The U.S. Solicitor General and a group of state attorneys general filed pro-borrower briefs in Freeman v. Quicken Loans, a case in which the U.S. Supreme Court will decide whether a plaintiff has to prove that an unearned fee for a real estate settlement service was divided between two or more persons.The court’s ruling is expected to determine the ability of the mortgage lending industry to decide on its own what to charge borrowers at the point of origination.At issue is Section 8(b) of the Real Estate Settlement Procedures Act, 12 U.S.C. §2607(b), which states that no person “shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.”
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The Supreme Court of the United States considered oral arguments recently in its second high-profile case this session that addresses key issues under the Real Estate Settlement Procedures Act.The case is First American Financial v. Edwards, in which the fundamental question is whether a private purchaser of real estate settlement services has standing under Article III, §2 of the U.S. Constitution to maintain an action in federal court in the absence of any claim that the alleged violation affected the price, quality or other characteristics of the settlement services provided. In this case, respondent Denise Edwards purchased a home in Cleveland in September 2006, obtaining title insurance through Tower City, which issued policies on behalf of First American. Edwards paid $455.43 towards the purchase of the policies (one for her lender and one for herself); the seller of the home paid $273.42.
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Federal banking regulators recently put out some fresh signals that they are listening to the lending community and want to collaborate with the new Consumer Financial Protection Bureau to better harmonize their regulatory, supervisory and examination requirements and procedures to help lower the compliance load for lending institutions. “Our dealings with the CFPB over the last several months have focused on consumer complaints and policy and exam coordination,” John Walsh, acting comptroller of the currency, told members of the Senate Banking, Housing and Urban Affairs Committee during a recent hearing. “The CFPB currently has in process several rulemakings where interagency consultation will be critical, and we are working on a consultation agreement that will provide the prudential regulators with reasonable time to review, discuss and comment on CFPB rulemakings,” he added.
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Senate Republicans successfully thwarted an attempt by President Obama’s Democratic allies in the Senate to force an up-or-down vote on the nomination of Richard Cordray as the first director of the controversial Consumer Financial Protection Bureau. “Mr. President, after all the harm caused to consumers by financial regulators, it is time that the majority stop using consumer protection as a political football and start taking actions that actually help consumers,” said Sen. Richard Shelby, R-AL, the ranking member of the Senate Banking, Housing and Urban Affairs Committee. “We can take the first step by reforming the bureau to make it accountable to the very consumers it seeks to protect,” he added. “Until that time, however, we cannot, should not and will not move forward on the nomination of a director to lead this massive and unaccountable bureaucracy.”
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Last month, as part of the Consumer Financial Protection Bureau's "Know Before You Owe" project, the CFPB unveiled two new prototypes for a single mortgage disclosure to replace the HUD1 Settlement Statement and final Truth in Lending disclosures. This month, the bureau is paying close attention to closing costs by trying to figure out which of two different designs communicates both the closing costs and transaction details clearly. One is similar to the existing HUD]1 settlement statement that consumers now receive when they close a mortgage loan. The other is based on the prototype for the disclosure consumers get when they first apply. gWefre curious to see if something different may work even betterh than the earlier iterations, the CFPB said. gThis new design provides the same information as the other prototype, but it uses a format for the closing costs that is based on our application disclosure prototype. It has sections that correspond to the application disclosure and a little more plain language.h
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Weeks after bringing the first criminal charges to be filed in a “robo-signing” related case, the Nevada State Attorney General’s office has filed suit against Lender Processing Services, the nation’s largest provider of default mortgage services, and some of its subsidiaries for engaging in allegedly deceptive practices against consumers in the state. The lawsuit, filed Dec. 15, 2011, in the 8th Judicial District of Nevada, follows the state AG’s investigation into LPS’ default servicing of residential mortgages in Nevada, especially loans in foreclosure. The lawsuit includes allegations of widespread document execution fraud, deceptive statements made by LPS about efforts to correct document fraud, improper control over foreclosure attorneys and the foreclosure process, misrepresentations about LPS’ fees and services, and evidence of an overall press for speed and volume that prevented the necessary and proper focus on accuracy and integrity in the foreclosure process.
