Category: Mortgage Lending

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COVID-19: Impact on Consumer Financial Service Providers
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COVID-19: How the CARES Act Will Impact Chapter 7 and Chapter 13 Consumer Bankruptcies
3
The Massachusetts Supreme Judicial Court Considers the Effect of a State-Mandated Default Notice on the Validity of Non-Judicial Foreclosures
4
DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges
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HMDA Reality Check: What You Can and Cannot Conclude from New Mortgage Loan Data
6
Ninth Circuit Clarifies Amount in Controversy Standard Where Borrower Seeks Only “Temporary” Foreclosure Stay Pending Loan Modification Review
7
Financial Institutions & Services Litigation Group Highlights Key Legal Issues at MBA Conference
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Securitization developments for Alternative Finance
9
Webinar: Developments in Student Loan Servicing with Lessons Learned from Mortgage Servicing
10
Payday Loans Under Attack: The CFPB’s New Rule Could Dramatically Affect High-Cost, Short-Term Lending

COVID-19: Impact on Consumer Financial Service Providers

A Summary of Federal and State Statutes, Rules and Orders

By David E. FialkowBrian M. Forbes, and Jeffrey S. Patterson

The coronavirus (“COVID-19”) pandemic has been and will continue to be a major business disrupter that will have a substantial impact on the consumer financial services industry in the weeks and months to come. Notably, federal, state and local governments and agencies are acting swiftly and changing the rules by which consumer financial services companies are to do business in the short and long term. K&L Gates LLP (“K&L Gates”) has developed a COVID-19 Task Force to closely monitor these developments and is tracking them in several jurisdictions across the firm’s footprint. Below is a summary, current as of March 30, 2020, of key new and proposed statutes, rules, and orders that are likely to impact consumer financial services companies. Keeping track of these almost daily developments to foreclosure, eviction, debt collection, student loans and other business lines, which vary state to state, is critical for consumer financial services companies to respond to their customers. As with previous nationwide crises, how these companies implement and apply these changes will have a substantial impact on post-pandemic compliance, litigation, and risks. K&L Gates has team members assigned to each of the states listed below who are able to help answer your questions and help companies address ongoing issues associated with the pandemic. Please click on a jurisdiction below for more information:

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COVID-19: How the CARES Act Will Impact Chapter 7 and Chapter 13 Consumer Bankruptcies

By Phoebe S. Winder, Ryan M. Tosi, Stacey Gorman, Emily Mather

On March 27, 2020, the President signed into law the historic Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”), a $2.2 trillion stimulus package designed to mitigate the widespread economic effects of the novel coronavirus (“COVID-19”). The Act includes several temporary modifications to chapter 7 and chapter 13 of the U.S. Bankruptcy Code.[1] This alert details these modifications.

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The Massachusetts Supreme Judicial Court Considers the Effect of a State-Mandated Default Notice on the Validity of Non-Judicial Foreclosures

By Andrew C. GlassGregory N. BlaseJeremy M. McLaughlin, and Hollee M. Boudreau

The Massachusetts Supreme Judicial Court (“SJC”) heard argument on February 13, 2020, on whether compliance with a state-mandated default notice could, nevertheless, void foreclosure sales in Massachusetts. Specifically, the SJC examined whether the provision of the state-mandated notice has the potential to deceive a borrower where it describes a period for reinstating a loan that varies (to the benefit of the borrower) from the period contained in the mortgage.

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DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges

By Andrew C. Glass, Gregory N. Blase, and Daniel S. Cohen

For the past six months, the mortgage lending industry has reported receiving conflicting messages from the Department of Housing and Urban Development (“HUD”) and the Federal Housing Administration (“FHA”) regarding Deferred Action for Childhood Arrivals (“DACA”) recipients’ eligibility for FHA-insured mortgages. In December 2018, Senators Robert Menendez (D-NJ), Cory Booker (D-NJ), and Catherine Cortez Masto (D-NV) asked HUD to clarify whether it has “developed a policy regarding DACA recipients’ eligibility for FHA-insured mortgage loans.” If not, the senators requested HUD to “promptly provide clear and written guidance to FHA-approved lenders clarifying” that DACA recipients are not ineligible for FHA insurance simply because of their DACA status. [1] In response, HUD issued a letter explaining that is has “not implemented any policy changes” with respect to “FHA’s eligibility requirements” for non-U.S. citizens who are lawful residents. HUD reiterated that “non-U.S. citizens without lawful residency are ineligible for FHA financing.” [2] In early 2019, Fannie Mae issued a guide regarding “non-citizen borrower eligibility,” explaining that mortgages provided to DACA recipients are eligible to be purchased by Fannie Mae because DACA recipients are lawful nonpermanent residents because they have a valid Employment Authorization Document number. [3] During congressional testimony in April, HUD Secretary Ben Carson seemingly clarified that DACA recipients are eligible for FHA-insured mortgages. The secretary commented that “plenty of DACA recipients … have FHA mortgages,” and that he would be surprised if lenders received statements to the contrary from HUD staff.

