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News By Edition
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RESPA News Monthly Edition
RESPA News Monthly
June 2013
This month RESPA News takes a look at a CFPB investigation into mortgage marketing and advertising. In addition, we tell you about a CFPB enforcement action against a Texas homebuilder for alleged RESPA violations. Also this month, we provide you with an in-depth review of some important RESPA basics including how to have a compliant affiliated business arrangement and a thorough discussion of Section 8 kickbacks, unearned fees and exemptions. In its June edition, RESPA News examines a variety of RESPA lawsuits including some involving sham AfBAs and alleged illegal kickbacks. We take a look at a state enforcement action against a company for apparent RESPA violations. We also tell you about Sen. Elizabeth Warren’s suggestion that agencies should consider filing lawsuits against alleged violators of consumer financial laws, rather than rely on settlement agreements and consent orders. Also this month, we provide you with informative RESPA tips. Be sure to check out the June 2013 issue for these articles and more. |
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Georgia homeowners allege attorneys, VMC violated RESPA
Posted Date: Tuesday, May 28, 2013
In two class action lawsuits, Georgia homeowners sued vendor management companies and their attorneys, alleging the companies engaged in the unauthorized practice of law, and made claims for violations of RESPA, racketeering and Georgia’s good funds statute. Read on to find out more.
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Mortgage servicing lawsuit against BofA survives motions to dismiss
Posted Date: Tuesday, May 28, 2013
A couple filed suit against Bank of America NA, alleging the bank failed to respond to the couples’ qualified written requests as required under RESPA. The bank filed a motion to dismiss, arguing that the couple did not correctly state their claim. The court found that the claim was adequately plead and denied the motion. Read on to find out more.
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State agency disciplines company for fraudulent HUD-1s
Posted Date: Tuesday, May 28, 2013
The Maryland Commissioner of Financial Regulation disciplined a company that conducted mortgage-related business, alleging that the company placed fraudulent fees on the HUD-1 settlement statement without the lender’s knowledge and without performing actual services.
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Poll respondents split on social media use
Posted Date: Tuesday, May 28, 2013
In an April/May poll, RESPA News asked readers if they used social media to market their services. Though social media is useful, there are regulatory concerns to be aware of.
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Mortgage servicers distribute more than $50 billion to consumers
Posted Date: Thursday, May 23, 2013
In a recent statement, U.S. Department of Housing and Urban Development Secretary Shaun Donovan said that the National Mortgage Settlement has surpassed expectations. So far, more than $50 billion has been distributed to approximate 620,000 homeowners.
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State regulators and CFPB establish supervisory coordination framework
Posted Date: Thursday, May 23, 2013
At the Conference of State Bank Supervisors State-Federal Supervisory Forum in Nashville, the CSBS and CFPB signed a framework establishing a process for coordination on supervision and enforcement matters. The framework builds upon a 2011 memorandum of understanding between the CFPB, CSBS and a variety of financial regulatory agencies and regulatory associations.
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Uniform state test guidance released for loan originators
Posted Date: Thursday, May 23, 2013
The Consumer Financial Protection Bureau issued a one-page guidance regarding whether states are allowed to use the uniform state test developed by the National Licensing System and Registry as part of the qualified written test that is required by the SAFE Act.
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RESPA basics: Required use, mortgage servicing and other requirements
Posted Date: Thursday, May 23, 2013
In the first three parts of this four-part series, RESPA News has covered Section 8 violations and exceptions, affiliated business arrangements and penalties for RESPA violations. This final part provides a summary review of other RESPA sections and issues to be aware of. Specifically, we take a look at the required use prohibition under Section 9, the servicing requirements under Section 6 and some of the other requirements under RESPA.
In 1974, Congress passed RESPA to help keep settlement costs down by targeting illegal unearned fees, splits of fees, referral fees and kickbacks. RESPA is also meant to provide more effective disclosures to homebuyers and sellers regarding settlement costs and reduce the amounts homebuyers are required to place into escrow accounts. The law is complex; however, there are some key points that everyone working in the settlement services industry should be aware of and understand. In this series of articles, RESPA News will provide a review of those important RESPA issues including kickbacks, splitting of unearned fees, affiliated business arrangements, penalties, enforcement and more.
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Warren suggests that settlement actions aren’t enough
Posted Date: Monday, May 20, 2013
In a May 14 letter to Federal Reserve Board Chairman, Ben Bernanke, Attorney General Eric Holder and Securities and Exchange Commission Chairman, Mary Jo White, Sen. Elizabeth Warren, D-Mass., suggested that relying on settlement agreements and consent orders to enforce possible violations may not be sufficient.
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Third Circuit sides with D.C. Circuit over recess appointments
Posted Date: Monday, May 20, 2013
In January 2012, while Congress was in session but on a short adjournment, President Barack Obama appointed three members of the National Labor Relations Board, ostensibly using his power under the recess appointments clause of the U.S. Constitution. The U.S. Court of Appeals for the D.C. Circuit held on Jan. 25, in the case of Noel Canning v. National Labor Relations Board, that the appointments were invalid because the Senate was not in a recess between congressional sessions. In a similar case, the 3rd Circuit has agreed with the D.C. Circuit’s interpretation of the Recess Appointment Clause of the U.S. Constitution.
