FHA Releases Guidance on Use of Professional Employer Organizations

On November 28, 2016, the Federal Housing Administration (“FHA”) published Mortgagee Letter 2016-18, “Mortgagee Use of Professional Employer Organizations.” The purpose of this Mortgagee Letter is to clarify HUD requirements for mortgagees that contract with professional employer organizations and similar entities for human resources services. The guidance outlines permissible and impermissible uses of contractors, as well as the standard for use and required documentation for use of contractors. This Mortgagee Letter replaces previously issued guidance contained in HUD Handbook 4000.1 governing the use of contractors by FHA-approved mortgagees. The updated guidance is effective immediately. To read the full Mortgagee Letter, click... read more

CFPB Updates Mortgage Servicing Small Entity Compliance Guide

Last week the Consumer Financial Protection Bureau (“CFPB”) published an updated version of its Mortgage Servicing Small Entity Compliance Guide. The updated Guide incorporates amendments made to the mortgage servicing rules and regulations contained in Regulation X and Regulation Z. These amendments were released by the CFPB in August 2016, but the clock did not start ticking on their effective date until they were published in the Federal Register. The amendments were published in the Federal Register on October 19, 2016. Accordingly, most of the amended regulations will be effective on October 19, 2017. The amendments related to successors in interest and periodic statements for borrowers in bankruptcy will be effective on April 19, 2018.  The CFPB’s Mortgage Servicing Small Entity Compliance Guide provides a summary of the amended rules, along with official commentary and interpretations. The updated Guide can be accessed on the CFPB’s Mortgage Servicing implementation webpage. To read more about updated mortgage servicing rules, please click... read more

CFPB Warns Mortgage Lenders and Brokers They May be Out of Compliance with HMDA

Last month, the CFPB issued warning letters to 44 mortgage lenders and brokers warning that they may be in violation of the Home Mortgage Disclosure Act (“HMDA”) and its implementing regulation, Regulation C. HMDA and Regulation C require certain qualifying financial institutions to collect, record, and report data regarding their housing related lending activities. The CFPB identified the 44 lenders and brokers by reviewing available bank and nonbank mortgage data. The warning letters stated that the recipients should review their current practices to ensure they are in compliance with all relevant laws. The companies were encouraged to respond to the Bureau to advise if they have taken, or will take, steps to ensure compliance with HMDA and Regulation C, or alternatively to provide an explanation if they think the HMDA reporting requirements do not apply to them. It is important to note that the CFPB made no determination that a legal violation did, in fact, occur. As a mortgage banking focused law firm, AMLG continues to be involved with our clients’ implementation of the amended HMDA reporting requirements which will begin going into effect next year. If you need assistance with HMDA-related issues, including deciphering the reporting requirements applicable to your organization, assistance with implementation, updates to your policies and procedures, and/or counsel regarding fair lending best practices, please contact us by clicking here.  AMLG clients and newsletter readers may receive a complimentary copy of the firm’s HMDA Reporting Implementation Checklist by clicking... read more

CFPB Issues Updated Guidance on Vendor Management and Oversight

The CFPB recently issued Compliance Bulletin 2016-02, which updates the Bureau’s guidance on vendor management and oversight. The Bulletin clarifies that the depth and formality of the risk management program put in place to monitor service providers may vary depending on the type of service(s) being performed and the performance of the service provider in complying with federal consumer financial laws and regulations. Specifically, the Bureau noted that the size, scope, complexity, importance, and potential for consumer harm were factors to take into consideration when assessing the scope of a vendor risk management and oversight program. Consistent with previous guidance, the Bulletin noted that in order to limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers and outlined a number of recommended actions. Interestingly, the Bureau continued to emphasize the potential for UDAAP (Unfair, Deceptive and Abusive Acts or Practices) violations inherent in third party service provider relationships, an area we have seen the Bureau enforce heavily via enforcement actions in the past few years. As a mortgage banking focused law firm, AMLG continues to be involved in our clients’ vendor management efforts. If you need assistance setting up or strengthening your company’s vendor management oversight program, updating your related policies and procedures, negotiating related contracts, or more, please contact AMLG by clicking... read more

Another Win for Lenders Against a Former Subsidiary of Lehman Brothers Holdings, Inc. (“LBHI”)

