Saturday, June 27, 2015

FYI: 9th Cir Holds Debt Collector Did Not Violate FDCPA By Charging Pre-Judgment Interest Under State Law

The U.S. Court of Appeals for the Ninth Circuit recently held that a debt collector’s demand seeking ten percent interest that was not expressly authorized by the debt agreement did not violate the federal Fair Debt Collection Practices Act or California’s equivalent Rosenthal Act, because the pre-judgment interest was permitted by state law.

 

A copy of the opinion is available at: http://cdn.ca9.uscourts.gov/datastore/opinions/2015/05/12/14-55235.pdf

 

The plaintiff incurred a debt for dental services in 2011. The provider referred the debt to a collection agency, which sent a demand letter in May of 2012 seeking the principal balance owed, plus interest at ten percent per year.

 

In July of 2012, the debtor filed suit in federal district court, alleging that the collection agency violated section 1692(f)(1) of the federal Fair Debt Collection Practices Act and California’s state equivalent (the “Rosenthal Act”) by seeking to collect the 10% interest in the demand letter.

 

Section 1692f(1) of the FDCPA, 15 U.S.C. 1692(f)(1), prohibits debt collectors from attempting to collect any sum not “expressly authorized by the agreement creating the debt or permitted by law.”  Courts have held that this provision is not violated if what the debt collector is trying to collect is authorized by state law.

 

The debtor moved for summary judgment, which the district court granted, holding that the collection agency could not collect prejudgment interest at the statutory rate without first obtaining a judgment for breach of contract awarding prejudgment interest.

 

The debtor waived her remaining claims and instead sought statutory damages, and the district court awarded her $500 in statutory damages, plus attorney’s fees and costs. The collection agency appealed.

 

On appeal, the Ninth Circuit first pointed out that the collection agency was clearly entitled to collect prejudgment interest under California law when it sent the demand letter, if the debt was “certain or capable of being made certain at that time,” even though no judgment had been entered yet.

 

This is because section 3287(a) of the California Civil Code permits the recovery of interest from the point in time when a creditor’s right to recover “is vested,” and California courts have uniformly interpreted “vesting” as the point in time “damages become certain or capable of being made certain, not the time liability to pay those amounts is determined.”

 

The Court then pointed out that once the amount of damages becomes calculable mechanically based on indisputable evidence, prejudgment interest is available as a matter right, not at the court’s discretion.

 

The Court reasoned that its conclusion that the collection agency was entitled to prejudgment interest without a prior judgment is supported by section 3287(b), which applies where damages are not certain or capable of being made certain, and which provides that prejudgment interest is only allowed where a person “is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated.”

 

Therefore, the Ninth Circuit held, it follows that a judgment awarding interest under section 3287(a) “merely vindicates a pre-existing right to interest instead of creating it,” and because the contract at issue was silent as to the rate of interest, the applicable rate would be the ten percent default rate contained in section 3289 of California’s Civil Code.

 

The Court concluded that the district court’s summary judgment in the debtor’s favor was based on a wrong interpretation of section 3287 because the district court never determined that the debt at issue was unliquidated, i.e., not certain or capable of being made so, which would have meant that section 3287 did not apply at all.

 

In addition, the Ninth Circuit held that the collection agency’s argument that the claim was certain or liquidated was supported by documents from the debtor’s insurer and a settlement in small claims court between the debtor and the dental provider.

 

The Ninth Circuit concluded that, because the debt was certain or liquidated by May of 2012 when the letter was sent, collection of prejudgment interest was permitted by section 3287(a) of California’s Civil Code and thus did not violate section 1692f(1) of the FDCPA or the Rosenthal Act.

 

The district court’s judgment was reversed and the case remanded for further proceedings.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

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Friday, June 26, 2015

FYI: INVITATION: Annual Consumer Financial Services Conference (CCFL | Nov. 19-20, 2015 | Chicago, IL)

Please join us at the Annual Consumer Financial Services Conference organized by The Conference on Consumer Finance Law, and co-sponsored by the Loyola University Chicago School of Law, along with various law firms.