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Homebuilder pays $100K penalty for alleged sham AfBA
Posted Date: Monday, May 20, 2013
In a settlement with the Consumer Financial Protection Bureau, Texas homebuilder, Paul Taylor, agreed to pay more than $100,000 for allegedly using a sham affiliated business arrangement to receive kickbacks for the referral of mortgage origination business in violation of RESPA Section 8(a). The bureau said it became aware of Taylor’s conduct through a referral from the Federal Deposit Insurance Corporation.
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Captive reinsurance class action hits a snag
Posted Date: Thursday, May 16, 2013
A federal district court dismissed a class action alleging a RESPA violation involving a captive reinsurance arrangement. The plaintiffs alleged that JP Morgan Chase had an arrangement where it required borrowers to purchase private mortgage insurance from certain insurers and then required the insurers to pay a portion of the inflated premiums to one of its subsidiaries. The plaintiffs claimed the subsidiary did not take on any of the risk and that the arrangement violated RESPA. Read on to find out why the court dismissed the claims.
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RESPA basics: Penalties, enforcement and investigations
Posted Date: Wednesday, May 15, 2013
In part three of this RESPA basics multi-part series, RESPA News reviews the penalties that come with violating RESPA, along with enforcement powers and current investigations. The Consumer Financial Protection Bureau took over regulatory authority of RESPA in July 2011. It has significant investigatory and enforcement powers not only under RESPA, but also from the Dodd-Frank Act. The bureau has made no secret that it is watching for, and currently investigating, possible RESPA violations.
In 1974, Congress passed RESPA to help keep settlement costs down by targeting illegal unearned fees, splits of fees, referral fees and kickbacks. RESPA is also meant to provide more effective disclosures to homebuyers and sellers regarding settlement costs and reduce the amounts homebuyers are required to place into escrow accounts. The law is complex; however, there are some key points that everyone working in the settlement services industry should be aware of and understand. In this series of articles, RESPA News will provide a review of those important RESPA issues including kickbacks, splitting of unearned fees, affiliated business arrangements, penalties, enforcement and more.
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Would your marketing agreements pass a CFPB review?
Posted Date: Monday, May 13, 2013
Much has changed in the way of marketing agreements in the past decade. With the CFPB at the helm, new regulations, an interpretive rule and the volatilities of the market, title insurance, mortgage, real estate and settlement services professionals need to be on alert with how they are structuring marketing agreements. Read on for information on a training webinar that will cover minimizing your risks with marketing agreements, recognizing red flags and much more.
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NY bill requires signed mortgage bill of rights
Posted Date: Monday, May 13, 2013
A proposed bill in New York State would require mortgage lenders and brokers to provide consumers with a bill of rights pamphlet before the consumer proceeds with an application for a mortgage that is secured by residential property.
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QWR creates inference that attorney acted as couple’s agent
Posted Date: Monday, May 13, 2013
Two borrowers sued Wells Fargo, arguing that the bank failed to respond to their qualified written request in violation of RESPA. Wells Fargo filed a motion to dismiss, setting forth a number of arguments, including that the couple’s attorney sent the QWR and that the couple did not provide authorization for the bank to release loan information to the attorney. The bank also said the letter was not a valid QWR because it pertained to the couple’s payments under a bankruptcy plan rather than Wells Fargo’s servicing of the mortgage under the loan agreement. Read on to find out why the court denied the bank’s motion to dismiss.
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Court questions P.O. Box as separate address for receipt of QWRs
Posted Date: Monday, May 13, 2013
In a lawsuit against her mortgage servicer, a borrower argued that the servicer failed to properly investigate and respond to her qualified written requests. The servicer argued that it had a separate address set up for QWRs and that the borrower did not send her letters there. Both parties filed motions for summary judgment, which the court denied, finding that questions of material fact remained. In its opinion, the court questioned whether the servicer’s use of a P.O. Box as a separate address for receipt of QWRs satisfies regulatory requirements.
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RESPA basics: Kickbacks, unearned fees and exemptions
Posted Date: Monday, May 13, 2013
In part two of this RESPA basics multi-part series, RESPA News reviews Section 8 and the prohibition against kickbacks and unearned fees, as well as exceptions to the law. It’s important to understand the statutory language and what activities will constitute a violation. Certain actions, like paying for a referral of business, or giving a gift or discount for a referral of business, can get you in hot water with the Consumer Financial Protection Bureau.
In 1974, Congress passed RESPA to help keep settlement costs down by targeting illegal unearned fees, splits of fees, referral fees and kickbacks. RESPA is also meant to provide more effective disclosures to home buyers and sellers regarding settlement costs and reduce the amounts home buyers are required to place into escrow accounts. The law is complex; however, there are some key points that everyone working in the settlement services industry should be aware of and understand. In this series of articles, RESPA News will provide a review of those important RESPA issues including kickbacks, splitting of unearned fees, affiliated business arrangements, penalties, enforcement and more.
