RESPA Lawyer Blog

The Consumer Financial Protection Bureau "CFPB" announced plans today to implement an early warning enforcement action plan ("the Early Warning Notice") which would allow those under investigation the ability to respond to the CFPB. The CFPB Bulletin 2011-04 (Enforcement) announced the first in a series of periodic bulletins the CFPB will release which are aimed at providing information about the policies and priorities of the CFBP's Bureau of Enforcement.

"Before the Office of Enforcement recommends that the Bureau commence enforcement proceedings, the Office of Enforcement may give the subject of such recommendation notice of the nature of the subject's potential violations and may offer the subject the opportunity to submit a written statement in response. The decision whether to give such notice is discretionary, and a notice may not be appropriate in some situations, such as in cases of ongoing fraud or when the Office of Enforcement needs to act quickly."

It is important to note that if the subject(s) of an investigation is asked to provide the Bureau of Enforcement a response statement and the subject prepares and submits the response statement under oath to the Bureau the response may be discoverable by third parties.

The Early Warning Notice also allows any person involved in an investigation to voluntarily submit a written statement at any point during an investigation.

Continue reading "CONSUMER FINANCIAL PROTECTION BUREAU: "THE EARLY WARNING NOTICE" PROCEDURE ANNOUNCED FOR ENFORCEMENT ACTION" »

Reporter Avi Salzman with Barron's is reporting that Bank of America may file for bankruptcy protection for it's Countrywide subsidiary if litigation costs from Countrywide threaten Bank of America. Bank of America is the parent company of Countrywide but it is a separate legal entity. If Bank of America (NYSE: BAC) decides to declare bankruptcy it would only affect the Countrywide division not the entire company.

If Bank of America does file for bankruptcy protection for Countrywide it could have a material impact on on-going litigation involving RESPA, TILA, and other legal actions across the United States involving Countrywide. The purchase by Bank of America is widely viewed as one of the worst acquisition decisions in corporate American history.

The United States Department of Treasury has hired Richard Cordray to lead the Enforcement Division of the Consumer Financial Protection Bureau (CFPB) which was created under the Dodd-Frank Bill. Richard Cordray was elected as the Ohio Attorney General in 2008. Cordray has filed numerous lawsuits during his tenure as the Ohio Attorney General, most notably against AIG, Marsh & McLennan, Bank of America, and Merrill Lynch which resulted in more than 2.5 billion dollars in settlements.

Given Cordray's history it appears that he will be focusing on federal preemption of nationally chartered banks and the problems state regulators have had with their inability to enforce laws. The doctrine of preemption was used by the Office of Comptroller of the Currency as a way to stop states from enforcing rules and regulations against nationally chartered banks. He has pledged to jointly work with state attorney generals while at the CFPB in his investigations which could significantly hamper nationally chartered banks argument of federal preemption against state laws. Cordray and The American Bankers Association have opposing stances on the bank preemption issue. The underlying premise is that nationally chartered banks who engage in abusive and fraudulent tactics better be prepared for an onslaught of litigation and penalties when the enforcement team starts working with the states.

Richard Cordray's reputation is that of a staunch advocate for consumer rights against financial services companies who break the law. Cordray is responsible for selecting the enforcement team and preparing for the exercise of enforcement powers. RESPA enforcement under Cordray appears to be a priority based on his past history and Section 6 of RESPA is a prime target for future regulatory enforcement action by the CFPB.

The Consumer Financial Protection Bureau which will oversee the Real Estate Settlement Procedures Act (RESPA) now has a decision maker to help set up the CFPB. President Obama announced today the appointment of Harvard Professor Elizabeth Warren to implement policies and procedures to protect consumers from financial products. Ms. Warren who is widely known as the person who developed the idea for the CFPB will also be responsible for helping select a director to head up the CFPB.

Warren is considered a strong consumer advocate and her ideology has some in the financial services industry concerned. The concern reached a fevered pitch over the last two months with Republicans and the financial services industry pledged to hold up her confirmation in the Senate. Obama's move of not appointed her to the CFBP but rather giving Warren supervisory authority of the CFPB without going through a senate confirmation process stunned her critics.

It remains to be seen how Warren will tackle the enforcement of RESPA in the near future but I suspect that we will see a huge increase in both funding and manpower in the RESPA enforcement arena.

The U.S. Housing and Urban Development (HUD) made a number of surprising management changes last month including the shuffling of Ivy Jackson, the Director of the Office of RESPA and Interstate Land Sales to the Office of Insured Health Care Facilities. Ivy Jackson's departure took the real estate industry by surprise and created uncertainty for state regulators who were relying on her to educate them the new RESPA regulations this year.

The Sterbcow Law Group would like to thank Ivy Jackson for her contributions over the years at RESPA. She will always be remembered as a federal regulator who was fair to the real estate industry and to consumer interests while at RESPA. Ms. Jackson's work ethic, honesty, and experience will be missed.

HUD promoted Teresa Baker Payne to the position of Assistant Deputy Assistant Secretary and Barton Shapiro was named Acting Director of RESPA and Interstate Land Sales. Ms. Payne and Mr. Shapiro both bring experience to their new positions. Ms.Payne and Mr. Shapiro both are excellent choices for their respective roles at HUD.

