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News By Edition
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RESPA News Monthly Edition
RESPA News Monthly September 2014
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Marketing agreements refresher: Is your MSA RESPA compliant?
Posted Date: Thursday, August 28, 2014
For some time, there has been talk about a possible marketing services agreement (MSA) enforcement action coming from the Consumer Financial Protection Bureau (CFPB). So far, nothing has come down the pike. However, there have been some rumblings within the industry about current, ongoing MSA investigations. With the CFPB out there in search of RESPA violations, now is a good time to make sure your MSA is compliant.
First, consider the prohibitions under RESPA.
RESPA Section 8(a) states that the payment or receipt of kickbacks for the referral of settlement service business is a violation. Section 8(b) provides that splitting charges for services that are not rendered is not allowed.
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Mortgage disclosure forms: Time is of the essence
Posted Date: Monday, July 21, 2014
By now, the settlement services industry is aware of — or at least, it should be aware of — the changes to the closing process that will occur beginning Aug. 1, 2015, when the new integrated, five-page Closing Disclosure form must be provided to consumers three days before consummating a mortgage transaction. But Mary Schuster, chief product officer at RamQuest Inc. and president of Op2, has another deadline she suggests the industry meet.
“The date you need to get at least a first pass at these working forms in your systems needs to be no later than the first quarter of 2015,” Schuster told attendees of October Research, LLC’s 10thAnnual National Settlement Services Summit (NS3).
During a session on June 11 titled “The New Mortgage Disclosure Forms: Chart Your Course for Implementation,” Schuster told attendees that although August 2015 is more than a year away, having conversations with your software provider at this time is critical.
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RESPA violations that could lead to prison time
Posted Date: Friday, August 1, 2014
When you envision the consequences of a RESPA violation, prison time may not be the first thing you consider. Instead, you may be worrying about the hefty fines the Consumer Financial Protection Bureau (CFPB) can dole out for violations of federal consumer protection laws. Indeed, civil penalties are certainly nothing to scoff at. With the ability to fine a company up to $1 million a day, the CFPB has the power to stop a business in its tracks.
It’s important to recognize, however, that monetary penalties are not the only concern. Jail time could also result from certain RESPA violations.
First, consider Section 8 of RESPA. This section contains the prohibitions against kickbacks and unearned fees
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Need RESPA answers? Don’t forget about HUD
Posted Date: Monday, August 11, 2014
RESPA is nearly a 40-year-old law and over the years, the U.S. Department of Housing and Urban Development (HUD) has developed a stockpile of guidance that still can be helpful in finding answers to your RESPA questions.
The Consumer Financial Protection Bureau (CFPB) took over regulatory authority of RESPA in July 2011. Before that, HUD was the RESPA regulator, and during its time as the RESPA regulatory agency, HUD provided guidance, issued statements of policy and entered into settlement agreements. When the CFPB took over, it said that it would apply the official commentary, guidance and policy statements issued by the agencies that regulated the laws it was inheriting.
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Trade groups successfully urge CFPB to extend comment period for public complaints proposal
Posted Date: Thursday, July 24, 2014
The Financial Services Roundtable, American Bankers Association, Consumer Bankers Association, The Clearing House and U. S. Chamber of Commerce are urging the Consumer Financial Protection Bureau (CFPB) to extend the comment period for the bureau’s proposed policy allowing consumers to publicly compliant about financial services companies. On July 29, the bureau said in a release that it is extending the comment period from Aug. 22 to Sept 22 — 60 days from the date the proposed policy was published in the Federal Register.
The bureau initially proposed a new policy on July 16 that would allow consumers to publicly complain about financial products and services by sharing their personal account of an incident on the bureau’s online Consumer Complaint Database. The proposal allowed for a 30-day comment period.
“The proposal raises many serious legal and practical issues and 30 days is simply not enough time for us and our members to analyze and respond to the proposal,” the groups said. “The associations request that the bureau extend the comment period to not less than 90 days following publication in the Federal Register.”
