Day of the Dead: Director Cordray didn’t get his Halloween wish

Standard

President Trump signed the legislation repealing the CFPB arbitration rule

As we discussed in this blog last week, the United States Senate recently voted to dispose of a Consumer Financial Protection Bureau (CFPB) rule that allowed consumers the right to bring class action lawsuits to resolve financial disputes. Under that rule, banks and credit card companies could not use mandatory pre-dispute arbitration clauses in the fine print of credit card and checking account agreements.

Day of the DeadThe vote was 51-50 with Vice President Pence casting the deciding vote. The vote in the Senate followed a previous vote with the same result in the House of Representatives, leaving only the stroke of President Trump’s pen to finalize the repeal.

After the Senate’s vote, CPBP director Richard Cordray released a statement stating the action was “a giant setback for every consumer in the country.” “Wall Street won”, he said, “and ordinary people lost.”  Interestingly, Director Cordray wrote a letter directly to President Trump on October 30 pleading with him to save the arbitration rule.

The letter said, “This rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.” It also appealed to President Trump’s support of veterans and lower income Americans by saying, “I think you really don’t like to see American families, including veterans and service members, get cheated out of their hard-earned money and be left helpless to fight back.”

The letter obviously had no effect. President Trump signed the law on November 1 to the delight of banking and business groups. Director Cordray said, “In signing this resolution, the President signed away consumers’ right to their day in court.”  The Trump administration, however, is clearly in favor of dismantling regulatory efforts it believes may put a damper on the free market in any way.

Advertisements

Trick or Treat!

Standard

Senate votes to rescind CFPB class action rule

Is this action scary for consumers?

pumpkin

The United States Senate voted last week to dispose of a Consumer Financial Protection Bureau (CFPB) rule that allowed banks and credit card companies to use mandatory pre-dispute arbitration clauses in the fine print of credit card and checking account agreements to deny consumers the right to bring class action lawsuits to resolve financial disputes.

The vote was 51-50 with Vice President Pence casting the deciding vote. Lindsey Graham voted against the repeal. The House of Representatives had already voted to rescind the rule, and President Trump is expected to sign the bill into law.

When the rule was passed last year, CFPB Director Richard Cordray said the purpose was aimed at giving consumers more power by discontinuing the abusive practice of banks inserting arbitration clauses into their contracts for consumer financial products and services and literally “with the stroke of a pen” blocking any group of consumers from filing class action lawsuits. He also said CFPB’s research indicated that these “gotcha” clauses force consumers to litigate over small amounts ($35 – $100) acting alone against some of the largest financial companies in the world. Consumers are forced, he said, to “give up or go it alone.”

After the Senate’s vote last week, Director Cordray released a statement stating the action was “a giant setback for every consumer in this country.”  “Wall Street won”, he said, “and ordinary people lost.”

HousingWire reported on October 30 that Director Cordray wrote a letter directly to President Trump pleading with him to save the arbitration rule. According to the HousingWire report, the letter said, “This rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.” It also said, “I think you really don’t like to see American families, including veterans and service members, get cheated out of their hard-earned month and be left helpless to fight back.”

Time will tell whether the President will listen to Director Cordray. But it is clear that the CFPB continues its efforts to shake up the market. It has also been clear up to this point Republicans are seeking to dismantle those efforts that they feel hurt the free market.

What should dirt lawyers do about the Equifax data breach?

Standard

Protect yourself! Advise your clients!

Everyone should have heard about the Equifax data breach at this point, but have you taken any action to protect yourselves and your clients in the face of it?

Equifax has created a website that allows individuals to determine whether their information has been compromised and allows them to sign up for a free year of credit monitoring. Originally, the fine print on this site indicated taking advantage of the free-year credit monitoring service would result in a waiver of legal rights against the company, but I understand the company folded under extreme pressure and removed this language. In any event, please read the fine print since it is apparently changing as this story unfolds.

