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 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

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

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

The linchpin of the Federal Fair Debt Collection Practices Act (“FDCPA”) is debt collection. Not surprisingly, litigation often focuses on the crucial question of what is a “debt” and who is a “debt collector” for purposes of the FDCPA. In Ho v. ReconTrust Co., NA, the U.S. Court of Appeals for the Ninth Circuit recently concluded that the enforcement of a security instrument by nonjudicial foreclosure is not debt collection as a matter of law.

The Ho court explained that “[t]he object of a non-judicial foreclosure is to retake and resell the security, not to collect money from the borrower[,]” and because “California law does not allow for a deficiency judgment following non-judicial foreclosure[,]” “the foreclosure extinguishes the entire debt even if it results in a recovery of less than the amount of the debt.” On this basis, the Ho court held that “actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect ‘debt’ as that term is defined by the FDCPA.”
Continue Reading McNair v. Maxwell & Morgan PC: Judicial and Nonjudicial Foreclosure—A Distinction With a Difference