October 21, 2015

RESPA News Lead Generation Compliance Webinar

Marx Sterbcow, managing attorney with the Sterbcow Law Group, and James Milano, member with Weiner Brodsky Kider PC will speak on RESPA News's webinar series on the topic of Lead Generation Compliance. The webinar is scheduled for Tuesday, November 10, 2015 from 2:20-3:15 PM EST. The Editor of RESPA News, Justine Jones will moderate the webinar.

We will train participants on the regulations governing the real estate lead generation industry and what increased attention the CFPB, Federal Trade Commission, and other agencies mean for your business practices. The webinar will focus on how the CFPB expanded its authority with the use of UDAAP, the potential ramifications of Regulation Z's Loan Officer Compensation Rule, the dangers of co-marketing with other settlement service providers, and how to carefully vet lead generation companies.

October 20, 2015

Marx Sterbcow to Moderate RESPRO RESPA Webinar

Marx Sterbcow, managing attorney with the Sterbcow Law Group, will moderate a RESPRO Marketing Service Agreement webinar with Phil Schulman, partner at K&L Gates on October 22, 2015. The RESPA webinar titled "To Agree to Market or Not Agree to Market" will discuss how MSAs have been around for 20 years and in June of 2010 HUD's RESPA Division issued an interpretative rule. Now however, after the CFPB's RESPA consent order in Lighthouse Title, the PHH decision, and the recent CFPB Bulletin 2015-05, Marketing Service Agreements a/k/a MSAs have become a controversial and hot topic. Learn what you can do and what you can't do based on the latest CFPB guidance.

October 20, 2015

Marx Sterbcow invited to speak at 2015 Bank Counsel Conference

Marx Sterbcow, managing attorney, of the Sterbcow Law Group, has been invited to speak at the Louisiana Bankers Association 2015 Bank Counsel Conference on the topic of "Who's Your Vendor? Secondary Market Compliance & Title Agent Vendor Management." The session will provide insight into how banks should be managing their vendors and what requirements they should be requiring their title agent vendors to have in place. The presentation will also focus on managing the third party vendor management risks in a Post-TRID world and the expectations the secondary market will be playing in this new changing regulatory landscape.

The 2015 Bank Counsel Conference will be held on December 10-11, 2015 at the Ritz Carlton Hotel in New Orleans.

August 27, 2015

Marx Sterbcow to appear on the Real Estate Mortgage Shoppe Radio Program

Marx Sterbcow will appear Saturday, August 29th, 2015 on the Real Estate Mortgage Shoppe with Radio Host Jo Garner from 9:00 AM to 10:00 AM CST on WREC 600 AM on iHeart Radio. The topic is "Ask The Expert--How the New Real Estate Lending Guidelines Affect You."

August 27, 2015

Marx Sterbcow to speak at the Midwest TRID and Compliance Summit in Kansas City

Marx Sterbcow, the managing attorney, of the Sterbcow Law Group, has been invited to speak to the Kansas Land Title Association, Mortgage Bankers Association of Greater Kansas City, and Missouri Land Title Association's Midwest TRID and Compliance Summit on September 23, 2015 in Kansas City, Kansas at Arrowhead Stadium, Tower Club East, One Arrowhead Drive, Kansas City, MO 64129.

The presentation "Vendor Management and the Secondary Market" will discuss the secondary market investors expectations for settlement agents and how you should be monitoring your third party and fourth party vendors.

Mr. Sterbcow will then moderate a Lender Panel where he will ask TRID and Vendor Management questions to Kate Steineman from Wells Fargo, Ruth Battle from Central Bank, and Amy Prater from Bank Midwest to help title agents understand what they need to do to get ready for the TILA-RESPA Integrated Disclosure implementation date on October 3, 2015.

For more information and to register please check out the Midwest TRID and Compliance Summit page.

August 24, 2015

BREAKING: 9th Circuit Court of Appeals Grants Class Certification in Edwards v. First American Corp RESPA Class Action

The United States Court of Appeals for the Ninth Circuit issued their 24 page Opinion today, August 24, 2015, in the Denise P. Edwards versus The First American Corporation; First American Title Insurance Company class action lawsuit. No. 13-55542 D.C. No. 2:07-cv-03796-SJO-FFM.

