If It’s Not In Writing, It Didn’t Happen: Oral Promises To Modify A Loan Are Not Enforceable

A recent decision issued by the California Court of Appeal will make it more difficult for plaintiffs seeking to avoid foreclosure.  In Rossberg v. Bank of America, N.A., 219 Cal.App.4th 1481 (4th Dist. 2013), the California Court of Appeal affirmed a trial court’s dismissal of plaintiffs’ claims of oral promises to modify a loan.

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SEC Announces 2014 Examination Priorities for Investment Advisers

On January 9, 2014, the Securities and Exchange Commission released its examination priorities for 2014 (the “2014 Exam Priorities Release”), covering a wide range of issues at financial institutions, including investment advisers and investment companies, hedge funds and private equity funds.  The 2014 Exam Priorities Release highlights a number of areas and key risks that the SEC will be monitoring and examining in 2014.  The SEC has identified the following core risk areas for investment advisers:

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The End Is In Sight? Deutsche Bank Claims Victory In Defense Of A Repurchase Claim Based Upon Statute Of Limitations

A unit of Deutsche Bank won dismissal of a suit brought by mortgage bond investors after a New York state appeals court determined the claims for loan repurchase and indemnity were subject to a six-year statute of limitations that began to run when the deal to purchase the loans closed.  This decision may limit new suits by investors who allege that their claims don’t accrue – and that therefore the statute of limitations does not begin to run – until the claim is discovered or the seller of the loan refuses to repurchase it or provide indemnification.

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Commissioner of California Department of Business Oversight Issues Order on Designated Point of Contact for Delivery of Emails

The Commissioner of the California Department of Business Oversight on November 22 issued an order directing all DBO licensees (which would include California Finance Lender licensees and residential mortgage lender licensees, among others) to designate a single standard email address for Department communications.

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Sixth Circuit Holds That Affiliated Business Arrangements Are Not Bound by HUD’s Statement of Policy Regarding Sham AfBAs

The U.S. Court of Appeals for the Sixth Circuit, which covers Michigan, Ohio, Kentucky and Tennessee, held late last month that real estate settlement service providers whose relationships satisfied the Real Estate Settlement Procedures Act ‘s (“RESPA’s”) statutory three-part test for affiliated business arrangements (“AfBAs”) were not also required to satisfy any tests set forth in HUD’s Statement of Policy 1996-2 Regarding Sham Controlled Business Arrangements (the “Policy Statement”).  That three-part test provides a safe harbor from violation by the AfBA of the anti-kickback prohibition set forth in Section 8 of RESPA if (i) the party referring the AfBA to a consumer provides the consumer with an Affiliated Business Arrangement Disclosure Statement at the time of the referral, (ii) the person making the referral does not require the consumer to use any particular provider of settlement services or business incident thereto, and (iii) the only thing of value that is received from the arrangement (with certain exceptions) is a return on ownership interest or franchise arrangement.

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OCC Issues New Risk Management Guidance For Third Party Relationships

The Office of the Comptroller of the Currency published on October 30, 2013 a new Guidance relating to risk management for third party relationships. This Guidance rescinds OCC Bulletin 2001-47, “Third-Party Relationships: Risk Management Principles” and OCC Advisory Letter 2000-9, “Third-Party Risk.” Prior to the formation of the Consumer Financial Protection Bureau, OCC-regulated institutions were subject to the rescinded Guidance and Advisory Letter, and OTS-regulated institutions were subject to Thrift Bulletin 83 (since rescinded), “Interagency Guidance on Weblinking: Identifying Risks and Risk Management Techniques,” but non-bank lenders were not subject to similar requirements with respect to their relationships with third party vendors. The CFPB then published its vendor management guidance last year. The OCC’s new Guidance is the first published by a bank regulator since the CFPB published its guidance, and is therefore the first view we have of current regulatory thinking since that time. This new Guidance, which is considerably more detailed than the CFPB’s guidance, may therefore be useful to both banks and non-bank lenders as to the types of things they should consider in building a robust vendor management policy. Among the highlights of the Guidance:

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Is Everybody A Debt Collector? CFPB Proposes New Rules That Could Subject Creditors That Collect On Their Own Debts To New Debt Collection Rules

The Consumer Financial Protection Bureau is considering new rules to govern debt collection practices that could radically change the debt collection regulatory landscape and for the first time include creditors that are collecting their own debt. Third-party debt collectors are currently subject to the Fair Debt Collection Practices Act, but this law does not apply to creditors that originate and collect their own debt.

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CFPB Releases Exam Procedure Updates For TILA and RESPA

On August 15 the Consumer Financial Protection Bureau released updates to its examination procedures in connection with the new mortgage regulations that were issued in January. These updates offer valuable guidance on how the CFPB will conduct examinations for compliance with the Truth in Lending Act and the Real Estate Settlement Procedures Act.

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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 QM and Home Ownership and Equity Protection Act (HOEPA) rule;
  • Establishes a new smaller creditor portfolio QM;
  • Loosens requirements for smaller creditors originating balloon loan QMs for two years; and
  • Establishes new exemptions from the ability to repay requirements for credit extended under Emergency Economic Stabilization Act programs, community-focused lending programs and by certain non-profit creditors.

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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 of Section 8 of RESPA. According to the CFPB’s findings, the joint venture had no employees (all work was done on behalf of the joint venture by an employee of Benchmark Bank), did not have its own office space, did not advertise to the public, and conducted no origination business outside of the referrals that it received from Taylor. All 32 loans originated by the joint venture between the time of its formation in March 2010 and the date of the consent order were funded by Benchmark Bank. Continue Reading

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