

In another display of multijurisdictional cooperation, the CFPB and the Maryland Attorney General last week brought an enforcement action against a Maryland-based title company and its executives, alleging they participated in a mortgage kickback scheme, trading cash and marketing services in exchange for referrals. The complaint names Genuine Title, LLC, as well as Jay Zukerberg, Brandon Glickstein, Gary Klopp, Adam Mandelberg, William Peterson, and Angela Pobletts, along with a number of limited-liability companies controlled by certain defendants. The CFPB and Maryland allege that Zukerberg and Glickstein developed and operated schemes to give loan officers marketing services and cash payments in exchange for referrals of title work. The kickback schemes violated the Real Estate Settlement Procedures Act, which prohibits giving a ...