The Edwards v. First American class action lawsuit was originally filed on June 12, 2007 and has spent over 8 years bouncing from federal court to federal court.

The 9th Circuit Court of Appeals affirmed in part and vacated in part the United States District Court for the Central District of California's order denying class certification in a case where the Plaintiffs alleged that First American Title engaged in a national scheme of paying title agencies things of value in exchange for the title agencies' agreement to refer future title insurance business to First American in violation of the Real Estate Settlement Procedures Act "RESPA".

The Court of Appeals Panel held that in determining the proprietary of class certification, the district court erred in holding that the RESPA Safe Harbor in 12 U.S.C. §2607(c)(2) requires Edwards to prove that First American overpaid for its ownership interests in each of the title agencies.

The Opinion written by Judge Gould explained that the ownership goods purchased by First American are equity shares--not goods, services or facilities within the meaning of RESPA §2607(c)(2). The Panel also held that the district court abused its discretion in denying class certification on the grounds that 12 U.S.C. §2697(a) requires an individual inquiry, on each transaction, to determine whether First American's purchase prices of the ownership interests exceeded their fair market value.

The Court also held that cases involving illegal kickbacks in violation of RESPA §2607(a) are not necessarily unfit for class adjudication. The 9th Circuit Court of Appeals wrote that Edwards need only prove the existence of an exchange involving a referral agreement, which does not require inquiry into individual facts across all 38 captive title agencies, and that the proposed class members also share common questions of fact.

The Panel concluded that the alleged common scheme, if true, presents a significant aspect of First American's transactions that warrant class adjudication: Whether First American paid a thing of value to get its agreement for exclusive referrals in violation of RESPA. The Federal Appeals Court vacated the District Court's denial of class certification in part to these transactions that involved the common scheme presented to First American's Board of Directors.

The Panel of Judges also disagreed with the District Court's holding that influences by third parties constitute individual issues that render RESPA class adjudication improper. The panel wrote that other sources of referral do not defeat the predominate common questions of fact, i.e. whether the title agencies have contractual obligations to refer their customers to First American.

The Court also held that the District Court erred in determining that individual inquiries are required in connection with twelve title agencies that are affiliated business arrangements and in connection with certain agencies that are majority-owned by First American.

First American however did score one small victory when the 9th Circuit Court of Appeals agreed with the District Court that First American's transactions with newly formed title agencies do not raise common issues sufficient for class action adjudication, and affirmed the District Court's denial of certification as to the newly formed title agencies.

July 29, 2015


Marx Sterbcow, managing attorney of the Sterbcow Law Group, will discuss issues concerning the TRID rollout with Rich Horn of Richard Horn Legal on September 17, 2015 at the Five Star Conference's Title and Closing Coalition's Semi-Annual Summit in Dallas Texas at the Hotel Anatole.

July 28, 2015


The CFPB announced on Feb. 12, 2015 another consent order for issues involving a lender mortgage origination advertising practices. Flagship Financial Group, LLC was alleged to have made material misrepresentations in commercial communications that improperly suggested that Flagship Financial was affiliated with a United States government entity and Flagship made material misrepresentations that it was endorsed or sponsored by a governmental program. This consent order is very similar to the American Preferred Lending consent order.

The Consumer Financial Protection Bureau alleged that Flagship disseminated advertisements promoting FHA streamline refinance loans and that the format & design of these advertisements looked like a government notice and implied that a governmental agency was the source of the advertisement.

The FHA streamline refinance mailers contained the heading “PURSUANT TO THE FEDERAL HOUSING ADMINISTRATION (FHA) HUD No. 12-045,” and “United States Housing and Urban Development 12-045 Program,” and instructed consumers to call their “assigned FHA loan specialist.” Flagships name appeared only on the back of the FHA streamline advertisement mailers in the disclaimer section that Flagship was not an agency of the federal government and wasn't affiliated with the borrower's current lender.

