July 2016 - Denbeaux & Denbeaux Attorneys at Law

CFPB again finds loan servicers routinely violate federal laws causing injury to homeowners

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CFPB again finds loan servicers routinely violate federal laws causing injury to homeowners

July 22nd, 2016 by

The CFPB found specific areas that loan servicers compliance is lacking in a June 2016 report.

Adam Deutsch, Esq.

CFPB again finds loan servicers routinely violate federal laws causing injury to homeowners

by Adam Deutsch

In the final days of June, 2016 the Consumer Finance Protection Bureau (CFPB) released its eleventh Supervisory Highlights report. The Report offers a summary of findings from CFPB regulatory investigations on loan servicing practices and compliance with federal statutes including the Real Estate Settlement Procedures Act (RESPA). The report is a devastating critique of the loan servicing industry, providing the general public a look into the continued systematic abuses of law and institutional incompetence of the companies that oversee collection of mortgage payments nationwide.

For homeowners who have been victims of loan servicing errors, the report offers a small bit of relief knowing that “you are not alone.” For attorneys representing homeowner victims, the report is a new arrow in the quiver because it details industry wide patterns of practices in violation of federal law. RESPA specifically awards statutory damages where a pattern and practice of wrongful behavior is exhibited and now consumers have government backed research to show industry wide patterns of abuse.

The latest CFPB report is not surprising to consumer advocates who speak daily with homeowners about their mortgage loans. The report concludes that the “magnitude and persistence of compliance challenges since 2014, particularly in the areas of loss mitigation and servicing transfers, show that while the servicing market has made investments in compliance, those investments have not been sufficient across the marketplace.” In other words, the loan servicing industry still has failed to ensure that homeowners are afforded all of their rights under federal law. There are five specific areas that the CFPB has found loan servicing industry compliance to be lacking.

    • Loss mitigation acknowledgement notices – “Examiners found that one or more servicers failed to send any loss mitigation acknowledgment notices due to a repeated loss mitigation processing platform malfunction over a significant period of time.” Simply put, software malfunctions are responsible in many cases for the lack of loss mitigation notices that should have been sent to homeowners. Under RESPA if a homeowner submits a loss mitigation application, the bank is required within a few days of receiving the application to provide the homeowner with an acknowledgment of receipt. According to the CFPB this acknowledgment has too often not materialized.
    • Loss mitigation offer letters and related communications – The CFPB also found that some servicers “engaged in a deceptive practice by misrepresenting to borrowers that it would defer such charges to the maturity date of the loan.” Basically, servicers told borrowers in writing that their homes would not be foreclosed on prior to the deadline date for submitting documents. Yet, frequently before the date was reached the servicer foreclosed on the home. This is a common theme among clients who have contacted me about loan servicing issues. Also, the CFPB uncovered many instances of loan servicers refusing to convert trial loan modifications to permanent modifications, despite borrowers having successfully completed the trial loan modification terms. Perhaps most importantly the CFPB acknowledged in its report that rejection of the permanent modification causes damages to borrowers because interest accrues at the original contract rate, which is higher than the trial modification rate, and late fees are tacked on as well.

 

    • Loan modification denial notices – Loan modification denial letters continue to have errors. Among the errors is that “one or more servicers failed to state the correct reason(s) for denying a trial or permanent loan modification option as required.” Moreover, many servicers are failing to advise borrowers that they have the right to appeal the loan modification denial, a failure which often results in major consequences since under RESPA borrowers only have a limited time to appeal their denial.· Servicing policies, procedures, and requirements – The CFPB found that servicers have failed to follow policies and procedures instituted to obtain the following objectives: “providing timely and accurate information; properly evaluating loss mitigation applications; facilitating oversight of and compliance by service providers; and facilitating transfer of information during servicing transfers.” RESPA requires that servicers maintain written policies and procedures for how they will comply with the above objectives. Yet, despite this requirement, many borrowers still are unable to acquire servicing records from lenders, even when the request is in the form of a QWR (Qualified Written Request). It seems clear from the CFPB report that banks are failing to provide their policies and procedures not because they fear revealing trade secrets, but because they don’t actually have policies in place to ensure compliance with federal law.
  • Servicing transfers – According to the CFPB “one or more servicers failed to honor the terms of in-place trial modifications after transfer. Some borrowers who completed trial payments with the new servicer nevertheless encountered substantial delays before receiving a permanent loan modification.” This is among the biggest complaints voiced by homeowners. Repeatedly I have encountered situations where a borrower has honored a trial loan modification for six months, and then immediately following the final payment the borrower’s loan is transferred to a different servicer. And, lo and behold, that servicer announces that they will not honor the trial modification.