On October 24, 2016, in a hard fought lawsuit in Utah, a long awaited decision came down against Aurora Bank, FSB (“Aurora”) and Aurora Loan Services (“ALS”) in favor of Security National Mortgage Company (“Security National”). Security National won a several million dollar judgment in Utah against Aurora and ALS on December 24, 2014. After a motion for summary judgment in this Utah case, which involved a 2007 Indemnification Agreement between Security National and Aurora, the court held that Lehman Bank could only assign rights for losses it had suffered. Lehman Bank had no losses because of the way they structured their transactions with LBHI, and it had been fully compensated by LBHI. This case is significant to AMLG clients, and any defendant involved in the LBHI litigation pending in the Southern District of New York, and is being watched, because the ruling  based on depositions of several LBHI and Aurora key executives essentially renders the assignments under which LBHI is pursuing all 3,000 counterparties in New York worthless. The basic premise is that you can only assign the rights you possess. If Lehman Bank had no damages then it assigned LBHI no damages to pursue. All this time since 2014, the parties in Utah have been fighting over claims of an offset, or reduction in the amount awarded to Security National in 2014, and a demand that Security National continue to pay Aurora under the Indemnification Agreement. Finally,  Aurora and ALS lost, leaving Security National entitled to recover several million dollars from LBHI. All they have to do now is collect. If you are facing claims by LBHI,... read more

Court Ruling Provides Security for Lenders Around RESPA Section 8 Issues

Last week, the D.C. Circuit Court of Appeals issued its much-anticipated decision in PHH Corp. v. CFPB. The 100+ page decision offered thoughtful analysis on the myriad of issues at play in the matter, including the constitutionality of the CFPB’s single director structure. Perhaps the ruling with the greatest impact on the mortgage compliance industry though was the Court’s finding that the CFPB violated due process by retroactively enforcing an alternative interpretation of RESPA Section 8 which deviated from the long-standing interpretation set forth by HUD. As the Court summarized, “In its order in this case, the CFPB thus discarded HUD’s longstanding interpretation of Section 8 and, for the first time, pronounced its new interpretation. And then the CFPB applied its new interpretation of Section 8 retroactively against PHH, notwithstanding PHH’s reliance on HUD’s prior interpretation. The CFPB sanctioned PHH for previous actions that PHH had taken in reliance on HUD’s prior interpretation, even though PHH’s conduct had occurred before the CFPB’s new interpretation of Section 8.” (emphasis in original) The D.C. Circuit Court of Appeals found that not only did the CFPB violate “bedrock due process principles” by retroactively applying a new interpretation of the statute, but that the CFPB had also misinterpreted Section 8(c) of RESPA. The Court confirmed that Section 8(c) of RESPA indeed carves out a safe harbor for certain types of payments between settlement service providers and found the CFPB’s recent interpretation that it does not provide a “substantive exemption” to be “a facially nonsensical reading of Regulation X.” Specifically, the Court held that Sections 8(a) and 8(c) of RESPA as read together, “allow captive reinsurance... read more

Bank of America Works to Resolve Legacy Portfolios While Warning of Possible Future Claims in Connection with an $8.5 Billion Private Label Securities Settlement

While Bank of America (“BOA”) has not been known to be as litigious as many other investors regarding repurchase demands in the past, we have seen a resurgence lately in correspondence from BOA regarding legacy matters. Over the past few months, many correspondent lenders have approached AMLG about correspondence they received from BOA, wherein BOA was reaching out with the intent to rebuild relationships and amicably resolve legacy matters.  While many of BOA’s settlement overtures have been promising, it is important to note that BOA has been using this opportunity to do something that we have not seen much of from any of the major investors to date, which is their indicating that they may begin pursuing damages tied to losses on private label securities, for which BOA alleges it entered into a roughly $8.5 billion settlement agreement during the first quarter of 2016. Though we are not presently aware of any concrete claims having been made in connection with these private label securities, BOA is advising lenders of their potential future exposure, which is alleged to be very significant in many cases.  If you are a lender who has received similar correspondence from BOA and/or simply have questions regarding this latest revelation from BOA, please contact AMLG by clicking here. We have also seen a spike in repurchase and indemnification demands from both CitiMortgage, Inc. and EMC Mortgage LLC in recent weeks and are also handling many such matters on behalf of our valued clients. The recent uptick in activity goes to show that repurchase and indemnification claims and actions are alive and well and do not show... read more

