Category Archives: Financial Institutions

Subscribe to Financial Institutions RSS Feed

Bank Had No Duty To Advise Business Charge Card Owner That Bank Had Obtained Judgment Against A Person Who Was Authorized To Use The Card

Question: Does a bank that enters into an agreement with a company to issue a business charge card have a duty to disclose to the card owner, before issuing a card to another person authorized to use the card, that the bank’s affiliate had previously obtained a default judgment against that person for not paying … Continue Reading

No Private Right of Action for Violation of Statutes Extending Notice Period for Foreclosures

Question: Is there a private right of action under sections 2923.52 or 2923.53 of the Civil Code, which generally require a mortgagee or trustee to give three months additional notice before noticing a foreclosure sale? Answer: No, according to the Fourth District Court of Appeal, Division 3, in Vuki vs. Superior Court, No. G043544 (decided … Continue Reading

Mortgage Lender Not “Financial Institution” for Federal Criminal Bank Fraud Just Because It Was Owned By a Financial Institution

Question: Is a mortgage lender that is a wholly-owned subsidiary of a “financial institution” itself a “financial institution” for purposes of federal criminal bank fraud? Answer: No, according to the Ninth Circuit Court of Appeals in United States vs. Bennett, No. 06-50580 (decided September 10, 2010).… Continue Reading

Lender’s Representation That Borrower “Qualified” For Loan Not A Representation Borrower Could “Afford” A Loan

Question: Is a lender’s representation to a borrower that the borrower can "qualify" for a mortgage loan a representation that the borrower can also "afford" the loan? Answer: No, according to the First District Court of Appeal in Perlas v. GMAC Mortgage, LLC (No. A125212), decided August 11, 2010.… Continue Reading

New Los Angeles Ordinance Requires Banks And Lenders To Repair Vacant Residential Property

In another blow to residential lenders, the city of Los Angeles has passed an ordinance that will require the person that owns or is in control of certain residential real property to maintain the property in a safe and sanitary condition and in good repair. While one might logically expect that this ordinance would only … Continue Reading

Ohio Federal District Court Rules That HUD’s Sham Joint Venture Guidelines Are Unconstitutional

In a decision that was handed down on June 30, 2010, a United States District Court for the Northern District of Ohio has ruled that HUD’s sham joint venture guidelines, as contained in HUD’s RESPA Statement of Policy 1996-2 (the "Policy Statement"), are unconstitutionally vague, and has granted the defendants summary judgment against claims by the … Continue Reading

The California Court Of Appeal Narrowly Interprets The Perata Mortgage Relief Act

On June 4, 2010, the California Court of Appeal issued its first important decision on the scope of California’s Perata Mortgage Relief Act, passed into law in 2008 and codified at California Civil Code Sections 2923.5 and 2923.6. See Mabry v. Superior Court (Case No. G042911, June 4, 2010) —Cal.App.4th—, 2010 WL 2180530.… Continue Reading

House Approves Legislation to Eliminate Duplicative Consumer Privacy Notices

The U.S. House of Representatives approved by a voice vote on April 14 an amendment to the Gramm-Leach-Bliley Act that will provide an exemption from annual privacy notice updates for financial institutions that do not share non-public consumer information with unaffiliated third parties or make changes to their privacy policies. Currently, a financial institution is … Continue Reading

3rd Circuit Decision Holds That Captive Reinsurance Arrangements Violate Section 8(a) of RESPA

In Alston v. Countrywide Financial Corporation, 585 F.3d. 753 (3rd Cir. 2009), the United States Court of Appeals for the 3rd Circuit held that homebuyers may pursue a class action claim that Countrywide Financial Corporation engaged in taking kickbacks in violation of Section 8(a) of the Real Estate Settlement Procedures Act (RESPA) by steering private … Continue Reading

Ninth Circuit Court of Appeals Joins Other Circuits And Holds That Overcharge Does Not Violate Section 8(b) of RESPA