 

 

WHEN:  Nov. 19-20, 2015

WHERE:  Chicago, Illinois

CLE:  12.0 CLE Credits to Be Provided, including 1.0 hr of Ethics

PRICE:  $495 before Sept. 18, 2015

 

 

The Conference will include presentations by some 45 of the best and brightest speakers and practitioners in the country, on the following topics:

 

 

TCPA: The New FCC Order

Fair Lending and HMDA

CFPB Administrative Appeals

Arbitration Developments

UDAAP

Cybersecurity

CFPB Regulation of Non-Bank Auto Finance

 

TRID: Issues and Implementation

Flood and Lender-Placed Insurance

Mortgage Servicing and Bankruptcy

 

State Regulation of Debt Collection/Debt Buyers

Credit Reporting and Bankruptcy

The Madden Case and Debt Sales

 

CFPB Regulation Through Enforcement Actions

Ethics and Professional Responsibility

 

 

Additional information is provided in the attached.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery Services

 

 

 

 

 

Thursday, June 25, 2015

FYI: US Sup Ct Holds Disparate Impact Claims Cognizable Under FHA, But Puts in Place Various Limits and Safeguards

In a 5-4 decision, the Supreme Court of the United States held that disparate impact claims are cognizable under the federal Fair Housing Act (“FHA”). 

 

A copy of the opinion is available at: http://www.supremecourt.gov/opinions/14pdf/13-1371_m64o.pdf

 

The underlying lawsuit involved a dispute between Texas based non-profit that assists low-income families with finding affordable housing and a Texas state department that that distributes tax credits to developers. 

 

The non-profit sued the department under a disparate impact theory, claiming that the department violated the FHA because it had allocated too many tax credits to housing in pre-dominantly minority inner-city areas, and too few in predominately white suburbs. 

 

In its initial lawsuit in the U.S. District Court for the Northern District of Texas, the non-profit plaintiff provided statistical evidence showing that, from 1999-2008, the department had approved tax credits for 49.7% of proposed affordable housing units in areas where less than 10% of the population was white, and approved only 37.4% of that same type of tax credit in areas where greater than 90% of the population was white.  Additionally, the statistics showed that in the City of Dallas, 92.29% of low-income housing tax credits were awarded in census tracts where less than 50% of the population was white.

 

On that basis, the District Court held that the non-profit had made a prima facie showing of disparate impact discrimination in violation of the FHA.  Moreover, after hearing evidence from the department, the trial court held that the department had failed to meet its burden “of proving that there are no less discriminatory alternatives.”  Accordingly, the District Court issued a remedial order, directing the department to follow an additional set of criteria when awarding tax credits. 

 

While the trial court’s ruling was on appeal to the U.S. Court of Appeals for the Fifth Circuit, the Secretary of Housing and Urban Development (“HUD”) issued a regulation that explicitly incorporated disparate impact claims into the FHA.  The HUD regulation also established a framework for courts to follow when adjudicating FHA disparate impact discrimination claims. 

 

In that regulation HUD stated that plaintiffs filing FHA disparate impact discrimination claims must first show that the challenged practice at issue has “caused or predictably will cause a discriminatory effect.”  Notably, if a statistical discrepancy is “caused by factors other than the defendant’s policy,” the disparate impact claim fails on its face.  However, if a plaintiff establishes a prima facie case, then the burden shifts to the defendant to prove that “the challenged practice is necessary to achieve one or more substantial, legitimate, non-discriminatory purposes.”

 

Given these regulations and consistent with its own precedent, the Fifth Circuit affirmed the District Court in part, and reversed in part.  The Fifth Circuit held that disparate impact discrimination claims were available under the FHA, but reversed the District Court on the merits.  It held that, under the HUD regulations, the District Court should “reexamine whether the non-profit had made a prima facie disparate-impact case” and should allow the department to attempt to prove there were no “less discriminatory alternatives.” 

 

The department subsequently appealed to the Supreme Court of the United States on the question of whether the FHA even allows disparate impact claims.

 

As you may recall, a disparate impact discrimination claim does not require a plaintiff to plead or show discriminatory intent; rather it only requires a showing of discriminatory result. 

 

The Supreme Court traced the history of disparate-impact claims under similar anti-discriminatory laws and listed several reasons why in the view of the majority of Supreme Court justices such claims must also be cognizable under the FHA. 

 

The Court likened the FHA and statutory language in the FHA to similar language in Title VII of the Civil Rights Act, and the Age Discrimination in Employment Act (ADEA) because those, like the FHA, are anti-discrimination laws. 

 

In particular, the Court focused on the use of language in the statutory text that “refers to the consequences of actions and not just to the mindset of actors.” 

 

The Supreme Court focused on language used in Section 804(a) of the FHA that provides it is unlawful to “refuse to sell or rent after the making of a bona fide offer…or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.”  Additionally, the Court pointed to language in Section 805(a) that states it is unlawful to “discriminate against any person in making available” a real estate transaction. 

 

The Supreme Court held that the phrase “otherwise make unavailable” and repeated use of the verb “to make” refers to the “consequences of an action, rather than the intent.”  Moreover, it held that the use of the word “otherwise” signals a shift in emphasis “from an actor’s intent to the consequences of its actions.”