Attorneys such as myself who defend borrowers against loan servicing violations have encountered all five of the above issues addressed in the CFPB report. The benefit of the CFPB report is that it proves these violations are not “one-offs”; they are part of a systematic practice across the industry. The CFPB continues to apply pressure to the servicing industry, but it is clear that government oversight alone has not motivated loan servicers to be compliant with the law. The only way to ensure compliance and to prevent a loan servicer from causing injury to a home owner is to bring suit when violations occur. The consumer law landscape that includes RESPA is intended to be enforced by individuals. By exposing industry-wide abuses, the CFPB has provided consumers an excellent tool to fight for their own rights by exposing individual offenses in the context of macro-abuses.

Time-Bar Invoked in Mortgage Foreclosure Action

July 12th, 2016 by

Max Mitchell, New Jersey Law Journal 

mphillips007

Wading into the rarely-invoked statute of limitations for mortgage foreclosure actions in New Jersey, a Bergen County judge has barred a mortgage company from filing a foreclosure action, finding that the suit was brought outside the statute of limitations.

In a recent decision made public Monday, Bergen County Superior Court Judge Edward A. Jerejian determined that a mortgage company seeking to file a foreclosure complaint was time-barred because it filed the suit more than six years after the maturity date outlined in the mortgage. As part of the ruling, Jerejian also determined that the statute of limitations law, which took effect in August 2009, should be applied retroactively.

“Although the legislature did not specify whether the statute should be applied retroactively, N.J.S.A. 2A:50-56.1 is meant to be curative, and provide guidance on an issue that was previously unaddressed,” Jerejian said in Anim Investment v. Shalhoub.

Although the mortgage company had contended that section (c) of that statute, which provides for a 20-year statute of limitations starting from the date of default, Jerejian ultimately determined that section (a), which provides for a six-year statute of limitations starting from the last payment or the maturity date in the mortgage, would apply in the case.

Attorney Myron D. Milch, who represented the defendants, George and Kathleen Shalhoub, said the ruling will provide guidance on an issue that has not been addressed by the courts.

“It clarifies the law with respect to the statute of limitations,” he said.

Arnold G. Shurkin, who represented Anim Investment, however, said he felt Jerejian applied the law improperly, and that the six-year statute of limitations only applied to suits on the mortgage note itself.

“The judge said the six-year statute applies to mortgage foreclosures, which makes the 20-year and the 36-year statutes of limitation don’t apply to anything,” he said. “We’re not suing anybody, we’re just foreclosing.”

Shurkin added that he plans to appeal the decision.

According to Jerejian, the Shalhoubs borrowed $178,100 from Mina Investment Co. in September 1990. The Shalhoubs, Jerejian said, defaulted on their first payment in November 1990.

The mortgage was later assigned to Anim Investment, and the company filed its complaint against the Shalhoubs on Aug. 31, 2015. The Shalhoubs then filed a summary judgment motion, claiming the action was barred under the statute of limitations.

The parties initially agreed that the 20-year statute of limitations should be applied from the default date but disputed whether the default date should be applied as the maturity date stated in the mortgage, which was Oct. 1, 1995, or the date of the first missed payment.