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Chamber of Commerce urges detailed audit of CFPB consumer complaint database
Posted Date: Wednesday, August 6, 2014
The Federal Reserve’s Office of Inspector General has a project underway to audit the Consumer Financial Protection Bureau’s public consumer complaint database. The U.S. Chamber of Commerce commended the OIG’s decision to review the database and urged the office to analyze a group of specific issues.
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New lawsuit against Creig Northrop Team and Long & Foster filed in federal court
Posted Date: Monday, August 11, 2014
The Creig Northop Team PC and Long & Foster Real Estate Inc. already are embroiled in a legal battle in federal court regarding alleged RESPA violations. On Aug. 1, a new group of plaintiffs filed a similar lawsuit against the two companies.
Nancy Wade and Janice Rulli filed a purposed class action suit in the U.S. District Court for the District of Maryland against the companies, alleging that Long & Foster participated in a scheme in which the Creig Northrop Team and Creig and Carla Northrop received $1.3 million in illegal kickbacks from Lakeview Title Company Inc.
The plaintiffs alleged that the defendants used a sham employment arrangement and sham marketing agreement to accomplish the scheme.
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Appeals court finds in favor of Wells Fargo in ongoing RESPA case
Posted Date: Thursday, August 7, 2014
A group of plaintiffs filed a class action suit against Wells Fargo and Long & Foster, alleging violations of RESPA. Wells Fargo and Long & Foster won at the trial level, but the plaintiffs argued that a new trial was necessary because of an alleged admission during the closing arguments. The lower court disagreed and the plaintiffs appealed to the U.S. 4th Circuit Court of Appeals.
Plaintiffs Denise Minter, Jason and Rachel Alborough and Lizbeth Binks brought a class action suit in the U.S. District Court for the District of Maryland, against Wells Fargo and Long & Foster Real Estate, alleging violations of RESPA Sections 8(a) and 8(c).
Specifically, the plaintiffs claimed that the defendant created a joint venture, Prosperity Mortgage Co., to circumvent RESPA’s prohibition against kickbacks in exchange for the referrals of settlement service business. The plaintiffs alleged that Prosperity was a sham affiliated business arrangement (AfBA). In addition, the plaintiffs alleged that the defendants failed to disclose the arrangement to their customers.
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9th Circuit reviews RESPA mark-up, thing of value, equitable tolling issues
Posted Date: Thursday, July 31, 2014
A couple sued Countrywide Financial Corp. for alleged violations of RESPA. The borrowers alleged that the lender violated RESPA by marking up third-party services and inflating appraisal values and requested the court allow them to equitably toll their claims. These were issues of first impression for the 9th Circuit.
The appeals court declined to decide the mark-up and inflated appraisal issues until they were more fully developed in the lower court. In addition, the 9th Circuit determined that RESPA claims can be equitably tolled.
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Federal court lacked jurisdiction over RESPA foreclosure action
Posted Date: Monday, July 21, 2014
After a North Carolina court clerk filed an order authorizing the foreclosure sale of his property, a borrower filed suit in federal court against the holder of his note, alleging violations of RESPA. The court determined that it lacked jurisdiction over the matter.
Washington Mutual sent plaintiff Larry Baxter a notice of intent to foreclose on Nov. 17, 2008. The clerk entered an order authorizing the foreclosure sale, indicating in the order that the property’s note and deed were held by JP Morgan Chase & Co., that Baxter had defaulted and that Chase had the authority to foreclose.
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QWR damages could include expenses incurred before servicer fails to respond
Posted Date: Thursday, July 31, 2014
In a RESPA action against Chase Home Finance LLC regarding an alleged failure to respond to a borrower’s qualified written request, the court determined that all expenses attributed to Chase’s purported violation, including those incurred before its failure to respond, are considered actual damages.
Christine Marais obtained a refinancing loan on her home in 2006, and Chase Home Finance LLC became the loan servicer. According to the note, the monthly payments were set at $1064.80.
