While the COVID-19 pandemic affected nearly every industry last year, the consumer finance industry faced unique challenges in the wake of economic changes and government response. In this report Perkins Coie offers an analysis of the past year’s most noteworthy regulatory developments and litigation outcomes in the mortgage lending and servicing industry. We review the
Consumer Financial Protection Bureau Issues Two Final Rules Changing General QM Standard and Creating Seasoned QM Standard
The Consumer Financial Protection Bureau (CFPB) released two final rules amending the General Qualified Mortgage loan definition in Regulation Z and creating a new “Seasoned QM” loan category in Regulation Z. The General QM Final Rule replaces the current requirement for the General QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43 percent
The CFPB Proposes to Create a New Category of Seasoned Qualified Mortgages
The Consumer Financial Protection Bureau (CFPB) recently issued a proposed rule to create a new category of Seasoned Qualified Mortgages (QMs). The proposal seeks to “encourage safe and responsible innovation in the mortgage origination market” by allowing an alternative pathway to the qualified mortgage safe harbor.
By way of background, the Dodd-Frank Act amended the Truth in Lending Act (TILA) to establish ability-to-repay (ATR) requirements for most residential mortgage loans. TILA specifies the factors a creditor must consider in making a reasonable and good-faith assessment of a consumer’s ATR. TILA also defines qualified mortgages as a category of loans that are presumed to comply with the ATR requirements. Regulation Z, TILA’s implementing regulation, requires creditors to make a reasonable good-faith determination of a consumer’s ability to repay any residential mortgage loan, and loans that meet Regulation Z’s requirements for QMs must obtain certain protections from liability.
Continue Reading The CFPB Proposes to Create a New Category of Seasoned Qualified Mortgages
The CFPB Proposes Amendments to the Qualified Mortgage Definition in Regulation Z and Extends the GSE Patch
The Consumer Financial Protection Bureau (CFPB) recently proposed certain amendments to the General Qualified Mortgage (QM) definition in Regulation Z and issued a filing rule extending the expiration of the Government-Sponsored Enterprise (GSE) Patch as a “temporary qualified mortgage” until the mandatory compliance date of the final amendments to the General QM loan definition.
By way of background, the Dodd-Frank Act amended the Truth in Lending Act (TILA) to establish ability-to-repay (ATR) requirements for most residential mortgage loans. TILA specifies the factors a creditor must consider in making a reasonable and good-faith assessment of a consumer’s ATR. TILA also defines qualified mortgages as a category of loans that are presumed to comply with the ATR requirements. Regulation Z, TILA’s implementing regulation, requires creditors to make a reasonable good-faith determination of a consumer’s ability to repay any residential mortgage loan, and loans that meet Regulation Z’s requirements for QMs must obtain certain protections from liability.
Continue Reading The CFPB Proposes Amendments to the Qualified Mortgage Definition in Regulation Z and Extends the GSE Patch
Coronavirus Uncertainty and the New York Foreclosure Statute of Limitations
In response to the ongoing coronavirus pandemic, New York’s Governor Andrew Cuomo issued two executive orders since March 20, 2020, suspending the state’s statute of limitations for the commencement of new court cases until May 7, 2020. Executive Order 202.14; Executive Order 202.8.
Likewise, New York’s Office of Court Administration issued two memoranda suspending,
Quashing Subpoenas for Borrower Records
Beyond the Financial Services Modernization Act (also known as the Gramm-Leach-Bliley Act), which generally provides that a financial institution may not disclose a customer’s nonpublic personal information unless it falls under one of the general exceptions of 15 U.S.C. § 6802(e) (e.g., consent of the customer or compliance with a properly authorized civil subpoena), the failure to domesticate a subpoena remains one of the most utilized arguments in motions to quash.
Continue Reading Quashing Subpoenas for Borrower Records
A Loan Servicer’s Acknowledgment vs. an Oath in New York
Many loan servicers face the daunting task of issuing affidavits for their litigation cases across the United States. For the sake of efficiency, a loan servicer may wonder whether it would be worth it to streamline the affidavit process by using uniform acknowledgment language. However, research suggests that any alteration of an affidavit that replaces the traditional oath or “sworn to statement” with acknowledgment-like language is contrary to both New York statutory and case law and would likely result in rejection by New York State courts.
Continue Reading A Loan Servicer’s Acknowledgment vs. an Oath in New York
Second Circuit: Mortgage Foreclosure Constitutes “Debt Collection” Under FDCPA
The United States Court of Appeals for the Second Circuit recently made clear that foreclosure actions qualify as “debt collection” under the Fair Debt Collection Practices Act (FDCPA). See Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75 (2d Cir. 2018). Thus, even if a foreclosure action is not seeking a deficiency judgment and the proceeding is strictly in rem, it now falls under the FDCPA debt collection umbrella in the Second Circuit.
In Cohen, the borrower appealed the district court’s dismissal of his FDCPA claims based on the defendants’ allegedly incorrect identification of Green Tree Servicing LLC as the creditor in the foreclosure complaint, certificate of merit, and request for judicial intervention. The basis for the district court’s dismissal of the case was that “enforcement of a security interest through foreclosure proceedings that do not seek monetary judgments against debtors” does not qualify as debt collection within the scope of the FDCPA. The Second Circuit disagreed. Cohen, aff’d, 897 F.3d 75 (2d Cir. 2018)
Continue Reading Second Circuit: Mortgage Foreclosure Constitutes “Debt Collection” Under FDCPA
Limitations to the New York Foreclosure Statute of Limitations
Because New York residential foreclosures can take several years and several attempts to complete, it is essential for a statute of limitations analysis to be completed during all phases of the foreclosure proceedings. The discussion that follows includes some of the considerations that should be made during a statute of limitations analysis.
Background
Mortgage debt accrues as each installment becomes due, with a six-year statute of limitations running accordingly. CPLR 213(4); Koeppel v. Carlandia Corp., 21 A.D.3d 884, 800 N.Y.S.2d 607 (2d Dept. 2005). Where there is an acceleration clause giving the creditor the right to declare the whole amount due, the six-year statute of limitations begins to run on the full amount of the debt at the time of acceleration. Zinker v. Makler, 298 A.D.2d 516, 748 N.Y.S.2d 780 (2d Dept. 2002); EMC Mortgage Corp. v. Patella, 279 A.D.2d 604, 720 N.Y.S.2d 161 (2d Dept. 2001). While acceleration clauses can be categorized as automatic or optional, most clauses are not considered truly self-operative in nature. Seligman v. Burg, 233 A.D. 221, 251 N.Y.S. 689 (2d Dept. 1931). In most residential foreclosure actions, acceleration occurs at commencement of the action, which would include a provision explicitly calling the entire amount due. See, e.g., Walsh v. Henel, 226 A.D. 198, 235 N.Y.S. 34 (4th Dept. 1929).
Continue Reading Limitations to the New York Foreclosure Statute of Limitations