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California Attorney General Kamala Harris and her counterpart in Nevada, Catherine Cortez Masto, have launched a “joint investigation alliance” into misconduct and fraud in the mortgage industry. The joint probe will combine investigative resources, including litigation strategies, information, and evidence gathered through their respective ongoing investigations, assisting each state as it pursues independent prosecutions, the officials said. “This alliance will link the offices’ civil and criminal enforcement teams, speeding along the full, fair and adequate investigation of wrongdoing in the two states, which have experienced similar foreclosure and mortgage fraud crises,” the AGs said.
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A week after filing suit against a handful of top lenders, including Ally Financial and its mortgage subsidiary, GMAC Mortgage, Massachusetts Attorney General Martha Coakley has asked the leadership of two key Congressional panels to investigate alleged mortgage-related misconduct by Ally via GMAC Mortgage. In this particular case, Coakley has some unusual leverage: Uncle Sam owns nearly three-quarters of Ally Financial as per a $17 billion investment made in 2008 under the Troubled Asset Relief Program. “In light of Ally’s alleged deceptive and illegal actions against homeowners in Massachusetts and across the country, I respectfully request that your committees investigate Ally’s serious misconduct and consider what actions the federal government can take to ensure that Ally adheres to the law,” Coakley said in a letter to Sen. Tim Johnson, D-SD, chairman of the Senate Banking, Housing and Urban Affairs Committee, and Rep. Spencer Bachus, R-AL, chairman of the House Financial Services Committee.
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California. In XL Specialty Insurance Company v. Perry, No. 11-2078, U.S. District Court for the Central District of California ruled that the Federal Deposit Insurance Corp. cannot intervene in in a litigation dispute between former IndyMac Bancorp executives and their insurers. The court ruled the FDIC did not meet the standard for intervention as a matter of right, or the standard for permissive intervention. Connecticut. In RMS Residential Properties, LLC v. Anna M. Miller et al., the Connecticut Supreme Court recently ruled that RMS Residential Properties, LLC, with an assignment from Mortgage Electronic Registration Systems, Inc., had standing to foreclose after the borrower defaulted, and that MERS was a valid mortgagee at the origination of the loan, as the nominee for the original lender. The court rejected the claim of the defendant, who argued that that MERS, as third party, could not be named as a mortgagee because it was not the original lender or the party secured by the mortgage. The court also rejected the defendant’s request to declare the MERS mortgage to be void because MERS was not the owner of the debt.
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Consumer Financial Protection Bureau. CFPB Now Accepting Mortgage Complaints. The Consumer Financial Protection Bureau began accepting mortgage complaints from consumers through its websitefs home page, as of Dec. 1, 2011. To file a complaint, a consumer has to describe what happened and what would be a fair resolution. The consumer is presented with a menu of options and has to specify the type of mortgage involved (conventional fixed-rate, FHA, etc.) as well as the part of the mortgage process involved that is the source of the complaint. Once the complaint is filed, the relevant company will be notified, and the consumer will be provided a tracking number.
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There’s been a notable changing of the guard among attorneys in the mortgage banking practices at the law firms of Patton Boggs, Ballard Spahr and Dykema. Partners Richard Andreano, John Socknat and Michael Waldron and associate Reid Herlihy left Patton Boggs recently with upwards of 100 clients and signed on with the newly created Mortgage Banking Group at Ballard Spahr. The new unit is part of Ballard Spahr’s larger effort to build up its Washington, DC, office. Meanwhile, Dykema augmented its regulatory presence by bringing on board former Patton Boggs senior lawyers Heather Hutchings and Haydn Richards to its Financial Services Regulatory and Compliance practice.
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