As we previously noted, the statute of limitations on actions to enforce a note or deed of trust can be a brutally effective sword for borrowers in Washington State. Under the six-year limitations period of RCW 7.28.300, a borrower is entitled to “judgment quieting title” against the security instrument where “an action to foreclose . . . would be barred by the statute of limitations.”Copper Creek (Marysville) Homeowners Ass’n v. Kurtz, 502 P.3d 865, 869 (Wash. Ct. App. 2022), Division 1 of the Washington Court of Appeals resolved an issue central to the statute of limitations—i.e., the effect, if any, of a bankruptcy discharge on the commencement of the limitations period on each installment of a mortgage loan. Since 2017, state and federal courts in Washington have concluded, in a series of unpublished rulings, that a bankruptcy discharge commences the statute of limitations on each and every installment of a mortgage loan. See, e.g., Jarvis v. Fed. Nat’l Mortg. Ass’n, No. C16-5194-RBL, 2017 WL 1438040, at *1 (W.D. Wash. Apr. 24, 2017). Courts routinely held that upon the expiration of six years after the bankruptcy discharge, the limitations period expired as to all installments, and the borrower was entitled to judgment quieting title against the security instrument.
Continue Reading Copper Creek Confirms That Bankruptcy Discharges Have No Effect on the Statute of Limitations in Washington State

The Supreme Court of California handed down a big win to mortgage lenders and servicers on March 7, 2022, when it issued a decision in Sheen v. Wells Fargo Bank, National Association et al., No. S258019, 2022 WL 664722, at *1 (Cal. Supreme Ct. March 7, 2022), ruling that lenders owe no tort duty sounding in general negligence principals to borrowers when reviewing loan modification requests. Going forward, this decision will impact litigation of negligence claims against mortgage lenders and servicers in California because it debunks the often-asserted claim for negligence based on allegations that the loan servicer “negligently” processed a loan modification application.

Continue Reading California Supreme Court Rules No Tort Duty of Care Required by Lenders When Considering Borrowers’ Loan Modification Requests

On December 8th, the Consumer Financial Protection Bureau (CFPB) issued the 25th edition of its Supervisory Highlights report, which covers examinations completed in the first half of 2021. The CFPB reported on violations that occurred in the areas of credit card account management, debt collection, deposits, fair lending, mortgage servicing, payday lending, prepaid accounts, and remittance transfers.

The report signals that the CFPB will continue to enhance enforcement actions against mortgage servicers. Since March 2020, the CFPB has prioritized mortgage servicing supervision due to the increase in borrowers applying for and receiving mortgage forbearance under the CARES Act as a result of the COVID-19 pandemic. CFPB examiners found that mortgage servicers unlawfully charged borrowers late fees and default-related fees. Examiners found that mortgage servicers failed to refund some of the fees until almost a year later. The CFPB vowed to continue its work to ensure that all mortgage servicers meet their homeowner protection objections under applicable consumer protection laws.
Continue Reading Consumer Financial Protection Bureau Issues 25th Supervisory Highlights

Litigation of the Telephone Consumer Protection Act (TCPA) is an active area with frequent developments important to the consumer finance space. Two recent cases are worthy to note. In Loyhayem v. Fraser Fin. & Ins. Servs., Inc., 7 F.4th 1232 (9th Cir. 2021), the U.S. Court of Appeals for the Ninth Circuit held that the TCPA applies not only to “telemarketing” or “advertising” calls, but also to job-recruitment robocalls. In Fischman v. MediaStratX, LLC, No. 20-CV-83, 2021 WL 3559639 (E.D.N.C. Aug. 10, 2021), the Eastern District of North Carolina entered the debate on whether 47 C.F.R. § 64.1200(d) contains a private right of action by holding that it does.
Continue Reading Recent Developments in Telephone Consumer Protection Act Litigation

In Hunstein v. Preferred Collection and Management Services, Inc., 994 F.3d 1341 (11th. Cir. 2021), the Eleventh Circuit held that a debt collector’s communication of a consumer’s personal information to a third party print vendor violated the Fair Debt Collection Practices Act’s prohibition on third party communications in connection with debt collection under 15 U.S.C. § 1692c(b).

