By: Jonathan D. Jaffe, Eric Mitzenmacher
On May 9, the United States Department of Veterans Affairs (“VA”) issued an interim final rule defining which VA-guaranteed and VA-originated loans will have qualified mortgage (“QM”) status under the Truth-in-Lending Act’s (“TILA’s”) Ability to Repay (“ATR”) rule. Read More
By: Melanie Brody, Anjali Garg*
*Ms. Garg is a Law Clerk and is not admitted to practice law.
CFPB (the “Bureau”) released a report to Congress on its fair lending activities on April 30, 2014. The report highlights the activities of the Office of Fair Lending and Equal Opportunity from July 21, 2012 through December 31, 2013. It provides an overview of the Bureau’s supervision activities and highlights the data collection activities of the Bureau in the areas of mortgage lending, auto finance, and other credit markets. The report explains how the Bureau uses its complaint database, along with regular supervision programs, in order to prioritize its fair lending activities. It also highlights recent CFPB bulletins on indirect auto lending and HMDA reporting.
By: Kristie D. Kully, Eric Mitzenmacher
The Consumer Financial Protection Bureau issued a proposed rule requesting public comments on several amendments to its recent mortgage regulations under the Truth in Lending Act (“TILA,” as amended by the Dodd Frank Act). One of those amendments would, if finalized, allow creditors a limited opportunity to “cure” a loan that inadvertently exceeds the three percent limit on points and fees for qualified mortgages (“QMs”). Read More
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.
Melanie Brody will address “A Look Ahead: HMDA and Fair Lending” on Sunday, May 4, at 4:35 pm.
Krista Cooley will participate on a panel on Tuesday, May 6, at 3:15 pm, entitled “False Claims, Indemnifications, Repurchases and Rescissions.” She will discuss how the False Claims Act is affecting participants in HUD’s Federal Housing Administration loan program.
Andrew Glass will speak on Sunday, May 4, at 1:50 pm in the Litigation Forum on Fair Lending, explaining the status of fair lending/servicing litigation, and specifically the status of challenges to the disparate impact rule, the status of the municipal lawsuits against banks for “predatory” lending, and the HUD complaints by NFHA challenging the maintenance of properties held in REO.
Paul Hancock will address fair lending issues on Tuesday, May 6, at 1:30 pm.
Kris Kully will discuss Dodd-Frank Act amendments to RESPA and TILA on the ever-popular “Essentials: Alphabet Soup of Federal Laws,” on Sunday, May 4, at 1:50 pm.
Larry Platt will speak on Monday, May 5, at 3:15 pm on the “Deep Dive” panel for QRM, the Future of the Secondary Market, and GSE Reform.
Phil Schulman will participate on the panel entitled “A Look Ahead: TILA/RESPA,” on Sunday, May 4, at 3:15 p.m., and then will continue the discussion on the integrated disclosure forms on Monday, May 5, at the “Deep Dive: RESPA/TILA” panel at 3:15 pm.
Nanci Weissgold will present on two panels at the conference. On Sunday, May 4, at 12:30 pm, Nanci will present on a panel entitled “Essentials: Servicing Rule,” focusing on the basics of the CFPB’s Mortgage Servicing Rules. Nanci also will provide more insights into the national servicing standards on the “Deep Dive: Servicing: New Rules, New Developments” panel to be held Monday, May 5, at 1:30 pm.
We look forward to seeing you in San Diego!
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. This is the first circuit court to apply the rule since it took effect on March 18, 2013. Read More
By: Nanci L. Weissgold, Morey Barnes Yost
The April 9 Federal Register contains the announcement for which the appraisal management industry has been waiting for months: the federal banking and finance regulatory agencies’ proposal of minimum standards for appraisal management companies (“AMCs”). Section 1473 of the Dodd-Frank Act requires the agencies – the OCC, FRB, FDIC, NCUA, CFPB, and FHFA (the “Agencies”) -to adopt standards for states to apply in their registration and supervision of AMCs.
Non-QM lending received a big boost this week when Fitch Ratings issued its criteria for analyzing residential mortgage-backed securities (“RMBS”) under the Ability to Repay (“ATR”) and Qualified Mortgage (“QM”) rules issued by the Consumer Financial Protection Bureau. It announced that it would apply a relative “credit enhancement” adjustment (i.e., extra collateralization) to non-QM loans pooled to back RMBS, but the level of credit enhancement reflects its belief that the risk of massive losses on such loans is relatively slight. In reliance upon required third-party due-diligence reviews, Fitch said that it would assume the accuracy of an originator’s designation of loans as “safe harbor” QM loans, higher-priced QM loans or non-QM loans. Read More
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. The U.S. Court of Appeals for the D.C. Circuit held last July that a prior administrative ruling issued in a 2006 DOL Opinion Letter was established law and that DOL was therefore required to use notice and comment rulemaking to change it. The 2006 Opinion Letter had previously determined that loan officers could qualify for the administrative exemption and therefore would be ineligible for overtime pay based on that exemption. The Solicitor General argues that requiring notice and comment for an interpretive rule in any circumstances is inconsistent with the Administrative Procedure Act, which exempts interpretive rules from notice and comment requirements, and therefore the 2010 interpretation should be reinstated. The petition also argues that the D.C. Circuit decision is inconsistent with the rulings of at least two other federal appeals courts. Read More
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”). See Carter v. Welles-Bowen Realty, Inc., No. 10-3922 (6th Cir. Nov. 27, 2013). The Real Estate Settlement Procedures Act (“RESPA”) prohibits the payment of a fee in exchange for a referral of settlement service business. Profits generated by ABAs are exempt from this prohibition if the ABA meets the three prerequisites in RESPA’s safe harbor. Even though the plaintiff did not dispute that the ABA in Carter satisfied the three safe harbor requirements, they urged the district court to hold that the ABA nonetheless fell outside the safe harbor because, they claimed, the ABA did not satisfy a fourth requirement, namely HUD’s 1996 Policy Statement. While several district courts have otherwise concluded that an ABA must satisfy HUD’s policy statement in order to fall within the safe harbor, the theory was rejected by district judge Jack Zouhary in the Carter case. Read More
The wait is over. The anxiety begins. On Wednesday, November 20, 2012, the CFPB released its final regulations requiring combined mortgage disclosure forms under the Real Estate Settlement Procedures Act and the Truth in Lending Act. With an effective date of August 1, 2015, mortgage companies and settlement companies have 20 months to implement new Loan Estimate and Closing Disclosure forms that will forever replace the GFE, initial and final TIL statements, and HUD-1. Read More
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