Lawyers who represent consumers in bankruptcy, litigants in divorce cases, homeowners in foreclosure or parties to real estate transactions should be aware of powerful new regulations that have been promulgated by the Consumer Finance Protection Bureau (CFPB) under the Real Estate Settlement Protection Act (RESPA) and the Truth in Lending Act (TILA). These regulations create, for the first time, a private right of action when mortgage loan servicers fail to properly and promptly respond to requests for information, correct irregularities with application of payments, assessments of fees and charges, or to comply with new strict timelines for handling applications for loan modifications, deeds in lieu of foreclosures and short sales.
Unfortunately, as mortgage loan servicing has transitioned from large banks like Chase, Bank of America, Citicorp and Wells Fargo to smaller, thinly capitalized non-bank loan servicers like Ocwen, Greentree, Nationstar and Caliber, the quality of customer service and treatment of consumers generally has diminished. Both New York state and California regulators have taken action against such servicers in recent months. Likewise, mortgage loan servicers of all sizes have had a hard time complying with the new CFPB regulations. Just this past September, the CFPB fined Flagstar $37.5 million for failing to follow regulations related to loss mitigation for their customers.
Here are the issues that could trigger liability under regulations X and Z for statutory damages of $1,000 to $4,000, compensatory damages (including emotional distress, legal fees, credit diminution and other pecuniary loss) and allows for shifting of attorney’s fees:
1 – Failure to Timely Process Loss Mitigation Applications – This includes loan modifications, deed in lieu of foreclosure applications and short sale requests. Decisions must be made within 30 business days of receipt of a complete loss mitigation package. Servicer must request additional documents from applicant within five business days.
2 – Dual Tracking is Prohibited – Loss mitigation application triggers a 120-day stay on any activity to advance a foreclosure, this includes a prohibition on commencing a foreclosure action; scheduling a sheriff ’s sale or foreclosure sale; and, moving forward in a judicial foreclosure with a motion for summary judgment or presenting evidence at trial or other effort to advance to judgment or sale.
3 – Failure to Provide Information – The failure to provide information properly requested about ownership of note and mortgage under TILA within 10 business days. The failure to provide information properly requested about loan payments, loan history and other loan information within 30 business days. Marc Dann