Category Archives: Financial Institutions

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CFPB Amends Ability-To-Repay/Qualified Mortgage Regulations To Exclude Creditor’s Payment Of Compensation To Loan Originator Employees From Calculation Of Points and Fees

On May 29, 2013, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending its Ability to Repay/Qualified Mortgage (ATR/QM) rule, originally issued on January 10, 2013. The final rule addresses the following: Removes compensation to individual loan originator employees from the calculation of the points and fees limit for purposes of both the … Continue Reading

CFPB Issues Consent Order To Taylor Homes Based On Sham Joint Venture Arrangement

On May 17, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued a consent order to Paul Taylor Homes Limited, Paul Taylor Corp. and Paul Taylor individually (altogether “Taylor”) based on the CFPB’s findings that Taylor entered into a sham joint venture arrangement with Benchmark Bank that resulted in Taylor receiving compensation for referrals in violation … Continue Reading

California Court Holds That Borrowers May Enjoin A Foreclosure If A Lender Fails To Meet Servicing Guidelines

In Pfeiffer v. Countrywide Home Loans, — Cal.Rptr.3d —-, 2012 WL 6216039 (Dec. 13, 2012), mortgage borrowers filed a damages claim against a trustee for violating the federal Fair Debt Collection Practices Act (“FDCPA”) and an injunction claim against a lender to halt a foreclosure they claimed was wrongful. The trial court sustained the defendants’ … Continue Reading

California Homeowner Bill of Rights: A New Mortgage Law For The New Year

The California Homeowner Bill of Rights (“HBR”) goes into effect on January 1, 2013. The HBR revamps California’s non-judicial foreclosure statutes granting borrowers additional rights. It was designed to correct perceived abuses by lenders and servicers. The HBR applies only to first lien mortgages or deeds of trust that are secured by owner-occupied residential real … Continue Reading

TILA Does Not Require A Loan Servicer To Identify Who Owns A Loan, Unless The Servicer Owns The Loan By Assignment

In Gale v. First Franklin Loan Services, 686 F.3d 1055 (9th Cir. 2012), the Ninth Circuit held that a borrower has no right under the federal Truth in Lending Act (“TILA”) to require a loan servicer to identify the owner of a loan obligation. TILA requires a servicer to identify the owner of the loan … Continue Reading

Court of Appeal Reaffirms MERS’ Ability to Foreclose, Holds That Recorded Documents Do Not Overcome a Specifically Pled Violation of Section 2923.5

In Skov v. U.S. Bank N.A., 2102 WL 2549811 (June 8, 2012), the Court of Appeal reversed the trial court’s decision to sustain a demurrer against plaintiff Andrea Skov’s second amended complaint, holding that she had stated a claim for violation of Civil Code Section 2923.5, which requires a lender to contact a defaulted borrower … Continue Reading

Another California Court Approves The Use Of MERS

In Herrera v. Federal National Mortgage Association (2012) 205 Cal.App.4th 1495, the California Court of Appeal joined other courts in rejecting the plaintiffs’ attempt to avoid their mortgage obligations on the grounds that Mortgage Electronic Registration Systems (MERS) is a sham. MERS is a private company that operates an electronic registry to track servicing rights … Continue Reading

Borrower’s “Show Me The Note” Argument Fails To Halt Foreclosure

By Alejandro Moreno and Shannon Petersen In Debrunner v. Deutsche Bank Nat. Trust Co. (Cal.App. 6 Dist., 2012) — Cal.Rptr.3d —-, 2012 WL 883128, the California Court of Appeal affirmed the dismissal of a complaint for wrongful foreclosure with prejudice, holding that a beneficiary under a deed of trust need not possess the original promissory … Continue Reading

California Department of Corporations States That Wholesale Account Executive Who Does Not Deal With Consumers Is Not A Mortgage Loan Originator

By David Sands and Sherwin Root The California Department of Corporations recently added a question to its on-line frequently asked questions on mortgage loan originators which made clear that wholesale lender account executives who do not deal with the public (but only with correspondent lenders) do not need to be licensed as mortgage loan originators with … Continue Reading

Massachusetts Supreme Judicial Court Holds That Bad Foreclosure = Bad Title For Bona Fide Purchaser