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Court finds non-owner occupied property used for family purpose subject to RESPA
Posted Date: Friday, August 1, 2014
A borrower who purchased a home for his daughter sued his mortgage loan servicer for charging him inappropriate late fees and failing to adequately respond to his qualified written request (QWR). The bank argued that the property was not covered under RESPA because the loan was taken for a business purpose. The court disagreed, finding that the loan was not exempt from RESPA.
Samuel Friedman obtained a mortgage loan from Maspeth Federal Loan and Savings Association to purchase a single-family home that was adjacent to his residential property. His daughter and son-in-law and their children moved into the home after the purchase and have been the only residents of the property.
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Court considers whether QWRs can be sent to servicer’s counsel
Posted Date: Friday, August 1, 2014
A borrower sued his mortgage loan servicer for a RESPA violation for allegedly failing to respond to his qualified written request (QWR). The servicer argued the letter was not a valid QWR because it was not sent to the designated QWR address. The borrower argued, however, that he was told to send all inquiries regarding his loan to the servicer’s attorney because his loan was in foreclosure. The court found that only payments were to be sent to the servicer’s counsel and that the borrower’s letter was not a QWR because it was sent to the wrong address.
David Moody sued his mortgage servicer and its law firm for violations of RESPA and the Racketeer Influenced and Corrupt Organizations Act, common law fraud and declaratory judgment.
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CFPB celebrates its third anniversary
Posted Date: Thursday, July 24, 2014
On July 21, the Consumer Financial Protection Bureau (CFPB) celebrated its third anniversary.
In a blog post, the agency reviewed its achievements since it opened its doors in 2011, which include launching a system to collect consumer complaints, finalizing new mortgage rules, drafting integrated mortgage disclosure forms, starting an eClosing project and filing numerous enforcement actions.
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Feds file lawsuits against alleged foreclosure relief scammers
Posted Date: Thursday, July 24, 2014
The Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) and 15 states announced a sweep against alleged foreclosure relief scammers that used deceptive marketing tactics to rip off distressed homeowners across the country. The bureau is filing three lawsuits against companies and individuals that purportedly collected more than $25 million in illegal advance fees for services that falsely promised to prevent foreclosures or renegotiate troubled mortgages. The CFPB is seeking compensation for victims, civil fines and injunctions against the alleged scammers. Separately, the FTC is filing six lawsuits, and the states are taking 32 actions.
“We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure,” said CFPB Director Richard Cordray. “These companies pocketed illegal fees — taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began. These practices are not only illegal, they are reprehensible.”
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Mo. court grants summary judgment to IndyMac in QWR case
Posted Date: Friday, August 22, 2014
A Missouri federal court has granted summary judgment to IndyMac Mortgage Services in a case where the plaintiffs allege the company failed to properly respond to its qualified written request for information on the servicing of their mortgage loan, in violation of RESPA 2605(e)(2)(5)(i). However, in the case of Vitela v. Indymac Mortgage Services (U.S. District Court, E.D. Missouri, Eastern Division, No. 4:13–CV–747–JAR), IndyMac was able to prove otherwise.
In April 2007, George and Laura Vitela secured a $191,700 loan from Newcastle Mortgage Corp. and signed an adjustable rate note secured by a deed of trust on property in Ballwin, Mo. In March 2009, IndyMac, a division of OneWest Bank FSB, began servicing the loan.
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Organization launches campaign targeting CFPB complaint portal
Posted Date: Friday, August 22, 2014
The Financial Services Roundtable (FSR) has launched a multimedia campaign targeting the Consumer Financial Protection Bureau’s (CFPB) proposal to start publishing consumer complaints about financial products on the agency’s online Consumer Compliant Database.
According to FSR, the bureau’s plan runs the risk of spreading misinformation.
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Michigan man pleads guilty to mortgage fraud
Posted Date: Friday, August 22, 2014
U.S. Attorney Patrick Miles announced that Richard Hollern, of Grand Ledge, Mich., pled guilty to a conspiracy to commit bank fraud in connection with his ownership in CDC Investments. The guilty plea occurred before U.S. District Judge Robert Holmes Bell.
Hollern faces up to five years in prison. Sentencing in the case is scheduled for Dec. 1.