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HMDA Reality Check: What You Can and Cannot Conclude from New Mortgage Loan Data

Authors: Paul F. Hancock, Olivia Kelman

Extensive data about mortgage lending activity collected pursuant to the Home Mortgage Disclosure Act (“HMDA”) was just made available to the public for the first time on March 29, 2019. More detail about borrowers, about underwriting, and about loan features is now available than ever before, and that information also is easier for the public to access than it ever has been. The mortgage lending industry should expect that the expanded HMDA data will receive significant attention and scrutiny from private organizations and individuals, and the data is certain to spark controversy about the racial, ethnic and gender fairness of mortgage lending.

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Ninth Circuit Clarifies Amount in Controversy Standard Where Borrower Seeks Only “Temporary” Foreclosure Stay Pending Loan Modification Review

By David D. Christensen and Matthew N. Lowe

The Ninth Circuit recently limited the availability of diversity jurisdiction for certain cases with claims involving mortgage loan modifications. Specifically, in Corral v. Select Portfolio Servicing, Inc., the Ninth Circuit held that, where the plaintiff-borrower “seeks only a temporary stay of foreclosure pending review of a loan modification application … the value of the property or amount of indebtedness are not the amounts in controversy.” — F.3d —-, 2017 WL 6601872, at *1 (9th Cir. Dec. 27, 2017). Rather, to satisfy the amount in controversy requirement in such cases, parties must demonstrate that the value of the temporary delay in foreclosure exceeds $75,000, “such as the transactional costs to the lender of delaying foreclosure or a fair rental value of the property during pendency of the injunction” (in addition to any compensatory damages plaintiffs may be seeking). Id. at *5.

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Financial Institutions & Services Litigation Group Highlights Key Legal Issues at MBA Conference

Members of the K&L Gates Financial Institutions & Services Litigation Group will speak on key topics at the upcoming the MBA’s Legal Issues and Regulatory Compliance Conference in Miami, FL (May 7-10).

Olivia Kelman will review the Home Mortgage Disclosure Act (HMDA) as well as other lending-related requirements of the Fair Housing Act and the Equal Credit Opportunity Act (ECOA) on Sunday afternoon (May 7).

Andrew C. Glass will address major litigation and enforcement trends, including cases heard or pending before the Supreme Court and other federal courts on Monday afternoon (May 8).

Paul F. Hancock will discuss fair lending issues affecting business models and practices, a topic of particular interest with the entrance of a new administration, on Monday afternoon (May 8). Paul also will facilitate a fair lending roundtable discussion later that same afternoon.

In addition, many of our group’s attorneys are attending the conference. We look forward to seeing you all in Miami!

Securitization developments for Alternative Finance

K&L Gates partner Anthony Nolan will be speaking on “Securitization in Alternative Lending” at the Marketplace Lending & Alternative Financing Summit 2016 in Dana Point, California, on December 5th. This session will bring together participants with various perspectives, including investment bankers, platform representatives and service providers, in addition to Nolan’s viewpoint as a U.S. securitization and fintech lawyer. They will address recent commercial and regulatory developments that may affect the securitization of online and marketplace loans which include the impact of risk retention, which becomes effective on December 24, the implications of rating agency reform, emerging standards for asset-level representations and warranties, and the prospects for reform or rollback of Dodd-Frank consumer financial services regulation following President Trump’s inauguration in January.

The Marketplace Lending & Alternative Financing Summit is an educational forum for financial services professionals to delve into industry topics and trends to maximize returns and reduce risk in the growing field of marketplace lending. It brings together some of the thought leaders and market movers within the marketplace lending & alternative financing industry. Topics will include legal, tax and structural considerations, rating agency methodology, and information and tools for attendees to keep up with this dynamic industry. To see the agenda for the conference, please click here.

Webinar: Developments in Student Loan Servicing with Lessons Learned from Mortgage Servicing

Please join us for a webinar on student loan servicing covering a wide range of developments in regulatory, enforcement and litigation as well as the practical application of lessons learned in parallel servicing industries.

Panelists:
David E. Fialkow, Partner, K&L Gates
Hollee M. Watson, Associate, K&L Gates

To register, click here. Log-in instructions will be sent via email the day before the webinar. You must register to receive the log-in instructions.

Payday Loans Under Attack: The CFPB’s New Rule Could Dramatically Affect High-Cost, Short-Term Lending

By Jennifer J. Nagle, Robert W. Sparkes, III, Gregory N. Blase, and Hayley Trahan-Liptak

On June 2, 2016, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) proposed a new rule under its authority to supervise and regulate certain payday, auto title, and other high-cost installment loans (the “Proposed Rule” or the “Rule”). These consumer loan products have been in the CFPB’s crosshairs for some time, and the Bureau formally announced that it was considering a rule proposal to end what it considers payday debt traps back in March 2015. Over a year later, and with input from stakeholders and other interested parties, the CFPB has now taken direct aim at these lending products by proposing stringent standards that may render short-term and longer-term, high-cost installment loans unworkable for consumers and lenders alike. At a minimum, the CFPB’s proposal seriously threatens the continued viability of a significant sector of the lending industry.

To read the full alert, click here.

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