 

Next, the Court held that the statutory history of the FHA shows that Congress intended for the FHA to encompass disparate impact claims.  In 1988 Congress amended the FHA at a time where all nine Circuit Courts had concluded disparate impact claims were viable.  The Court noted that Congress could have amended the FHA to exempt disparate impact claims, but it did not.  Instead, Congress added addition language that only made sense if the FHA in fact allowed disparate impact claims.  The Court held that this meant Congress approved of the prior Circuit Court holdings that interpreted the FHA to include disparate impact claims. 

 

Still the Court held that there are limits to how disparate impact claims can be asserted under the FHA.  For example, the Court held that exemptions in the FHA plainly permit housing discrimination against persons who have been convicted of drug crimes, as long as that discrimination is not based on race, religion, color, sex, or familial status (even if such discrimination has a “disparate impact”).

 

Moreover, the Court held that a FHA disparate impact claim includes a required element of causation in the plaintiff’s prima facie case.  The Court held that disparate impact claims that rely on “a statistical disparity must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity.” 

 

It held that a “robust causality requirement” protects public and private defendants from liability for racial disparities that their policies and practices did not create. 

 

Mostly consistent with the prior HUD regulations, the Court then provided guidance on how lower courts should treat FHA disparate impact claims and the safeguards that must be in place to protect private developers and related entities.  

 

It held that lower courts must “examine with care” whether a plaintiff has pleaded a prima facie case, and that cases where a plaintiff fails at the pleading stage to “produce statistical evidence demonstrating a causal connection” must be immediately dismissed.  Accordingly the Court held that a plaintiff challenging a private developer’s decision to build a new building in one place rather than another “will not easily be able to show this is a policy causing disparate-impact because such a one-time decision may not be a policy at all.” 

 

Additionally, putting in place another safeguard, the Court held that if, in the case at issue the non-profit could not show a “causal connection between the [Texas] department’s policy and disparate-impact…because federal law substantially limits the department’s discretion” then the case must be dismissed.

 

Finally, the Court held that even when courts find liability under a disparate impact theory, their remedial orders should be carefully crafted.  The Court held the lower courts should be careful to ensure that their orders are consistent with the Constitution, and should “concentrate on the elimination of the offending practice” that had resulted in arbitrary discrimination. 

 

In sum, although the Court held that disparate impact claims are cognizable under the FHA, it placed some limits on the reach of those claims and put some useful safeguards in place. 

 

Indeed, the Court held certain limitations were necessary to protect businesses and public entities.  It held that if “the specter of disparate-impact litigation causes private developers to no longer construct or renovate housing units for low-income individuals, then the FHA would have undermined its own purpose as well as the free-market system.” 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:


Financial Services Legal Developments

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery 

 

 

 

FYI: CFPB Issues Proposed Rule Delaying TRID Effective Date to Oct. 3, 2015

As referenced in our prior update below, the federal Consumer Financial Protection Bureau (CFPB) issued a proposed rule to change the effective date for the “Know Before You Owe” TILA-RESPA Integrated Disclosure rule to October 3, 2015.

 

A copy of the proposed rule and request for public comment is available at:  Click Here

 

The CFPB previously indicated the effective date would be delayed to Oct. 1, 2015. 

 

The CFPB stated that it “is proposing a new effective date of Saturday, October 3,” explaining that “scheduling the effective date on a Saturday may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems. A Saturday launch is also consistent with existing industry plans tied to the original effective date of Saturday, August 1.”

 

The proposal will be open for public comment until July 7, 2015.

 

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery Services

 

 

 

 

 

From: Ralph T. Wutscher [mailto:rwutscher@mauricewutscher.com]
Sent: Thursday, June 18, 2015 9:34 AM
To: Ralph T. Wutscher
Cc: New York Office; Florida Office; New Jersey Office; San Francisco Office; San Diego Office; Philadelphia Office; Ohio Office; Indiana Office; DC Office; Chicago Office
Subject: FYI: CFPB to Issue Proposed Amendment Delaying TRID Effective Date to Oct. 1, 2015

 

The federal Consumer Financial Protection Bureau (CFPB) issued a short press release yesterday, confirming reports that it would be issuing a proposed amendment to delay the effective date for the “Know Before You Owe” TILA-RESPA Integrated Disclosure rule until October 1, 2015.

 

A copy of the press release is available at:  Press Release

 

The press release simply states:

 

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 public will have an opportunity to comment on this proposal and a final decision is expected shortly thereafter.