Continue reading "RESPA: DEPUTY DIRECTOR IVY JACKSON IS SHUFFLED OUT OF RESPA DIVISION" »

The Real Estate Settlement Procedures Act "RESPA" regulations set to take place on January 1, 2010 has purportedly been delayed by HUD for six months. We are now waiting for an official announcement to take place by HUD to officially confirm the six month delay which should make the new implementation date on or around July 1, 2010.

We don't know what precipitated this possible delay by HUD but the real estate industry has stepped up their criticisms on the new rule, including a recent letter sent to HUD by numerous trade organizations, issues with the new Truth In Lending Act form "TILA" integration, and other federal enforcement agencies concerns about the transparency of the new HUD-1 have forced HUD to re-evaluate parts of the new rule. Of course one of the other problems is that many in the real estate industry are still very much unaware or uneducated on the new RESPA Rule.

UPDATED at 10:39 PM:
Assistant Secretary of Housing David Stevens informed me that there will not be a delay in the implementation of the Jan. 1, 2010 RESPA rule. The information we received came from numerous credible sources in Washington, D.C. but it appears that the information regarding the delay according to HUD will not occur.

UPDATE #2 AT 11:53 ON THURSDAY:
Kelly McCarel atRESPA NEWS.COM is now confirming "that HUD has been holding private meetings about the possibility of a delay" according to their sources.

However, Assistant Secretary of Housing Dave Stevens stated to us in an email at 3:00AM this morning that "There have been all sorts of discussions on readiness but a delay on implementation has not been one of them. The industry needs to be prepared for January 1st."

Stay tuned.............

Latest Update November 13, 2009
HUD Announced a 120 day (4 month) delay in HUD Enforcement of the new rule or as HUD calls it a "Restraint in Enforcement."

U.S. Rep. Barney Frank officially introduced legislation to create the Consumer Financial Protection Agency (CFPA). The legislation, which is backed by the Obama Administration, would consolidate the consumer protection powers of the fifty various federal financial regulatory agencies by creating a single regulatory agency. The creation of this single regulatory agency is the single most important aspect of the proposed 229 page Consumer Financial Protection Agency proposal.

The current financial governing system encourages abuses in the industry to take place because of the loopholes created by an inefficient and ineffective regulatory structure. The loopholes are exploited even further by the mass infighting that many of the governmental regulatory bureaucracies regularly display. The consolidation of these various federal agencies into one rule-making and investigative federal division should provide more uniform rules for those in the real estate industry and for consumers of real estate products.

The CFPA will have sole authority to draft and interpret regulations under the existing consumer financial services and fair lending statutes. The recent Good Faith Estimate/HUD-1 Settlement Statement forms developed by HUD and the Truth In Lending Act form is a prime example of decisions being made by one federal agency without input from a completely different agency. The biggest benefit consolidation presents to the industry and to the consumer is that this will increase the number of enforcement investigators. The consolidation of regulatory investigators is crucial because quite often investigators in one agency stop investigating abuses that relate to other agencies due to a myriad of reasons.

Continue reading "THE CONSUMER FINANCIAL PROTECTION AGENCY (CFPA) PROPOSAL INCLUDES RESPA AND TILA REGULATORY GOVERNANCE" »

Reporter Kate Moran of the Times Picayune wrote a terrific article on a lawsuit the Sterbcow Law Group LLC and Melancon Rimes LLC filed on in behalf of their client and plaintiff Sarada LeBourgeois who was the victim of mortgage fraud.

"Lawsuit alleges that a loan originator stole money from a client" was published on May 12, 2009 and briefly describes the events surrounding the lawsuit. The federal case was recently remanded back to Civil District Court in New Orleans by U.S. District Judge Lance Africk.

Kelly McCarel with RESPA News also wrote an excellent article on the case on Feb. 12, 2009 entitled Louisiana case ties RESPA violations to alleged mortgage fraud"

The case was filed in the Orleans Parish, Civild District Court in Louisiana with the docket number 2008-2705 and is listed under the name Sarada LeBourgeois, et al. v. Allied Home Mortgage Capital Corporation, et al.

The Obama Administration is pushing new legislation which would create a financial services regulatory commission. The commission would be called "The Financial Product Safety Commission" and it would regulate all mortgages, credit cards, and mutual funds. The Washington Post's Zachary A. Goldfarb, Binyamin Appelbaum and David Cho wrote an article on May 20, 2009.

The Senate version of this bill under Section 10: Enforcement has some very strong criminal and civil money penalties that could further strengthen consumer protections against businesses. The current senate & house versions of the bill could add considerable consumer protections against loan servicing companies which under Section 6 of RESPA offer consumers very little protection from some mortgage servicing companies abusive practices. This is definitely one of those bills to keep an eye on as the ramifications could be huge for businesses and consumers.