The United States Court of Appeals for the Ninth Circuit, which includes California, issued a ruling on March 9 that the clear and unambiguous language of RESPA Section 8(b) does not reach the practice of overcharging. Martinez v. Wells Fargo Home Mortgage, Inc. Section 8(b) of RESPA states that "no person shall give and no … Continue Reading

FHA Proposes Higher Net Worth Requirement For Lenders In Effort To Strengthen Risk Management

The Federal Housing Administration has issued a proposed rule that would increase the net worth requirements for approved mortgage lenders and hold them responsible for the lending actions of affiliated mortgage brokers. Currently, the FHA requires approved mortgage lenders to have a net worth of at least $250,000. The proposed rule would require such lenders … Continue Reading

Preemption Not Dead: Servicers of Student Loans Achieve Significant Victory in Ninth Circuit Preemption Case

In Chae v. SLM Corporation, No. 08-56154 (9th Cir. January 25, 2010), the U.S. Court of Appeals for the Ninth Circuit held that the federal Higher Education Act (the "HEA") preempts student borrowers’ ("Plaintiffs") claims that Sallie Mae, Inc.’s ("Sallie Mae") interest rates, late fees, and payment schedules violate California law.… Continue Reading

Bank May Seek Attachment On Unsecured Guaranty Even If Principal Loan Is Secured

Question: May a Bank who made a construction loan secured by real property seek a right to attach order and writ of attachment against a third party guarantor on its unsecured guaranty security? Answer: Yes, according to the Fourth District Court Of Appeal, Division Three, in United Central Bank v. Superior Court (G042247), decided November … Continue Reading


The last few years have presented many challenges for mortgage lenders. The latest challenge may be coming from an unlikely source – private mortgage insurance policies. Private mortgage insurance, or PMI, is the insurance that mortgage lenders purchase, or cause their borrowers to purchase, when the borrower does not make a down payment of at … Continue Reading

New FCA Rules Put Lenders and Brokers Directly in Their Gun Sights

The author is a member of the Firm’s Government Contracts & Regulated Industries Practice Group. For additional articles and postings concerning this and related topics, please refer to Sheppard Mullin’s Government Contracts Blog, which can be found at I.  INTRODUCTION   Without a doubt, the False Claims Act ("FCA") has been dramatically changed in … Continue Reading

New Regulation Z Proposal Bans Yield Spread Premiums, Revamps Disclosure Requirements

The Federal Reserve Board on July 23 proposed significant changes to Regulation Z, the Truth in Lending Act regulation, including new consumer protections for receiving home mortgages and home equity lines of credit. These changes include a prohibition of payments to a mortgage broker or loan officer that are based on the loan’s interest rate … Continue Reading

When Is A Loan Sale A Table-Funded Transaction Subject To RESPA? U.S. District Court In California Casts Doubt On Routine Transactions

Section 3500.5(b)(7) of Regulation X states that a bona fide transfer of a loan obligation in the secondary market is not covered by the Real Estate Settlement Procedures Act (RESPA). That section goes on to state that "in determining what constitutes a bona fide transfer, HUD will consider the real source of funding and the … Continue Reading

Federal District Court In 11th Circuit Expands Scope Of RESPA Section 8(b)

In a memorandum opinion, a United States District Court for the Northern District of Alabama has held that a real estate broker that charges its customers a percentage based commission and a separate administrative brokerage commission of $149 that is not shared with its sales agents violates Section 8(b) of the Real Estate Settlement Procedures … Continue Reading

California Passes New Electronic Discovery Act Effective Immediately

On June 29, 2009, Governor Schwarzenegger signed into law California’s Electronic Discovery Act, which is effective immediately. All discovery propounded or responded to must now comply with the new law. These rules are very similar to the recent revisions to the Federal Rules of Civil Procedure, and bring California in line with the federal e-discovery … Continue Reading

By scrolling this page, clicking a link or continuing to browse our website, you consent to our use of cookies as described in our Cookie and Advertising Policy. If you do not wish to accept cookies from our website, or would like to stop cookies being stored on your device in the future, you can find out more and adjust your preferences here.