Archive: 1 November 2013

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HUD Extends Foreclosure Timeframes with Mortgagee Letter 2013-38
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New York Campaign Against Out-of-State Online Lenders Survives a Battle in the SDNY

HUD Extends Foreclosure Timeframes with Mortgagee Letter 2013-38

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.

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

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.

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