In Yvanova v. New Century Mortgage Corporation et al, the Supreme Court of California reversed the Court of Appeal’s ruling, and held that a borrower plaintiff who has been subject to a nonjudicial foreclosure has standing to bring an action for wrongful foreclosure based on an allegedly void deed of trust assignment (without making any determination as to whether the alleged facts established a void assignment). In so doing, the Supreme Court came down solidly in favor of the “aggrieved” borrower thus settling, at least in California and likely other non-judicial foreclosure states, the issue regarding the standing of such a plaintiff to challenge the acts of a securitization trust. Since the financial crisis there have been several cases considering the standing issue, most notably the California Court of Appeal decisions in Glaski v. Bank of America, N. A. (2011) 198 Cal. App. 4th 256 (holding the plaintiff had standing to challenge the authority of the beneficiary to foreclose) and Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal. App. 4th 497 (holding the plaintiff had no standing to enforce the terms of the agreements allegedly violated). The Supreme Court stated “On the narrow question before us – whether a wrongful foreclosure plaintiff may challenge an assignment to the foreclosing entity as void- we conclude Glaski provides a more logical answer than Jenkins.” Continue Reading
On December 29, 2015, CFPB Director Richard Cordray sent a letter to the president of the Mortgage Bankers Association regarding implementation of the CFPB’s Know Before You Owe mortgage disclosure rule (more commonly known as the Truth in Lending and RESPA integrated disclosure rule, or TRID) responding to concerns raised by the MBA. The letter addressed concerns that technical TRID violations are resulting in extraordinarily high rejection rates by secondary market purchasers of mortgage loans by stating that rejections based on “formatting and other minor errors” are “an overreaction to the initial implementation of the new rule” and that the risk to private investors from “good-faith formatting errors and the like” is “negligible.” Continue Reading
For some time now, the residential lending community has been concerned that the Consumer Financial Protection Bureau has taken unclear positions with respect to marketing services agreements (MSA’s) in its enforcement actions, leaving residential lenders unsure as to how to proceed. Some lenders, including Wells Fargo Bank and Prospect Mortgage Company, have responded to this uncertainty by terminating all of their MSA’s. The Mortgage Bankers Association and other groups had requested that the CFPB provide some clarity as to its position on MSA’s, and the CFPB responded by issuing a press release and a compliance bulletin with respect to MSA’s on October 8.
On August 3, 2015, the California Supreme Court issued its long-awaited arbitration decision in Sanchez v. Valencia Holding Co., LLC, No. B228027. The Court held that the arbitration provision found in a standard form auto finance and sales contract widely used by auto dealerships and lenders throughout California is not unconscionable. Not surprisingly, the Court acknowledged the recent U.S. Supreme Court authority holding that the Federal Arbitration Act (“FAA”) preempts conflicting state law, and affirmed that California law must now recognize the enforceability of class action waivers contained in arbitration provisions under the FAA. Nevertheless, arbitration provisions can be rendered unenforceable, depending on a fact intensive analysis of unconscionability. The Court refused to apply a uniform, bright-line standard. The ruling is unlikely to stem the tide of litigation over the enforceability of arbitration provisions in high stakes class action litigation.
In a victory for Sheppard Mullin and its client, in Trabert v. Consumer Portfolio Serv., Inc., __ Cal. App. 4th. __, 2015 WL 880949 (4th Dist. Mar. 3, 2015), the California Court of Appeal compelled arbitration and enforced a class action waiver after severing an arbitration term. Continue Reading
On January 27, 2015, the Consumer Financial Protection Bureau (“CFPB”) issued a compliance bulletin reminding supervised financial institutions (including large depository institutions, credit unions and their affiliates, certain nonbanks, and service providers) of existing regulatory requirements regarding confidential supervisory information. In this article we (i) explain the definition of confidential supervisory information; (ii) discuss exceptions to the non-disclosure rule; and (iii) offer tips for ensuring compliance. Continue Reading
Under California Law, a party seeking to defeat the statute of frauds based on promissory estoppel must allege an actual change in position. In Jones v. Wachovia Bank, 230 Cal.App.4th 935 (2014), the California Court of Appeal affirmed a trial court’s dismissal of plaintiffs’ claims for breach of oral promises to postpone a foreclosure sale after concluding plaintiffs could not establish detrimental reliance or injury under the doctrine of promissory estoppel.
The Dodd-Frank Wall Street Reform and Consumer Protection Act grants to the U.S. Bureau of Consumer Financial Protection (the “CFPB”) the power to bring actions against “related persons” of non-depository institutions. A related person is defined to mean:
In Baker v. Bank of America, N.A., No. 5:13-CV-92-F, 2014 U.S. Dist. LEXIS 9578 (E.D.N.C. Jan. 27, 2014), the United States District Court for the Eastern District of North Carolina held that even if a consumer timely exercises his or her right to rescind a loan transaction under the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et. seq. — i.e., during the three-day statutory “cooling-off” period — that exercise does not automatically cause the loan to be rescinded. Rather, the court held, if a consumer’s notice of rescission is met with silence by the lender, the consumer must also file a lawsuit in order to complete the rescission before the statute of limitations expires (in this case, the statute of limitations was determined to be four years). The Baker case provides a thorough interpretation of the effect of the statutory three-day “cooling-off” period, for which, it was noted in the decision, case law is “exceedingly sparse.”
The Bureau of Consumer Financial Protection (the “CFPB”) announced April 30 that it is proposing amendments to Regulation Z that will, among other things, permit a creditor that believes in good faith that it has made a qualified mortgage (“QM”) loan and learns afterwards that the loan exceeded the applicable limit on points and fees to refund to the consumer the amount by which the points and fees exceeded the limit, and have the loan retain its QM status. The proposal would require that the refund be made not later than 120 days following consummation of the loan. The proposal would also require the creditor to maintain and follow policies and procedures for post-consummation review of loans and refunding to consumers amounts that exceed the applicable limit.