Mortgage Lending, Servicing + Banking

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On April 24, the Consumer Financial Protection Bureau (CFPB or Bureau) released a special edition of its Supervisory Highlights report focusing on examinations of the residential mortgage servicing market that were completed between April 1, 2023 and December 31, 2023. According to the report, the CFPB found instances of mortgage servicers charging illegal fees, such as prohibited property inspection fees, and sending deceptive notices to homeowners. Examiners also found servicers violating Regulation X’s loss mitigation rules.

The U.S. Court of Appeals for the Ninth Circuit recently reversed a district court’s ruling, which had denied a motion to compel arbitration of Opportunity Financial (OppFi) on the basis that the arbitration clause was substantively unconscionable due to the choice of law provision in the loan agreement containing the arbitration clause. The Ninth Circuit vacated the decision and directed the district court to refer the matter to arbitration.

Yesterday, three trade organizations filed a complaint in Colorado federal court challenging H.B. 1229, Colorado’s effort to limit interest charges by out-of-state financial institutions, which is set to take effect on July 1, 2024. As discussed here, in June 2023, Colorado passed H.B. 1229, limiting certain charges on consumer loans and simultaneously opting Colorado out of §§ 521-523 of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA). Sections 521-523 of DIDMCA empower state banks, insured state and federal savings associations and state credit unions to charge the interest allowed by the state where they are located, regardless of where the borrower is located and regardless of conflicting state law (i.e., “export” their home state’s interest-rate authority). However, § 525 of DIDMCA enables states to opt out of this rate authority with respect to loans made in the opt-out state.

On March 18, Nacha, the organization that governs the ACH network, announced that its members approved a new set of rules aimed at reducing the incidence of frauds, such as business email compromise (BEC), that exploit credit-push payments. These rules establish a base level of ACH payment monitoring for all parties in the ACH Network, excluding consumers. While these rules do not alter the liability for ACH payments, they do, for the first time, assign a defined role to receiving depository financial institutions (RDFIs) in monitoring the ACH payments they receive.

On March 18, Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB), submitted comments to the Appraisal Subcommittee (ASC) regarding its oversight of The Appraisal Foundation. Director Chopra, who serves as a voting member of the Federal Financial Institutions Examination Council (FFIEC) and has been the designated executive sponsor for the ASC since 2022, highlighted several concerns about The Appraisal Foundation’s governance and conflict of interest policies.

The United States District Court for the District of Maryland recently denied a mortgage servicer’s motion to dismiss a putative class action claim pursuant to the Real Estate Settlement Procedures Act (RESPA) § 2605(g), providing insight as to what is required to state a claim for statutory damages with respect to alleged mishandling of escrow accounts.

On February 12, ten Rhode Island senators introduced S 2275, a bill proposing to opt Rhode Island out of §§ 521-523 of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA). On February 13, HF 3680 was introduced in Minnesota, proposing to opt-out of DIDMCA expressly as to non-credit card forms of credit. These legislative efforts to opt-out of DIDMCA, coupled with the influx in recent “true lender” legislation, seem to show a coordinated effort to restrict bank-model lending.

The U.S. Department of Education (ED) recently announced the approval of an additional $4.9 billion in student loan forgiveness for 73,000 individuals. The relief was provided through several modifications to the income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PLSF) programs. To date, the Biden Administration has forgiven $136.6 billion in student loans for more than 3.7 million borrowers.