The CFPB also said Flagship disseminated advertisements which promoted VA guaranteed loans which included the text "HUD-Approved Flagship Financial Group has been directed to...," "Benefits Department," and "VETERANS BENEFITS IMPROVEMENT ACT Passed by Congress and signed into law by the President." The consent order said "the statements that the company “has been directed to” provide loans with certain features, in combination with the references to federal legislation and the references to the “Benefits Department,” imply that the Company has a specific and unique relationship with a government agency."

Flagship also described themselves as a HUD-Approved Lender but it has surrendered that approval in March of 2011. This description was inaccurate & misstated according to the CFPB because they were not approved yet they disseminated this message to over one million consumers.

Flagship agreed to pay $225,000 dollars and institute a comprehensive compliance plan which is to be designed to ensure that their advertising practices comply with all applicable federal consumer financial laws.

The CFPB also further ordered that Flagship shall create for at least 5 years the following business records:
1. All documents and records necessary to demonstrate full compliance with each provision of the consent order;
2. Copies of all advertisements including any such materials used by a third party on behalf of Flagship;
3. Records showing, for each service provider providing services related to direct mail marketing, the name of a point of contact, and that person's telephone number; email, physical postal address; job title or position; dates of service, and, if applicable, the reason for termination.

July 28, 2015


The Consumer Financial Protection Bureau has been sending strong messages across the real estate industry lately with its aggressive campaign against companies who they believe have made material misrepresentations which improperly suggested the lender was affiliated with a United States governmental entity or the company advertising its mortgage products was endorsed, sponsored by, or affiliated with a governmental program to consumers. The first consent order is American Preferred Lending.

On Feb. 12, 2015 the CFPB entered into a consent order with American Preferred Lending, Inc. whereby the bureau deemed American Preferred Lending violated Regulation N, 12 C.F.R. 1014.3(n) and UDAAP. The consent order found that American Preferred Lending disseminated direct-mail mortgage loan advertisements that improperly suggested that American Preferred Lending was affiliated with a governmental agency, and misrepresented that the advertised mortgage loan products were endorsed, sponsored by, or affiliated with a governmental program. The CFPB said the direct mail pieces appeared as if they were United States government notices.

The CFPB noted that "the overall format of the advertisements, including the use of plain text in labeled boxes and the title 'Payment' Reduction Notice,' evoked a government form." The advertisements were also not clearly marked so consumers could see they came from American Preferred and not the Government.

The bureau also noted that the envelopes American Preferred Lending sent to consumers included a reference to federal law but did not include a return address, and on the primary page of the advertisement American Preferred Lending's name appeared only in the small print disclosures.

Also of concern is advertisements American Preferred sent out to consumers contained the web address www.FHAdept.us which was designed to deceive consumers into thinking the communications came from a governmental entity. Some of the advertisements that were mailed also contained the FHA Approved Lending Institution logo which the CFPB deemed to be eerily similar to HUD's circular logo with the words "FEDERAL HOUSING COMMISSIONER APPROVED LENDING INSTITUTION" around the exterior.

Regulation N (the Mortgage Acts and Practices Advertising Rule) prohibits any person from making "any material misrepresentations, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product, including by not limited to misrepresentations" that "the provider is, or is affiliated with, any governmental entity," 12 CFR 1014.3(n)(1), or that the product "is or relates to a government benefit, or is endorsed, sponsored by, or affiliated with any government or other program, including but not limited to through the use of formats, symbols, or logos that resemble those of such entity, organization, or program." 12 CFR 1014.3(n)(2).

The consent order also said American Preferred Lending violated Section 1036(a)(1)(B) of the CFPA stating the misrepresentations in connection with the advertising practices use for marketing, promoting, offering for sale, or sale of mortgage products was unfair, deceptive, or abusive acts or practices which triggered a UDAAP violation.

American Preferred Lending agreed to pay a $85,000 penalty and must establish a compliance program.