Continue reading "RESPA: THE FINANCIAL PRODUCT SAFETY COMMISSION ACT OF 2009" »

Section 6 of the Real Estate Settlement Procedures Act (RESPA) provides borrowers with consumer protections relating to the servicing of their loans. When a borrower sends a “Qualified Written Request” or "QWR" to his loan servicer concerning the servicing of the loan, the loan servicer must provide a written acknowledgment within 20 business days of receipt of the request. Not later than 60 business days after receiving the request, the servicer must make any appropriate corrections to the borrower’s account, and must provide a written clarification regarding any dispute. During this 60-day period, the loan servicer is strictly prohibited from providing information to a consumer reporting agency (i.e. Transunion, Equifax, etc) concerning any overdue payment related to such period or qualified written request.

Under RESPA Guidelines , a borrower can institute a private lawsuit for a Section 6 of Real Estate Settlement Procedures Act "RESPA" violation and/or a group of aggrieved borrowers may bring a class action lawsuit if a pattern of non-compliance can be shown within three years of the violation against a loan servicing company who refuses to comply with Section 6.

Reporter Kristi Marohn with the St. Cloud Times wrote an excellent article, "Experts: Improper fees play part in crisis--Servicers may benefit from loans in default" on how some loan servicing companies are engaging in abusive tactics which is helping fuel mortgage defaults across the United States.

The loan servicing companies typically do not own the loans they service and profit margins of just servicing loans is actually fairly small but they can make a tremendous amount of money in tacking on fees and penalties. Loan servicing companies can make even more money if a loan goes into foreclosure because they can charge even more fees.

The ongoing frustration for homeowners, attorneys, and others is that many loan servicing companies are simply none responsive to problems associated with the loans they service. We are seeing fees being charged to consumers for such things as Pre-paid Late Fees for all of 2009, 2010, 2011 or Pre-paid monthly inspection fees for years in advance when there is no inspection even done.

The charging of these fees is a direct cause for an increase in foreclosures across the United States. We are seeing these fees and many other unknown fees being charged now when borrowers enter into loan modification agreements which is why the default rates are so high for those borrowers who have entered into a loan modification only to find themselves stuck again in foreclosure because the fees that were charged forced them into foreclosure once again.

RESPA's Section 6 is routinely ignored by the loan servicing companies as most Qualified Written Requests are either totally ignored or the information they provide is non-information or a letter stating that the law does not require them to give information to the borrower on his/her own loan.

Loan servicing fraud is very prevalent and one must be very diligent when evaluating causes of action. When evaluating a claim please make sure you pull the courthouse records to make sure the signatures of the borrowers are actually the borrowers. We are seeing and hearing of many cases where the loan servicing employees are forging borrowers signatures to documents. These documents often increase the fees so much that it forces homeowners into foreclosure because they can't get anyone on the phone from the loan servicing companies to fix or even address the problems the loan servicer itself caused.

We urge everyone to call your congressman and senator and request they regulate this industry. This is a completely unregulated industry and the abusive behavior is fueling the credit and housing crisis in the United States. Consumers need real protection and relief from those loan servicing companies are preying on the American public.

Continue reading "REAL ESTATE SETTLEMENT PROCEDURES ACT: LOAN SERVICING ABUSE REQUIRES QUICK GOVERNMENT INTERVENTION " »

October Research has selected Charles C. Cain to be a speaker at the 2009 National Compliance Summit on February 19-20, 2009 at The Westin Casuarina Las Vegas Hotel, Casino & Spa. Charles Cain is Of Counsel to the Sterbcow Law Group LLC in New Orleans, Louisiana and is President of Alliance Solutions LLC based in Cincinnati, Ohio.

Section 6 of the Real Estate Settlement Procedures Act (12 U.S.C. 2605) gives certain classes of borrowers rights, regardless of whether the borrowers loan was held by the lender or the loan service was transferred to one or more loan servicing companies. If a borrower believes there is an issue with the loan servicing (including escrow account questions) on their loan the following steps must be carefully followed:

1. The borrower or the borrower's attorney must send a "Qualified Written Request" to the loan servicer. *See below as to what is required on a Qualified Written Request Letter.

2. The loan servicer must provide the borrower or borrower's attorney with a written acknowledgment within twenty (20) Business Days of receipt of the borrower's request.

3. The loan servicer has no more than 60 days Business Days after receiving the borrower's request to correct the errors on the borrower's loan account or the loan servicing company must provide the borrower with a written clarification disputing any such error.

4. Its extremely important to note that during this sixty (60) Business Day period that the borrower's servicer is forbidden to provide a credit reporting agency any information concerning any overdue payment related to such period or qualified written request.

What kind of damages would a borrower or a loan servicing company potentially be entitled/subjected to? Well Section 6 of RESPA provides for actual damages, additional damages, and costs for individuals or classes of individuals in circumstances where the services are shown to have violated the requirements of Section 6.

Section 6 of RESPA has a 3 year statute of limitations.

It is important to note that borrowers who are experiencing loan servicing irregularities continue to make their monthly mortgage payments.

Continue reading "RESPA SECTION 6: LOAN SERVICING COMPLAINT INFORMATION FOR CONSUMERS" »