The Massachusetts Supreme Judicial Court ruled this week that owners of property whose titles have been rendered defective due to improper foreclosures cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. The Court, which in January found that banks can’t foreclose on a house if … Continue Reading

No Need To Record An Assignment Of A Deed Of Trust Prior To Foreclosure

In Calvo v. HSBC Bank USA, — Cal.Rptr.3d —-, 2011 WL 4035791 (Cal.App. 2 Dist. 2011), the California Court of Appeal affirmed the longstanding rule that an assignee of a beneficiary under a deed of trust need not record its beneficial interest prior to initiating foreclosure. In Calvo, the plaintiff argued the foreclosure sale of … Continue Reading

Dispelling the Myth of MERS as a “Sham” Beneficiary

In the current flood of mortgage litigation, plaintiffs often rely on myth to avoid paying their debts. One of the most pervasive concerns the Mortgage Electronic Registration System (MERS). Plaintiffs accuse MERS of being a "sham" entity, lacking authority to foreclosure and used by lenders to engage in fraud. In Cervantes v. Countrywide Home Loans, … Continue Reading

HUD Revamps FHA Lending Requirements

On September 23, 2011, HUD issued Mortgagee Letter 2011-34 (the "Letter"). The provisions of the Letter, which became effective immediately upon the Letter’s release, dramatically revamp requirements for FHA-approved lenders. Most significantly, HUD has expanded the single family origination lending area of each home office and registered branch office to include all HUD field office … Continue Reading

Too Little, Too Late For Plaintiff’s Fraud-Based Mortgage Lawsuit

In Vaca v. Wachovia Mortgage Corporation, — Cal.Rptr.3d —-, 2011 WL 3659938 (Cal.App. 4 Dist. 2011), the California Court of Appeal affirmed the dismissal of a fraud claim on statute of limitations grounds. In 2005, the plaintiff sued her ex-husband, claiming he created false credit histories for their children and used those histories to refinance … Continue Reading

The California Court Of Appeal Again Rejects A Claim For Wrongful Foreclosure At The Pleading Stage

The recent published decision of Fontenot v. Wells Fargo Bank, N.A. (Cal.App.1 Dist., August 11, 2011) — Cal.Rptr.3d —-. 2011 WL 3506177, adds several more arrows to a secured lender’s quiver of arguments challenging wrongful foreclosure claims at the pleading stage. First, the Court explains in detail how and why publicly recorded documents can be … Continue Reading

More Teeth For The Tender Rule

In the current flood of mortgage litigation, the so-called "tender rule"—that a borrower generally cannot set aside a foreclosure unless he or she tenders the full amount owed on the loan—poses a significant obstacle for many plaintiffs. The rationale behind this rule is that a borrower should not be able to avoid foreclosure when the … Continue Reading

To Avoid Assuming Fiduciary Duties, Mortgage Lenders Should Take Care to Avoid Acting as Mortgage Brokers

"A mortgage broker has fiduciary duties to a borrower. A mortgage lender does not."  A decision published on March 28, 2011 by the California Court of Appeals (2 Dist.) clarifies the differences between duties owed to a borrower by a mortgage broker and those owed by a mortgage lender. To avoid potential lawsuits for breach of … Continue Reading

A Borrower May Not Bring An Action To Determine Whether The Owner Of A Mortgage Note Has Authorized A Nonjudicial Foreclosure

Civil Code sections 2924 to 2924k provide a comprehensive framework for regulating nonjudicial foreclosure sales under deeds of trust. A recent decision by the California Court of Appeal (4th Dist.) finds that, under California’s statutory framework regulating nonjudicial foreclosures, borrowers cannot challenge the authority of a trustee, mortgagee, beneficiary, nominee, or other agent of the … Continue Reading

Brokers – Thou Shalt Not Accept Payments From More Than One Source In Connection With a Mortgage Loan

Mortgage lenders and brokers are aware that the new regulations on loan originator compensation (part of Regulation Z) will go into effect on April 1. One aspect of those regulations that has received little attention until just recently is that if the consumer pays the loan originator directly (which may be the case with mortgage … Continue Reading

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