 

Prior to the proposed amendment, the effective date for the “Know Before You Owe” TILA-RESPA Integrated Disclosure rule was August 1, 2015, and would apply to transactions for which the mortgage lender or broker receives an application on or after that date.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 493-0874
Fax: (312) 284-4751
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:


Financial Services Legal Developments

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery 

 

 

 

Wednesday, June 24, 2015

FYI: Cal App Ct Holds HOBR Allows Borrowers to be Paid Attorney Fees for Obtaining a Preliminary Injunction as to Trustee's Sale

The Court of Appeal of the State of California, Third District, recently vacated a trial court order denying two borrowers’ motion for attorney fees and costs pursuant to Cal. Civ. Code § 2924.12 after they obtained a preliminary injunction as to the trustee’s sale of their home due to alleged “dual tracking” violations.

 

A copy of the opinion is available at: http://www.courts.ca.gov/opinions/documents/C077683.PDF

 

Two borrowers filed an ex parte application for a temporary restraining order (“TRO”) to prevent the trustee’s sale of their residence, as well as a civil complaint against the real parties in interest.  The trial court granted the TRO enjoining the trustee’s sale pending a hearing on the petitioners’ motion for a preliminary injunction.

 

The petitioners alleged that they repeatedly requested a hardship assistance package, but their servicer supposedly failed to send the package.  Thereafter, the servicer purportedly denied the borrowers’ request for hardship assistance because a completed package was not received from them, and recorded a notice of default.

 

The borrowers allegedly submitted a loan modification application subsequently provided the missing documents, and the servicer allegedly confirmed it received a complete package.  However, the borrowers were allegedly informed the loan modification was denied due to missing documents, and the servicer recorded a notice of trustee’s sale on the subject property.

 

The trial court granted the borrowers’ motion for a preliminary injunction enjoining the trustee’s sale conditioned on the posting of a $20,000 bond or monthly payments to the real party in interest pending trial of the action.

 

After the preliminary injunction, the borrowers moved for attorney fees and costs (the “Motion”) pursuant to Cal. Civ. Code § 2924.12(i), due to alleged violation of the “dual tracking” provisions of the California Home Owner’s Bill of Rights, Cal. Civ. Code § 2923.6(c).  The trial court denied the Motion, stating that statutory fees were only awardable at the end of the case and not upon provisional relief, such as a preliminary injunction.

 

The borrowers filed a writ of mandate seeking an order directing the trial court to grant the Motion.

 

In its analysis of legislative intent, the Appellate Court acknowledged the legislature’s targeting of a practice known as “dual tracking,” which occurs when a servicer continues to pursue foreclosure at the same time a borrower in default seeks a loan modification.  The Court also noted that the prohibition against dual tracking at issue here is found in Cal. Civ. Code § 2923.6(c), the violation of which gives rise to various remedies including attorney’s fees set forth in Cal. Civ. Code § 2924.12(i).

 

Cal. Civ. Code § 2924.12(i) specifically provides: “A court may award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section.  A borrower shall be deemed to have prevailed for purposes of this subdivision if the borrower obtained injunctive relief or was awarded damages pursuant to this section.” 

 

The Appellate Court stated that the statute refers to “injunctive relief,” which according to the Court incorporates preliminary and permanent injunctive relief.  Therefore, the Court held, a borrower who obtains a preliminary injunction has prevailed in obtaining “injunctive relief,” and Cal. Civ. Code § 2924.12(i) provides for attorney fees and costs to a borrower who obtains a preliminary injunction.

 

In addition, the Appellate Court held that even if the “prevailing borrower” language created an ambiguity, the language and purpose of the statutory scheme, and its legislative history, demonstrated legislative intent to award attorney fees and costs when a preliminary injunction issues when read in conjunction with related statutes and legislative reports. 

 

The Appellate Court specifically rejected the position put forth by the trial court and the servicer that “interim” attorney fee awards may never be made in conjunction with provisional relief such as a preliminary injunction, as well as their reliance on a practice guide, which states the general rule that attorney fees are ordinarily award at the end of the case rather than when interim relief is granted.

 

The Court further held that, despite purpose of a preliminary injunction to maintain the status quo, the award of attorney fees was proper as the trial court was required to -- and did in fact -- determine that the borrowers were likely to prevail on the merits.

 

The Appellate Court also rejected the position that an attorney fees award would result in an absurd consequence if the borrower obtains preliminary injunction, but the servicer subsequently corrects the violation or the borrower fails to obtain a permanent injunction. 

 

Thus, the Court held, a borrower who prevails in obtaining injunctive relief preventing the foreclosure of his or her home may recover attorney fees expended in obtaining the preliminary injunction. 