This website indicated my information had been stolen as well as my husband’s and several colleagues at work. I recommend that you check here to find out whether you need to take further action.

security unlocked data breach

What action should you take?  I am already a member of a credit monitoring service, so I did not sign up for the free year with Equifax. Regardless, I prefer to keep my legal rights intact. I may need those rights! You may decide to take advantage of the service. You may decide to bite the bullet and sign up for an independent credit monitoring service, and you may decide to remain with that service for more than a year.

What else can be done? I have read many news articles and opinion pieces on this matter and decided to have my credit reports frozen with TransUnion, Experian and Equifax.  You may want to take that action, too, so I have linked those websites for you.

Consider this. If your name, address and social security numbers were compromised, this information is not going to change and the potential financial devastation is not going to resolve itself in the span of one year. Everyone who was compromised will need to be vigilant about checking and credit card accounts indefinitely.

As a real estate lawyer, you may want to advise your clients, as a service to them, about this conundrum and the actions they may be able to take to protect themselves. You may also want to reach out to your real estate agents and lender contacts to ask them to spread the word. Assuming a leadership role in this situation will serve those who rely on you well and will set you apart as a professional who works diligently to protect those who need protection.

News from Wells Fargo

Standard

Lender issues settlement communication on June 1

Wells Fargo continues to update its settlement agents on a quarterly basis. South Carolina closing attorneys should pay close attention to these newsletters, which may highlight changes in closing processes and documentation. You can read the latest version here.

Significantly, the latest newsletter provides the following updated information:

  • Closing Insight™ training has been completed within Wells Fargo internally, and use of this portal method for communicating about closing files will continue to expand in all geographic areas. Closing attorneys should expect to receive requests to use Closing Insight™.
  • The numbers of “findings” are being reduced by RealEC, meaning some technicalities that were previously reported as closing file irregularities will now be eliminated. This change is good news for closing agents and applies not only to Wells Fargo, but to other lenders as well. An example is that file numbers will no longer trigger a “data mismatch” for dashes (-) if the rest of the file number matches. Another example is that differences in capitalization, formatting, common abbreviations and punctuation will no longer trigger findings.
  • The Service Provider Verification of Identity (SPVI) form has been updated and will now allow all document signers to use one form. Also, the revised form no longer requires details on the method of identification, such as drivers’ license numbers of borrowers.
  • The SPVI form for FHA loans must be send to the lender prior to disbursement. For all other loans, this form may be provided to the lender with the other executed loan documents.
  • Settlement agents are not authorized to sign any documents on Wells Fargo’s behalf. Any documents requiring the lender’s signature should be sent to the loan processor or closer.
  • Wells Fargo Tax Services will no longer provide services as an affiliate. Instead, the tax services will be provided by Wells Fargo Bank, N.A. The tax service fees previously disclosed in Section B or C of the Closing Disclosure will now be disclosed in Section A.

This blog will continue to attempt to keep closing attorneys updated on lender communications as they are distributed.

Multi-state mortgage modification practice may be hazardous to your law license!

Standard

Last week, this blog discussed two April 19 South Carolina Supreme Court cases* in the context of the social media issues they raised. This week, I want to point out the mortgage modification issues, which were, no doubt, the impetus for the discipline in both cases.

Let’s look at the facts in the first case, In the Matter of Bacon. In November of 2012, attorney Brunty hired INMN, Inc., a marketing company, to solicit out-of-state clients interested in modifying their home mortgages. Brunty hired Integrity Partners, LLC to process the loan modifications. Brunty was suspended and later disbarred.

Brunty introduced Bacon to a principal in Integrity, who assured Bacon that Integrity and INMN were complying with federal laws and regulations and had a network of attorneys licensed to practice in every state where clients were accepted. Bacon accepted those assurances and hired INMN and Integrity. (Two people who’ve read this blog asked me about the relationship between Bacon and Brunty. I don’t know. The Court did not specify.)

Handling the former Brunty cases did not go smoothly, to say the least. Integrity continued to work on those cases without attorney involvement. Integrity employees incorrectly advised many of Brunty’s clients that their files had been assigned to Bacon. Some of Brunty’s clients became Bacon’s clients, but some did not. Some of Brunty’s clients’ credit cards were charged fees that were paid to Bacon.