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Fannie, Freddie to purchase only Qualified Mortgages
Posted Date: Thursday, May 9, 2013
The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac future mortgage acquisition will be limited to loans that meet the requirements for a qualified mortgage.
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National Mortgage Settlement causes legal problems for Wells Fargo, BofA
Posted Date: Thursday, May 9, 2013
New York State Attorney General Eric Schneiderman said his office believes Bank of America and Wells Fargo violated the 2012 National Mortgage Settlement by failing to adhere to standards relating to the timeline for processing mortgage modifications. According to Schneiderman, his office is preparing to sue the two banks for failing to comply with the settlement.
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Four people indicted in RESPA-related mortgage fraud scam
Posted Date: Thursday, May 9, 2013
Three Nevada residents and one California resident were indicated by a grand jury on several felonies in connection with their operation of an alleged mortgage lending fraud scam. As part of the scam, the defendants allegedly sold a forensic audit to clients, promising that if the audit found one or more RESPA violations, the clients would be entitled to a legal remedy that would eliminate their mortgage obligation.
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RESPA basics: Affiliated business arrangements
Posted Date: Thursday, May 9, 2013
In part one of this RESPA basics multi-part series, RESPA News reviews the law surrounding affiliated business arrangements. RESPA Sections 8(a) and (b) generally prohibit referral fees, kickbacks and the splitting of unearned fees in exchange for providing a settlement service. As with most laws, however, there are exceptions. Section 8(c) provides a list of fees, compensation and payments that are allowed under the law. One of those exceptions is AfBAs. Read on for a refresher on how to have an AfBA and remain compliant.
In 1974, Congress passed RESPA to help keep settlement costs down by targeting illegal unearned fees, splits of fees, referral fees and kickbacks. RESPA is also meant to provide more effective disclosures to home buyers and sellers regarding settlement costs and reduce the amounts home buyers are required to place into escrow accounts. The law is complex; however, there are some key points that everyone working in the settlement services industry should be aware of and understand. In this series of articles, RESPA News will provide a review of those important RESPA issues including kickbacks, splitting of unearned fees, affiliated business arrangements, penalties, enforcement and more.
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New guidance explains RESPA-related rules
Posted Date: Monday, May 6, 2013
New guidance released by the Consumer Financial Protection Bureau instructs small business entities on how to comply with three regulations the bureau finalized earlier this year. The compliance guides also contain information on portions of the rules that are related to RESPA.
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Sham affiliated business arrangement case against Wells Fargo continues
Posted Date: Monday, May 6, 2013
A group of defendants in the class action Minter v. Wells Fargo filed motions to certify a question of law to the 4th U.S. Circuit Court of Appeals, dismiss the claims and decertify the classes. The plaintiffs claim that the defendants, Wells Fargo, Long & Foster Real Estate and Prosperity Mortgage Co., formed a sham affiliated business arrangement in violation of RESPA. Read on to find out what the court decided.
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Bill seeks to increase small servicer exemption
Posted Date: Monday, May 6, 2013
A new bill introduced in the U.S. House of Representatives seeks to amend RESPA by adding an increased small servicer exemption. If passed, the exemption would significantly increase the number of mortgages that an entity can service while still being considered a small servicer.
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Former DocX president to serve up to 20 years in prison
Posted Date: Monday, May 6, 2013
Lorraine Brown, the former president of mortgage document processor DocX, was sentenced to serve up to 20 years in prison for her role in a authorizing the fraudulent signing of mortgage documents filed in Michigan.
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President nominates new FHFA leader
Posted Date: Thursday, May 2, 2013
President Obama announced on May 1 that he will nominate Rep. Mel Watt to lead the Federal Housing Finance Agency. As the head of the FHFA, Watt will have regulatory authority over Fannie Mae and Freddie Mac. There have been indications, however, that Senate Republicans will block Watt’s confirmation.
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CFPB investigates mortgage advertising and marketing
Posted Date: Thursday, May 2, 2013
At least one company has received a civil investigative demand from the Consumer Financial Protection Bureau regarding the company’s mortgage advertising business. According to the CID, the bureau is conducting an investigation into whether mortgage lenders are engaging in advertising or marketing practices that are in violation of several consumer financial protection laws including RESPA.
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Borrower sues over alleged inflated appraisal scheme
Posted Date: Thursday, May 2, 2013
A residential mortgage loan borrower alleged that his mortgage broker joined with an appraisal company in an illegal scheme to inflate appraisals in order to induce borrowers to enter into high-cost, adjustable-rate mortgages that they were unable to afford. The borrower also alleged that the broker received a yield spread premium from the mortgage lender as a kickback for securing a loan with a higher interest rate. The lower court dismissed the claims, but a federal appeals court disagreed.
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Obama administration takes recess appointment argument to the Supreme Court
Posted Date: Tuesday, April 30, 2013
The Obama administration has asked the U.S. Supreme Court to clarify the president’s recess appointment power and to decide once and for all if the president has the power to fill government vacancies during a recess when the Senate is in session. The Supreme Court’s response could have an effect on Richard Cordray’s appointment to the Consumer Financial Protection Bureau.
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