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Inside the CFPB

October 6, 2008

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Increased Loan Mods Expected with EESA

In terms of consumer protection, last week’s enactment of emergency financial markets aid legislation promises an increased focus on loan modifications and reduced risk of investor lawsuits with respect to loan workouts. The crux of the Emergency Economic Stabilization Act, which President Bush signed Oct. 3, is a purchase-and-modification strategy aimed at unclogging the credit flow to... Read More

FHFA Fair Lending Scrutiny Raises New Risks

Fair lending programs may have to be modified to avert legal problems arising from increased regulatory scrutiny of Fannie Mae’s and Freddie Mac’s loan portfolios for possible discriminatory pricing, said a former government litigator. The government-sponsored enterprises’ new regulator, the Federal Housing Finance Agency, has new authority under the Housing and Economic... Read More

H4H Rules Out but Program Use Still Appears to Be a ‘Last Resort’

The Bush administration last week unveiled details of the $300 billion borrower-rescue program authorized under the 2008 housing act, but whether it can generate significant volume still remains to be seen. Guidelines were issued Oct. 1 by the board overseeing the HOPE for Homeowners program in two mortgagee letters, ML 2008-29 and 2008-30. The H4H program, a crucial component of the... Read More

Experts Note Lender Liabilities Under New HOEPA Regulations

The newly expanded consumer protection regulations under the Home Ownership and Equity Protection Act increase the likelihood of class-action lawsuits and enforcement actions by state attorneys general and monetary penalties for lenders, according to compliance experts. Even though the rules won’t take effect until Oct. 1 next year, lenders may already be vulnerable to third-party... Read More

Class-Wide Relief not Available for Rescission Claims, Court Rules

The mortgage industry is feeling quite relieved after a federal appeals court in Wisconsin concluded that class-action relief is not allowed for rescission claims under the Truth in Lending Act. In a long-awaited decision Sept. 24, the U.S. Court of Appeals for the 7th Circuit reversed a lower court’s decision to certify a class action for rescission in Andrews v. Chevy Chase Bank... Read More

SEC, FASB Issue Clarifications to Curb Fire Sale Asset Valuations

The Securities and Exchange Commission and the Financial Accounting Standards Board last week jointly issued guidance to curb accounting interpretations that result in marking mortgage-related assets to fire-sale prices. Guidance was provided at the request of lenders who were concerned about the devastating impact of FASB Statement No. 157, which requires that assets be valued at their current... Read More

FHA Lenders Warned on New Borrower ‘Buy and Bail’ Scam

FHA lenders have gone on the alert over a new unscrupulous practice: borrowers buying and bailing on their primary residences, allowing the property to go into foreclosure. In an effort to halt this fraudulent behavior, the Department of Housing and Urban Development is urging lenders to take a tough stance against such schemes... Read More

Court Extends FDCPA’s ‘Honest Mistake’ Defense to Legal Errors

Legal mistakes could be protected to the same extent as clerical or administrative errors under the Fair Debt Collection Practices Act, according to the U.S. Court of Appeals for the 6th Circuit. Ruling recently in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, the court held that a foreclosure firm that misstated the law in a mandatory notice to a borrower was entitled to claim... Read More

Certain Collection Notices from ‘Legal Department’ May Be Illegal

Mortgage lenders and servicers should make sure their legal departments have actual attorneys on staff before sending borrowers debt collection notices from the “Legal Department.” A letter stating it was from a debt collector’s “Legal Department” when, in fact, the department has no lawyers... Read More

State Roundup

New Jersey. The state enacted A2780, the “Save New Jersey Homes Act of 2008,” which requires several notices to... California. The total number of loan modifications in the Golden State has jumped 17 percent from June to July this... New York. Gov. David Paterson, D, has announced $3.5 million in grants as part of the state’s continuing effort to curb... Read More

Federal Roundup

Office of Thrift Supervision: Documentation and Underwriting Rules. Thrifts should follow prudent underwriting and documentation standards developed by their... Department of Housing and Urban Development: Neighborhood Stabilization Program. HUD has set aside a total of $3.92 billion to help states respond effectively to high... Read More

Worth Noting …

Washington Mutual and Wachovia became the latest casualties in the financial... On Sept. 16, Barclays Capital agreed to acquire Lehman Brothers’ business and assets for $250 million and... The American Enterprise Institute will be presenting its third national forum on... The Consumer Bankers Association is having its annual Fair Lending... The Office of the Comptroller of the Currency is hosting... Read More

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