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QWR or not? Maryland court decides
Posted Date: Thursday, August 21, 2014
A homeowner’s dispute over whether his mortgage loan servicer possessed an original copy of his mortgage note signed by both he and his wife resulted in his attempt to seek relief under RESPA Section 2605(e) after his mortgage fell into foreclosure. The case hinged upon whether his attempts to resolve the authenticity of the note constituted a qualified written request under that portion of the statute.
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Four Texas defendants sentenced to prison for mortgage fraud
Posted Date: Thursday, August 21, 2014
Four Dallas-area individuals, along with a defendant from Georgia, who were convicted for their roles in a mortgage fraud scheme that caused more than $3 million in losses to lenders, have been sentenced, announced U.S. Attorney Sarah Saldaña of the Northern District of Texas.
On Aug. 15, Jarrod Jamiel Williams was sentenced by U.S. District Judge Barbara Lynn to 87 months in federal prison and ordered to pay approximately $3.6 million in restitution. He pleaded guilty in January to one count of conspiracy to commit wire fraud affecting a financial institution.
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HUD, Treasury release July House Scorecard
Posted Date: Thursday, August 21, 2014
The U.S. Department of Housing and Urban Development (HUD) released the July edition of the Obama Administration’s Housing Scorecard. The latest data show progress among key indicators, including a rebound in the sale of existing homes and the continuing downward trend of foreclosure starts and completions.
Although this scorecard notes positive overall trends in the housing market, officials caution that more work needs to be done as the economy recovers from the Great Recession.
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RESPA case alleging illegal kickbacks in captive reinsurance pact moves forward
Posted Date: Monday, August 18, 2014
A federal court in Pennsylvania will hear further arguments from a group of plaintiffs in that state and in California who allege that their mortgage broker entered into a captive reinsurance agreement with their mortgage insurance provider and accepted illegal kickbacks. The case, Thurmond v. SunTrust Banks Inc. (U.S. District Court, E.D. Pennsylvania, No. 11–1352), concerns RESPA Section 2607, the portion of the statute that prohibits kickbacks and unearned fees.
At the heart of the case is the plaintiffs’ decision to file suit more than three years after they were notified of the alleged captive reinsurance scheme — exceeding the one-year statute of limitations on RESPA Section 2607 claims. After hearing the plaintiffs’ arguments and the defendants’ motion to dismiss, the court noted that it was troubled by the plaintiffs’ equitable tolling defense, but said because it cannot currently make a necessary factual determination, it will permit discovery on the issue.
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RESPA, TILA ‘closely intertwined’ in Illinois foreclosure case
Posted Date: Monday, August 18, 2014
When a Chicago homeowner filed suit against his mortgage company, alleging violations of both RESPA and the Truth in Lending Act stemming from his property foreclosure, he may not have considered the Rooker-Feldman doctrine when filing his 12-count pro-se complaint. But the Federal Civil Procedure doctrine was his undoing, as an Illinois federal court cited the doctrine in its recent conclusion that it lacks subject-matter jurisdiction in the case.
In its July 24 memorandum opinion and order in Williams v. Ameriquest Mortgage Co. (U.S. District Court, N.D. Illinois, Eastern Division, No. 14 CV 0401), the court also recognized that other courts have split on whether the doctrine precludes federal courts from considering claims under RESPA and TILA in the face of a state-court foreclosure judgment.
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Former sheriff’s deputy sentenced for mortgage fraud
Posted Date: Monday, August 18, 2014
Tammy Dickinson, U.S. Attorney for the Western District of Missouri, announced that a former deputy of the Los Angeles County, Calif., Sheriff’s department has been sentenced in federal court for his role in an $11 million mortgage fraud scheme.
James Arthur Nash, Jr. was sentenced by U.S. District Judge Greg Kays to three years and six months in federal prison without parole. The court also ordered Nash to pay $446,641 in restitution.