Bacon admitted that he violated federal rules against unfair or deceptive acts or practices in respect to the mortgage modification matters.

The FTC’s “Regulation O” places a number of restrictions on mortgage modification services. For example, a provider may accept a fee only after the client has executed a written agreement with the lender or servicer. Attorneys are exempt from this rule if they are licensed to practice in the state where the home is located as long as they hold advance fees in trust accounts and comply with trust accounting rules.

Bacon was not licensed to practice in all jurisdictions, so he was not authorized to accept any up-front fees. He also failed to deposit the fees into a trust account, failed to maintain separate ledgers for these clients, and failed to properly supervise the individuals who had access to the accounts.

The Court stated Bacon was involved in the unauthorized practice of law in several states. He was suspended from the practice for six months and ordered to pay restitution to clients.

In the second case, In the Matter of Emery, the attorney received a public reprimand. In 2013 Emery signed a contract with Friedman Law, a New York law firm, to accept referrals for mortgage modification cases. Emery received client referrals from an internet marketing company and paid for the service based on the potential number of clients referred to her. Regardless of the residence of potential clients, cases would be assigned to Emery as a part of the Friedman Law network.

Non-lawyers employed by Friedman Law or two paralegal services worked the cases. The non-lawyers included Emery Law in their signature blocks and used Emery Law letterhead. Other than the fact that some of the non-lawyers employed by one of the paralegal services worked in Emery’s office, she did not directly supervise the work.

For the most part, the non-lawyers worked diligently, but six clients filed disciplinary cases because of some issue or complication resulting in client dissatisfaction.

The Court stated that the written fee agreements in these cases were confusing and self-congratulatory and often contradicted the verbal communications of the non-lawyers.

The non-lawyers sometimes wrongly held themselves out as employees of Emery Law. Clients never knew whether they were dealing with employees of Emery Law, Friedman Law, a firm in the Friedman Law network or one of the paralegal services.

Interestingly, in 2013, the South Carolina Supreme Court held that lenders do not engage in the practice of law when they handle mortgage modification transactions.** In the present case, however, the Court stated that assisting clients in mortgage modification matters is the practice of law in South Carolina when performed by a lawyer.

Friedman Law represented to Emery that assisting clients in mortgage modifications is not the practice of law and that its network of lawyers in other states satisfied the requirements of multijurisdictional practice.

The Court stated that regardless of whether a particular state had adopted a rule permitting multijurisdictional practice and regardless of whether the particular state had determined that loan modification assistance was the practice of law, the fee agreements repeatedly referred to the services as “legal services”. In other words, the clients believed they were being represented by an attorney.

The Court said that Emery was involved in the systematic and continuous presence in other states, which constituted the unauthorized practice of law.

Accepting mortgage modification cases across state lines may be possible in certain circumstances, but these cases are obviously fraught with hazards. DO NOT accept these cases without carefully examining the federal and state laws involved in each situation and without carefully supervising each person who touches the cases. The best advice may be to never accept these cases when they involve properties located outside of South Carolina.

 

*In the Matter of Bacon, S.C. Supreme Court Opinion 27710, April 19, 2017; In the Matter of Emery, S.C. Supreme Court Opinion 27712, April 19, 2017.

**Crawford v. Central Mortgage Co. and Warrington v. Bank of America, 404 S.C. 39, 744 S.E.2d 538 (2013)

Wells Fargo distributes new settlement agent communication

Standard

Note: Settlement agents are scheduled to be re-evaluated

Wells Fargo delivered a memo entitled “News for Wells Fargo Settlement Agents” on March 23. The first paragraph cryptically announced that future communications will detail the Uniform Closing Dataset (UCD) that will become effective for lenders in 2018.

StageCoachLogo

For insight into the UCD, review Fannie Mae’s or Freddie Mac’s websites. Briefly, the UCD is going to be a common industry dataset to allow information on the Closing Disclosure to be communicated electronically. Fannie Mae and Freddie Mac have developed the UCD at the direction of the Federal Housing Finance Agency in an effort to enhance loan quality and consistency through uniform loan date standards. Stay tuned for more information on this topic and lenders gear up to comply.