AMLG Speaks Out Regarding CFPB Examinations

As the Consumer Financial Protection Bureau (CFPB) continues to issue new and revised rules and regulations affecting the mortgage industry, it is full-steam ahead for the CFPB as a regulator, including comprehensive supervisory examinations and enforcement actions. Recently, an AMLG representative spoke at the RESPRO Fall 2016 Seminar in Washington, DC on a panel entitled, “How to Ace Your CFPB Exam.” Specifically, AMLG spoke about hot topics and areas of focus we see the CFPB and its examiners zeroing in on in upcoming examinations and provided attendees with numerous resources and best practices for preparing for such examinations. As a mortgage banking focused law firm, AMLG routinely provides counsel to its clients on CFPB regulations, official interpretations, examinations, and enforcement actions. Some of the services we provide to clients include interpreting various CFPB regulations and providing legal opinions around difficult to understand portions of Bureau rules; reviewing and updating clients’ QC Plans, policies and procedures, and related agreements (including loan officer compensation agreements) to make sure they are compliant; reviewing and updating vendor contracts and providing assistance with vendor management issues; and providing compliance training and education for employees working on CFPB-related matters.  To learn more, please contact AMLG by clicking... read more

CFPB Issues Official Approval Regarding HMDA Collection of Self-Identified Ethnicity and Race Prior to January 1, 2018

On September 23, 2016, the Consumer Financial Protection Bureau (CFPB) issued an official approval regarding the collection of self-identified ethnicity and race data prior to January 1, 2018. Starting January 1, 2018, the revised Home Mortgage Disclosure Act (HMDA) data collection and reporting requirements will require financial institutions to permit applicants to self-identify using disaggregated ethnic and racial categories. The timing of this requirement is meant to co-inside with the effective date of the revised and redesigned Uniform Residential Loan Application (2016 URLA). Previously, many in the industry raised the issue that in order to comply with the revised HMDA reporting requirements set to take effect on January 1, 2018, creditors may need to start collecting such data prior to the date set by the rule in order to account for loan applications taken at the end of one calendar year (2017), but where “action taken” is not until the beginning of the next calendar year (2018). Under a strict reading of the applicable rules and regulations, this raised a potential conflict regarding whether or not creditors could legally request self-identified ethnicity and race data from consumers prior to January 1, 2018. The Bureau’s official approval, released on September 23, 2016, stated that the collection of self-identified ethnicity and race during 2017 will not violate Regulation B § 1002.5, which provides rules concerning requests for information about race, color, religion, national origin, or sex. This official interpretation allows the creditor the option to collect such data prior to the effective date of January 1, 2018. The official approval also provides that for reporting purposes, if a final action is... read more

AMLG Seeing Spike in Repurchase Activity from EMC Mortgage LLC and CitiMortgage, Inc.

AMLG has been contacted by several new and existing clients reporting a significant increase in repurchase and indemnification demands from both CitiMortgage, Inc. and EMC Mortgage LLC. While AMLG has been assisting numerous clients in negotiating such demands from CitiMortgage for a number of years, the spike in demands from EMC (formerly known as EMC Mortgage Corporation and a current affiliate of JPMorgan Chase Bank) has been somewhat more unexpected. CitiMortgage has become much more aggressive in aggregating what it believes are all outstanding demands to correspondent lenders even if that means reviving demands that have been dormant going on four, five, or even six years. It appears as though CitiMortgage may be gearing up for a new wave of litigation or may simply want to clear as many of these claims off its books as possible before the end of the year. When faced with such demands, AMLG has been assisting its clients to do everything possible to negotiate the best possible outcome, including providing counsel on which claims should be barred by the applicable statute of limitations. While CitiMortgage maintains otherwise, it appears clear to AMLG that many of CitiMortgage’s demands, at least on the face, are now time barred. AMLG has also developed unique and, as of yet, untested arguments relating the accrual date for CitiMortgage’s claims. While Chase has become less and less aggressive in pursuing repurchase and/or indemnification, it appears EMC has been ramping up its repurchase and indemnification practice and has begun filing lawsuits in several different jurisdictions around the country. Given the variety of jurisdictions in which EMC is pursuing these claims,... read more