The take-away from this consent order are:
1. Mortgage companies must ensure that their mailing pieces clearly and conspicuously identify themselves and not the government when they advertise.
2. Never use a website URL name which could mislead consumers into thinking they are on a government website.
3. Companies must have an internal compliance program in place to review all advertising and marketing campaigns.
4. Mortgage companies should never wrongfully depict their affiliation with the US Government in their direct mail or website advertisements.

Lastly, it should be noted the CFPB provided a lot more guidance in this enforcement action by providing more explicit examples in the consent order of what they found misleading in the advertisements and website.

July 28, 2015

Marx Sterbcow to speak to the Raleigh Regional Association of Realtors (RRAR) on RESPA Enforcement Trends

Marx Sterbcow, the managing attorney of the Sterbcow Law Group, has been invited to speak to the Raleigh Regional Association of REALTORS (RRAR) in Raleigh, North Carolina on August 13, 2015 from 11:00-12:30 PM. The presentation will be at RRAR's office located at 111 Realtors Way, Cary, North Carolina 27513.

The presentation "RESPA-Tory Therapy: The Do's and Don'ts of RESPA" will discuss the latest Consumer Financial Protection Bureau (CFPB) RESPA enforcement trends, marketing and advertising agreements, lead generation issues, and other issues surrounding Section 8 of the Real Estate Settlement Procedures Act. The presentation will also highlight how page 5 for the new TRID Closing Disclosure form will be a data gathering mechanism for the CFPB in their investigations of suspected illegal activity between settlement agents.

For more information and to register please check out the Raleigh Regional Association of REALTORS page herehttps://www.rrar.com/event-view.cfm/id/484/date/3149.

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June 17, 2015


The CFPB made a last minute surprise decision that they would be issuing a proposed amendment to delay the effective date of the TILA-RESPA Integrated Disclosure Rule "TRID" from August 1, 2015 to October 1, 2015.

Consumer Financial Protection Bureau "CFPB" Director Richard Cordray issued the following statement with respect to the TRID delay proposal:

“The CFPB will be issuing a proposed amendment to delay the effective date of the Know Before You Owe rule until October 1, 2015. We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks. We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.”

The financial services and real estate industry were growing increasingly concerned over the last few months with concerns about several LOS software systems not being ready by the August 1, 2015 deadline so this proposed delay would certainly provide some breathing room for their software integration activities.

June 3, 2015

TILA-RESPA "TRID" Enforcement Delay Announced by CFPB

The Consumer Financial Protection Bureau "CFPB" announced today they will delay "enforcement" of the new Truth In Lending-RESPA Integrated Disclosure "TRID" rule for an undefined period of time. Over two hundred members of Congress were pushing for an enforcement delay until December 31, 2015 but the CFPB did not place a definitive time frame for compliance thus leaving the date that CFPB enforcement starts very murky.

The CFPB also said they will apply a standard of "sensitivity" in their TRID enforcement oversight with companies who provide "good-faith efforts" to comply with TRID. However, the Bureau failed to define what "sensitivity" or "good-faith efforts" actually mean and how they will be applied.

The enforcement delay is certainly a good step because the CFPB clearly heard from the industry that a number software companies were unable to get their lending customers ready in time. The American Bankers Association recently conducted a study which said that 8 out of 10 bank members couldn't verify when their software system would be ready or were informed their software system wouldn't be ready before June. The Loan Originator System "LOS" troubles were discussed in a blog post we did in January.

Despite the CFPB's decision to delay enforcement of TRID for an unspecified period of time, TRID still goes into full effect on August 1, 2015 and loans that are originated after August 1 will still be required to comply with TRID because the real regulators of this rule will expect complete compliance. The real regulators in this case are the secondary market investors, mortgage insurance companies, and the plaintiffs bar. TRID loans will still be subject to representations and warranties by lenders who sell their mortgages to the secondary market. Additionally, the TRID enforcement delay at this point only pertains to the CFPB not other state and governmental agencies who also have oversight over TRID compliance.

So the single most important message from today's announcement by the CFPB is that nothing is really changing with TRID and that all companies need to ensure they are in compliance on August 1st. We hope this message does not get misinterpreted by the industry into thinking the CFPB has delayed the entire rule because it has not.