Jerejian, however, noted that, under N.J.S.A. 2A:50-56.1, the statute of limitations begins to run at the earliest of several possible dates, including six years from the date for making the last payment or the maturity date, or 20 years from the date on which the debtor defaulted.

After additional briefing in the case, the mortgage company argued that the six-year statute of limitations under subsection (a) did not apply. The company further argued that the U.S. District Court for the District of New Jersey’s 2015 decision in Specialized Loan Service LLC v. Washingtonmeant that subsection (c), which outlines the 20-year limitation period, applied to the case.

Jerejian said that decision dealt with the definition of “accelerated” but did not support the company’s argument that subsection (a) applied only to lawsuits for damages, or that the 20-year statute of limitations applied.

Section (a), Jerejian said, is “unambiguously” defined as a six-year statute of limitations starting from the maturity date outlined in the mortgage note.

“The court sees no reason why acceleration would change the commencement of the limitations period from that date,” Jerejian said. “Here, maturity date states on the note and mortgage is Oct. 1, 1995. Applying the plain language of the limitations period described in subsection (1), an action to foreclose on the mortgage is timely as long as it is commenced no later than Oct. 1, 2001.”

Max Mitchell can be contacted at 215-557-2354 or [email protected] Follow him on Twitter @MMitchellTLI.

July 12th News of the Week HUD Accountability Hearing

July 12th, 2016 by

HUD Accountability Hearing, Full House Financial Services Committee Hearing, Wednesday, July 13, 10 a.m EST

Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, on Thursday  to appear before his Committee to answer questions about the effect of recent changes to HUD’s delinquent loan sales program on taxpayers. The HUD Secretary accepted the invitation and will testify in a committee before the full House Financial Services Committee on Wednesday.

Tuesday, July 12

May 2016 National Foreclosure Report, CoreLogic

Wednesday, July 13

HUD Accountability Hearing, House Financial Services Committee, 10 a.m. EST

Thursday, July 14

JPMorgan Chase Q2 earnings report

Friday, July 15

Q2 earnings reports for Citi, PNC, U.S. Bank, and Wells Fargo

FCRT: CFPB Reveals Mortgage Servicing Problems

July 5th, 2016 by

In this episode of the FCRT Adam Deutsch discusses the CFPB supervisory report on the mortgage servicing industry. He reviews the report and provides additional insight for homeowners in relation to RESPA , the Real Estate Settlement and Procedures Act.

In this eleventh issue of Supervisory Highlights, (6/23/16) we share findings from recent supervisory examination observations in mortgage servicing.

To provide additional context for readers, we integrate these recent observations with observations from previous editions of Supervisory Highlights by subject matter – loss mitigation acknowledgement notices; loss mitigation offers and related communications; loan modification denial notices; policies and procedures; and servicing transfers.  The report also discusses Supervision’s approach mortgage to servicing exams, including a description of recent changes to the mortgage servicing chapter of the CFPB Supervision and Examination Manual.

CFPB Announcement of the Supervisory Report

Extract from the Introduction of the Report:

Mortgage servicers play a central role in homeowners’ lives by managing their mortgage loans. Servicers collect and apply payments, work out modifications to loan terms, and handle the difficult process of foreclosure. As the financial crisis made clear, weak customer support, lost paperwork, and mishandled accounts can lead to many wrongful foreclosures and other serious harm.

Since consumers do not choose their mortgage servicers they cannot take their business elsewhere. To improve practices in the servicing market, the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) imposed new requirements on servicers and gave the Consumer Financial Protection Bureau (CFPB) the authority to implement those new requirements and adopt additional rules to protect consumers.

The CFPB released rules, effective January 10, 2014, to improve the information consumers receive from their servicers, to enhance the protections available to consumers to address servicer errors, and to establish baseline servicing requirements that provide additional protections for consumers who have fallen behind on their mortgage payments. Supervisory examinations of mortgage servicers now generally focus on reviewing for compliance with these servicing rules and for unfair, deceptive, and abusive acts or practices.

 

Download the full report here from this

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