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Category Archives: Litigation & Enforcement Actions

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Mortgage Broker or Mini-Correspondent: CFPB Issues Policy Guidance on Questions for Consideration

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Holly Spencer Bunting, Anaxet Y. Jones

In response to what the CFPB views as an increasing trend among mortgage brokers shifting to a mini-correspondent lender model, the CFPB recently issued “Policy Guidance on Supervisory and Enforcement Considerations Relevant to Mortgage Brokers Transitioning to Mini-Correspondent Lenders” (“Policy Guidance”) regarding the application of Regulations X (RESPA) and Z (TILA) to transactions involving mini-correspondent lenders.

Inspector General Urges FHFA to Consider Suing Servicers, Force-Placed Insurers

Posted in Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, Kerri M. Smith, * Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

On June 25, 2014, the inspector general of the Federal Housing Finance Agency (FHFA) issued a report on force-placed insurance with only one recommendation: FHFA should consider suing servicers and force-placed insurers for hundreds of millions of dollars in allegedly “excessive” force-placed insurance premiums.

Recent Force-Placed Insurance Initiatives by FHFA & CFPB Suggest Divergent Priorities

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, *Christopher Shelton

* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

Force-placed insurance is under continuing scrutiny by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). However, each agency’s focus is slightly different.

Commonwealth of Massachusetts v. FHFA: Fremont Meets The Federal Government

Posted in Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs, UDAAP

By: Irene C. Freidel

On June 2, 2014, the Commonwealth of Massachusetts sued the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac, under Massachusetts’ consumer protection statute (“Chapter 93A”) to force them to sell foreclosed properties to non-profits at fair market value, so that the properties can be re-sold or leased back to the former homeowner.

K&L Gates Consumer Financial Services Group to Present at MBA Legal Issues Conference in San Diego

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, FHA/VA, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

On May 4-7, 2014 the Mortgage Bankers Association will hold its annual Legal Issues and Regulatory Compliance Conference in San Diego, CA. Several K&L Gates partners from the Consumer Financial Services Group will be presenting at the conference.

5th Circuit Applies HUD Discriminatory Effects Rule to Fair Housing Act Case

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending

By: Melanie Brody, Anjali Garg*

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

On March 24, 2014, the Fifth Circuit issued an opinion in Inclusive Communities Project, Inc. v. Texas Department of Housing and Community Affairs applying HUD’s discriminatory effects rule and burden-shifting analysis to a Fair Housing Act claim.

Beyond Credit Reporting: The Extension of Potential Class Action Liability to Employers under the Fair Credit Reporting Act

Posted in Litigation & Enforcement Actions

By: Brian M. Forbes, Mark D. Pomfret, Robert W. Sparkes, III

Do not be fooled by its title: the Fair Credit Reporting Act (“FCRA”) reaches far beyond the realm of credit reporting and governs a broad spectrum of industries. Indeed, the provisions of FCRA apply to any business entity that seeks to use a “consumer report” – which broadly includes anything from a credit report to a criminal or even motor vehicle background check – for any “employment purposes” (among other purposes).

DOL Seeks Supreme Court Review of the Invalidation of its Mortgage Loan Officer Overtime Ruling

Posted in Litigation & Enforcement Actions, Mortgage Lending, Other Federal Agencies & GSEs

By: Thomas H. Petrides, John L. Longstreth

On February 28, 2014 the Department of Labor, represented by the Solicitor General, petitioned for Supreme Court review of an appellate decision invalidating a 2010 DOL administrative ruling that determined mortgage loan officers generally do not qualify for the administrative exemption from overtime under the Fair Labor Standards Act.

Court Refuses to Defer to RESPA Statement of Policy Regarding Affiliated Businesses – 6th Circuit Says a Safe Harbor is a Safe Harbor

Posted in Litigation & Enforcement Actions, Mortgage Lending

By: Irene C. Freidel

Providing clarity in an area of law that had become increasingly muddled over the last two decades, the U.S. Court of Appeals for the Sixth Circuit held on November 27, 2013 that HUD’s 1996 policy statement setting forth a so-called “10-factor test” to determine whether an affiliated business arrangement (“ABA”) is bona fide or a sham is not entitled to deference (“1996 Policy Statement”).