 

The Court explained that a servicer’s correction of a violation and successful motion to dissolve the injunction will not entitle the servicer to recover the attorney fees.  According to the Court, if the servicer fails to correct the violation and to move to dissolve the preliminary injunction, as a practical matter, the borrower may have little incentive to set the matter for trial of a permanent injunction. But, the Court noted, in the scenario where the borrower has obtained a preliminary injunction and then pursues but fails to obtain a permanent injunction, the borrower will still have been entitled to seek the attorney fees he or she incurred in order to obtain the preliminary injunction.

 

Accordingly, the Court issued a peremptory writ of mandate issue directing the trial court to vacate its order denying the borrowers’ motion for attorney fees and costs, and to consider that motion on its merits. The Court also awarded the borrowers their costs in this writ of mandate proceeding.

 

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery Services

 

 

 

 

 

Tuesday, June 23, 2015

FYI: Fed Banking Regulators Issue Joint Final Flood Insurance Rule

Five of the federal banking regulatory agencies (FDIC, FRB, OCC, FCA, and NCUA) recently issued a joint final rule regarding flood insurance, which among other things:

 

(1) Requires escrowing of flood insurance payments for non-exempt loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed on or after January 1, 2016;

 

(2) Requires that borrowers be given the option to escrow flood insurance premiums and fees, as to residential loans extant as of January 1, 2016;

 

(3) Clarifies that regulated lending institutions and servicers acting on their behalf are allowed to charge for lender-placed flood insurance;

 

and

 

(4) States that the mandatory escrow of flood insurance premiums provisions, and the escrow option provisions, in this final rule will become effective on January 1, 2016.  All other provisions will become effective on October 1, 2015.

 

 

A copy of the final rule is available at:  http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150622a1.pdf

 

 

More specifically, and among other things, the final rule:

 

-  Requires “regulated lending institutions” (which means any “bank, savings and loan association, credit union, farm credit bank, Federal land bank association, production credit association, or similar institution subject to the supervision of a Federal entity for lending regulation”) and servicers acting on their behalf to escrow of flood insurance premium payments for loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed on or after January 1, 2016, unless the loan qualifies for a statutory exception.

 

-  Provides a new exemption to the flood insurance purchase requirement for any structure that is a part of a residential property, “but is detached from the primary residential structure and does not serve as

a residence.”

 

-  Implements the additional exceptions from the escrow requirement for: “(i) loans that are in a subordinate position to a senior lien secured by the same property for which flood insurance is being provided; (ii) loans secured by residential improved real estate or a mobile home that is part of a condominium, cooperative, or other project development, provided certain conditions are met; (iii) loans that are extensions

of credit primarily for a business, commercial, or agricultural purpose; (iv) home equity lines of credit; (v) nonperforming loans; and (vi) loans with terms not longer than 12 months.”  However, when a regulated lending institution (or a servicer acting on its behalf) determines that an exception no longer applies, the institution must require the escrow of flood insurance premiums and fees.

 

-  Requires regulated lending institutions and servicers acting on their behalf to provide residential borrowers with loans extant as of January 1, 2016 the option to escrow flood insurance premiums and fees.

 

-  Provides new and revised sample notice forms and clauses concerning both the escrow requirement, and the option to escrow.

 

-  Allows an exemption for certain regulated lending institutions with total assets under $1 Billion as of July 6, 2012, “was not required by Federal or State law to escrow taxes or insurance for the term of the loan, and did not have a policy of uniformly and consistently escrowing taxes and insurance.”

 

-  Clarifies that regulated lending institutions and servicers acting on their behalf have the “authority to charge a borrower for the cost of lender-placed flood insurance coverage beginning on the date on which the borrower's coverage lapses or becomes insufficient.” 

 

-  Specifies the circumstances under which regulated lending institutions and servicers acting on their behalf must terminate lender-placed flood insurance coverage, and refund payments to a borrower.

 

-  Specifies the documentary evidence regulated lending institutions and servicers acting on their behalf must accept to confirm that a borrower has obtained an appropriate amount of flood insurance coverage

 

-  Includes technical amendments, such as integrating the OCC’s flood insurance regulations for national banks and federal savings banks, and reference that the “FDIC has integrated its flood insurance regulations for State non-member banks and State savings associations in a separate rulemaking.”

 

According to the agencies, “the final rule does not address the private flood insurance provisions in the Biggert-Waters Act,” but they “plan to address these provisions in a separate rulemaking.”

 

The final rule is expected to be published in the Federal Register shortly.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery Services