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California homeowners’ RESPA Section 2605(e) claim fails
Posted Date: Monday, August 11, 2014
A California federal court in June granted a motion to dismiss filed by several loan servicers who disputed a couple’s claim that the companies failed to respond to a qualified written request for information about the servicing of their mortgage loan. The couple had sought relief under RESPA Section 2605(e), but the court found that they failed to present facts showing they suffered actual damages as a result of the defendants’ lack of response — and due to a confusing string of transfers of the couple’s deed of trust, that they also failed to seek a response from the correct loan servicer.
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Federal court upholds Kansas homeowner’s RESPA Section 2605(e) claim
Posted Date: Monday, August 11, 2014
A federal court in Kansas recently denied two mortgage loan servicers’ motion to dismiss a plaintiff’s claim for relief under RESPA Section 2605(e), the portion of the statute that requires loan servicers to respond to a borrower’s qualified written request for information about the servicing of his loan. According to the U.S. District Court, D. Kansas’ June 25 ruling, the plaintiff alleged actual damages of emotional distress, which was sufficient to satisfy the actual damage requirement of the defendants’ Rule 12(b)(6) motion to dismiss.
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Report highlights five years of cooperation between HUD, DOT and EPA
Posted Date: Monday, August 11, 2014
In celebration of the fifth anniversary of the Partnership for Sustainable Communities, the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Transportation (DOT) and U.S. Environmental Protection Agency (EPA) released “Five Years of Learning from Communities and Coordinating Federal Investments,” a report demonstrating how the three agencies are cooperating to help communities provide more housing choices, make transportation systems more efficient and reliable, and create vibrant neighborhoods that attract business development and jobs while protecting the environment.
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GAO analyzes CFPB’s civil penalty fund
Posted Date: Monday, August 11, 2014
The Consumer Financial Protection Bureau said it has taken steps to better document the factors it considers when determining how to allocate money from its civil penalty fund for consumer education and financial literacy programs. Word of the move came in a July 28 Government Accountability Office report on the bureau’s civil penalty fund.
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Attorney censured for paralegal’s participation in large-scale mortgage fraud scheme
Posted Date: Monday, August 11, 2014
New Jersey attorney Stephen Brown was censured by the Supreme Court of New Jersey after his paralegal admitted to participating in a mortgage fraud scheme that allegedly defrauded financial institutions of at least $2 million.
Linda Cohen, Brown’s paralegal, admitted in August 2013 to participating in a large-scale mortgage fraud scheme and pleaded guilty to conspiracy to commit bank fraud.
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Accountant sentenced to prison for mortgage fraud
Posted Date: Monday, August 11, 2014
A California accountant was sentenced to 57 months in federal prison and ordered to pay approximately $1.1 million in restitution for her role in a mortgage fraud scheme in southern Nevada, announced Daniel Bogden, U.S. Attorney for the District of Nevada.
Carmen Denise Mosley was sentenced by Senior U.S. District Judge Kent Dawson. Mosley was convicted by a jury May 6 of one count of conspiracy to commit bank and wire fraud and two counts of bank fraud. She was permitted to self-report to prison by Nov. 3.
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Greenleaf co-owner sentenced to four years in prison for mortgage fraud
Posted Date: Wednesday, August 6, 2014
Tammy Dickinson, U.S. Attorney for the Western District of Missouri, announced that Eric Gagnepain, co-owner of Greenleaf Companies, was sentenced in federal court for aiding and abetting a bank fraud conspiracy that was part of a multi-million-dollar mortgage investment scheme.
Gagnepain was sentenced by U.S. District Judge Greg Kays to four years in federal prison without parole. The court also ordered Gagnepain to pay $2,911,214 restitution.
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Seven headed to prison in multi-million dollar mortgage fraud scheme
Posted Date: Friday, August 1, 2014
The final two defendants charged for their roles in a multi-million dollar mortgage fraud scheme operating in the Houston area have been ordered to prison, announced U.S. Attorney Kenneth Magidson.
Din Chaney and Lisa Lipton admitted to participating in a conspiracy to commit bank, mail and wire fraud as did Catherine Sanoubane, Jose Batista, Dennis Hannah, Nathaniel Gordon III and Shawn Lewis Washington.
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