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.  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.”  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.  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.Read More
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.Read More
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.
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!
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.
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.
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.
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.
The TILA-RESPA Integrated Disclosure rule (“TRID”) went into effect on October 3, 2015, and has posed significant implementation challenges industry-wide. Those challenges have been articulated to the Consumer Financial Protection Bureau (“CFPB”) by industry participants, trade groups, and congressional leaders alike. In response, the CFPB has issued guidance in the form of letters, webinars, educational videos, guides, and factsheets. Notwithstanding this informal guidance, and despite the CFPB’s assurances that its initial compliance examinations would be “diagnostic and corrective, not punitive,” see December 29, 2015 Letter from CFPB Director Richard Cordray to the Mortgage Bankers Association, the mortgage industry continues to experience uncertainty and risk in its efforts to implement TRID’s sweeping changes to TILA and RESPA. See January 29, 2016 Mortgage Industry Trade Group Letter to CFPB; March 11, 2016 Sen. Bob Corker Letter to CFPB.
In the wake of pressure for more formal guidance, the CFPB recently announced that it will issue a Notice of Proposed Rulemaking (“NPRM”) on TRID in late July. In an April 28, 2016 letter to mortgage industry trade groups, Director Richard Cordray acknowledged that “the implementation of the Know Before You Owe rule poses many operational challenges” and that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”
In a decision that should be read as a warning to mortgage industry participants doing business in the Commonwealth of Massachusetts, the state’s high court has validated a condominium associations’ so-called “rolling” priority lien practice, placing prior-recorded first mortgages at risk. In Drummer Boy Homes Association, Inc. v. Britton, SJC-11969 (Mass. Mar. 29, 2016), the Massachusetts Supreme Judicial Court (SJC) held that there is no limit to the number of priority liens available to condominium associations and/or community associations for unpaid common expenses, ignoring the rights of first mortgage holders. Prior to Drummer Boy, Massachusetts courts had largely held that condominium associations were limited to a single priority lien for six months of unpaid common expenses. The SJC broke with prior decisions and held that a condominium association can enforce multiple priority liens for successive six-month periods based upon language added to the Massachusetts Condominium Act, General Laws, Chapter 183A (“Chapter 183A”) in 1998. In short, following Drummer Boy, any prior-recorded first mortgages may become junior to unlimited condominium association liens for unpaid common expenses.
To read the full alert, click here.