Hunstein will likely require major operational changes for many loan servicers. At a minimum, loan servicers who qualify as a “debt collector” under the FDCPA should rethink how to utilize third party vendors for such basic operations as printing and higher functions such as loss mitigation. Although it is theoretically possible to continue using such vendors without communicating the personal information of the consumer, the efficiencies of using such vendors will be diminished. The short term solution to avoid exposure under Hunstein will likely entail bringing such services in house—a major shift in industry practices.
Continue Reading 11th Circuit Issues FDCPA Decision That Could Dramatically Impact Mortgage Servicers Operations

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

The Federal Fair Debt Collection Practices Act (FDCPA) is the leading debt collection practices act, serving as the lynchpin of federal consumer protections in the area of debt collection as well as serving as a model for numerous state enactments. Not surprisingly, litigation often focuses on the crucial questions of who is a “debt collector” and what is “debt collection” for purposes of the FDCPA. This area of law has received close scrutiny in recent years with published cases from the U.S. Supreme Court and the U.S. Court of Appeals for the Ninth Circuit.

In Obduskey v. McCarthy & Holthus LLP, the Supreme Court had to decide whether “one principally involved in ‘the enforcement of security interests’ is . . . a debt collector” for purposes of the FDCPA. Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 1031 (2019). The Court concluded that the statutory language of the FDCPA’s definition of “debt collector” places:

Continue Reading The Ninth Circuit Clarifies Its Approach in FDCPA Cases Concerning Foreclosure

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, in response to the national emergency arising from the COVID-19 pandemic. Four key provisions of the CARES Act are likely to affect mortgage loan servicers: (1) credit protection; (2) a moratorium on foreclosures; (3) forbearance on mortgage payments; and (4) a moratorium on eviction filings. Compliance with the CARES Act may be straightforward for moratoriums but more challenging for credit reporting and regulatory compliance. This post provides an updated summary of salient portions of the CARES Act and identifies potential regulatory compliance pitfalls.
Continue Reading CARES Act Regulatory Considerations for Mortgage Servicers

Mortgage service companies (and their lawyers) got a big boost on March 20, 2019, when the Supreme Court delivered a unanimous opinion in Obduskey v. McCarthy & Holthus LLP, holding that a business engaged in no more than nonjudicial foreclosure proceedings is not a “debt collector” under the Fair Debt Collection Practices Act (FDCPA or Act), except for the limited purpose of §1692f(6). This decision will prevent needless and unfair litigation by borrowers seeking to stall collection efforts.

The petitioner in the case (who purchased his home in 2007 and defaulted approximately two years later) argued that the law firm hired by the creditor bank to carry out a nonjudicial foreclosure failed to comply with the FDCPA, which requires a debt collector to cease collection efforts until it obtains and delivers verification of the debt to the debtor.

Continue Reading Justices Rule that Businesses Engaged in Nonjudicial Foreclosure Proceedings are Not “Debt Collectors” under the FDCPA

In Washington State the statute of limitations on actions to enforce a note or deed of trust can be a brutally effective sword for borrowers. The limitations period is six years, and a borrower may sue for quiet title where “an action to foreclose . . . would be barred by the [statute of limitations].” RCW 7.28.300. If successful, the borrower is entitled to “judgment quieting title” against the security instrument. Two commonly litigated issues arising in this context are tolling and acceleration. The Court of Appeals of Washington recently published two noteworthy opinions as they relate to installment loans that should dampen quiet title claims based on the statute of limitations.

Tolling

Quiet title litigation based on RCW 7.28.300 often involves a loan in which foreclosure is delayed one or more times because of loss mitigation or bankruptcy filed by the borrower—easily extending the foreclosure well beyond six years of the default or acceleration. The potentially harsh effects of events beyond a lender’s control, such as bankruptcy, is ameliorated by RCW 4.16.230, which provides that a limitations period is tolled when “an action is stayed by . . . statutory prohibition.” The automatic stay under 11 U.S.C. § 362 is one such statutory prohibition. Nonetheless, borrowers have argued that § 362 is not a statutory prohibition for purposes of the tolling statute because a creditor may seek relief from the stay.
Continue Reading Merceri Times Two Equals Clarity on the Statute of Limitations in Washington State