The Effects of RESPA and TILA

The Real Estate Settlement Procedure Act Regulation (RESPA) Regulation X and Truth in Lending Act (TILA) Regulation Z (both of which took effect Jan. 10, 2014) are over two years old already. Because I’ve had the opportunity to conduct seminars around the country and our firm has filed more than 50 cases in federal court, I spend a lot of time studying the case law that has developed around these new regulations. These new laws hold mortgage loan servicers more accountable and provide meaningful tools to mortgage borrowers in distress and the lawyers who represent them.

Having spent part of my career in the public sector, the prospect of being part of the implementation of the first new federal regulatory scheme by way of “private attorney general” in several decades is professionally exciting and challenging. I feel very lucky to be one of the rare people and very few lawyers I know who can’t wait to get out of bed in the morning and get to work. Certainly, unlike the lawyers on the other side of our cases, I find great inspiration in my clients, almost all of whom are fighting back from some devastating setback with courage and determination.


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Making the best use of these new regulations which require high standards of servicer conduct can greatly enhance the law practices that we all value and make it more likely to obtain justice for our clients and maybe even get paid.

That’s why, as excited as I am to bring these cases and work with others across the country who aspire to bring them, as with any opportunity in for lawyers who represent consumers, we should take some time to step back to reflect on the risks. I recently read an article in the New York Times about giant rats in Angola who have been trained to sniff out land mines. Sometimes, I feel like those of us who are bringing cases so early in the life of these regulations are just like those rats. We need to train ourselves and our staff to carefully sniff out are the land mines that were placed by the banks, mortgage loan servicers and their lobbyists in the development of the rules themselves.

When mortgage servicers determined that they were never going to convince the Consumer Financial Protection Bureau to set standards for conduct lower than those they set for themselves in the National Mortgage Settlement, they instead worked to create a labyrinth of complicated processes that give them multiple “do-overs” in the loan servicing process. For example, all time limits under the regulations for the servicers run from the date they receive a request or a document. All the timeframes for borrowers run from the date the request for document is sent. This dichotomy not only creates the potential for abuse (half the letters we receive back from servicers have a different date on the letter than on the envelope) but it creates a factual issue around almost every instance of a required request or response.


Heart of Giving

Time will tell in the long run, but my instinct tells me that it is critical to choose to file only cases where the underlying problem has not been rectified by the loan servicer and where, in addition to the available statutory damages, there are articulable actual damages.

It is also critical in the cases that are brought under these new regulations, especially as we continue to sniff out the landmines, that we are extremely careful in picking out clients for whom we file claims and that we understand from the outset the story that we plan to tell. The jurors, through television, are conditioned to expect a clear narrative and a compelling story. We need clients that will wear the white hat so that we can place the black hat firmly on the loan servicer. I don’t care how many great technical violations of the regulations that may have been committed against an unlikeable person who brags at the coffee shop that he’s going to get a free house; consumer lawyers should resist the temptation to bring that case.

Remember, if you are seeking to hold a servicer accountable for its system working correctly, you and your firm, or the people you work with also need to make sure you have a reliable accountable way to prove that they didn’t meet their obligations. The enforcement mechanisms and timelines are intentionally complicated and confusing. This is why systems and process must be set up within consumer law firms to make sure that mortgage loan servicer non-compliance is thoroughly documented and that follow up is consistent and persistent.  Marc Dann


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