What’s Old is New: CFPB Claims Captive Reinsurance Arrangements Violate RESPA

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions

By: Phillip L. Schulman, Andrew L. Caplan

Last week, the CFPB announced the filing of a complaint and proposed consent order with a North Carolina-based private mortgage insurer, Republic Mortgage Insurance Corporation (“RMIC”), which echoes previous enforcement positions taken years ago by HUD and state regulators.

Proposed Castle & Cook Settlement on Alleged Loan Originator Compensation Violations

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Kristie D. Kully

The Consumer Financial Protection Bureau has proposed a settlement with Castle & Cook Mortgage and two of its officers. The CFPB brought an action against Castle & Cook and those officers, alleging that they violated the prohibition against loan-term based compensation under the Dodd-Frank Act and its regulations. On November 7, 2013, the parties to the action proposed a settlement to the federal court in Utah for the payment by the company and the officers of over $9 million for redress to affected consumers, plus a $4 million civil money penalty.

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

Posted in Litigation & Enforcement Actions

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.

Township of Mount Holly: The United States Supreme Court Considers Whether the Fair Housing Act Recognizes Disparate-Impact Liability

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending

By: Paul F. Hancock, Andrew C. Glass, Melanie Brody, John L. Longstreth, Roger L. Smerage

On September 3, 2013, K&L Gates LLP filed a brief as amici curiae before the United States Supreme Court in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., a case in which the Court will consider whether the Fair Housing Act recognizes a disparate-impact theory of liability.

Supreme Court Takes Mount Holly Disparate Impact Case

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Stephanie C. Robinson

Today, the Supreme Court granted certiorari in the appeal titled Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507, agreeing to consider whether the Fair Housing Act allows claims under the disparate impact theory of discrimination.

Solicitor General Urges Supreme Court to Reject Mt. Holly Case; Argues No Review Is Needed as to Whether the Fair Housing Act Recognizes Disparate Impact Claims

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Andrew C. Glass and Roger L. Smerage

In an increasingly complex battle among the branches of the federal government, the Solicitor General recently urged the Supreme Court to deny certiorari in the appeal titled Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507.

Supreme Court’s No Decision is a Decision in First American v. Edwards

Posted in Litigation & Enforcement Actions, Mortgage Lending

By: Phillip L. Schulman, Emily J. Booth

Must a consumer suffer actual harm to sue the settlement service providers involved in his or her real estate mortgage transaction for engaging in activities that violate the Real Estate Settlement Procedures Act (RESPA), or is the mere allegation of a statutory violation sufficient to get the consumer into court?

The Massachusetts Supreme Judicial Court Issues Its Long-Anticipated Eaton Decision

Posted in Litigation & Enforcement Actions, Mortgage Servicing

By: Phoebe S. Winder

In a long-anticipated decision, the Massachusetts Supreme Judicial Court (“SJC”) ruled in Eaton v. Federal National Mortgage Ass’n, 2012 WL 2349008 (June 22, 2012) (“Eaton”) that when conducting a non-judicial foreclosure in Massachusetts, a foreclosing entity must not only hold the mortgage – it also must hold the note or be authorized to act on behalf of the note holder.

DOJ Doubles Down on Disparate Impact, Settles Discriminatory Pricing Case with SunTrust Mortgage

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending

By: Melanie Hibbs BrodyDavid G. McDonough, Jr.

The Department of Justice recently announced a $21 million settlement with SunTrust Mortgage over allegations that SunTrust’s neutral and non-discriminatory policy of granting loan originators discretionary pricing authority somehow resulted in loans to minority borrowers to be priced higher than loans to White borrowers