The Wells Fargo memo also touted continued expansion of settlement agents who are using Closing Insight™.  Settlement agents who are just getting started were asked to take advantage of the support available at RealEC’s Closing Insight Resource Center at http://www.closinginsightresourcecenter.com or to contact the company at CISupport@realec.com or 800.893.3241. I encourage all South Carolina closing attorneys to get up to speed on this system as soon as possible.

The serious news from Wells Fargo, however, relates to a new effort to evaluate settlement agents.

The memo warned that Wells Fargo will evaluate the population of settlement agents who have closed loans within the past twelve months for problems such as missing documents, execution errors and other frequent problems that require curative work. As a result, settlement agents may receive letters indicating they are being removed from Wells’ list of approved settlement agents.

Processes are in place, however, to accommodate the customer’s choice for a settlement agent who is not on the approved list. Apparently, a new approval process will be instituted, but no detail on this process is provided.

house made of cashThe memo further indicates that attorneys’ ability to act as counsel for customers will not be impacted.  I don’t read this last directive to mean that attorneys who are not on the approved list will be in a position to close loans. They will only be in a position to dispense legal advice, if I am interpreting this correctly.

Settlement agents with questions are encouraged to communicate with Wells at WellsFargoSEttlementAgentCommunicatons@wellsfargo.com. I urge anyone who is interested in continuing to close Wells Fargo loans to hang onto this information.

Finally, the memo is requesting acknowledgement of Master Closing Instructions from all active and approved settlement agencies. Requests for this acknowledgement are coming from Wells Fargo in the form of e-mails to settlement agents. Please respond!

All lenders are beginning to hold settlement agents to higher standards. South Carolina closing attorneys are encouraged to stay abreast of changes and train, train, train staff members.

And, as always, contact your title insurance companies for insight into these matters.

The housing industry is crying Bah! Humbug!

Standard

Congress may eliminate mortgage interest deduction

Mike Goodwin, the “Bow Tie Comedian” based here in Columbia, mike-goodwin-bowtie-comedianentertained us during lunch at our recent Chicago Title seminar. A joke that bubbled up through his very funny presentation was a line his mother used to keep him on the straight and narrow during his childhood, “what you NOT gonna do is…..”

For example, she would say, what you NOT gonna do is to stand there and hold that refrigerator door open while you try to decide what you want to eat. During one lull in the laughter, Mike said to us, “what you NOT gonna do is sit there and not laugh at my jokes.” (So we laughed.)

While some of us believe America is about to be made great again, some of us might like to borrow Mike’s line to deliver a Bah! Humbug! message to Congress:  What you NOT gonna do is to eliminate, or effectively reduce the effectiveness of, the mortgage interest deduction. Many homebuilders, lenders and real estate agents (and South Carolina dirt lawyers) believe that’s one thing we don’t need 2017.

The mortgage interest deduction is a major driver of the housing market. One reason American dreamers strive for home ownership is to take advantage of this tax break. That, along with the property tax deduction, the points deduction, the PMI deduction and the home office deduction, make owning a home a wise move from a tax standpoint. Eliminating or reducing the effectiveness of the home interest deduction, which many consider as American as apple pie, might put a damper on the improved economy we have been experiencing in 2016.

But that approach is definitely going to be under consideration by Congress, and players in the housing industry are preparing to defend the deduction. The plan under consideration involves not a direct elimination of the deduction, but an indirect attack via an increase of the standardized deductions, now at $6,300 for a single taxpayer and $12,600 for married taxpayers filing jointly. By doubling these standard deductions, many taxpayers would have no need to take the mortgage interest deduction.

The mortgage interest deduction is the largest deduction currently available to homeowners, allowing a write-off of interest from up to a $500,000 loan for a single taxpayer and up to a $1 million loan for joint filers. The deduction is especially important during the early years of a mortgage when the majority of payments are applied to interest rather than principal.

megaphone-businessman-2

“Congress … what you NOT gonna do is … “

If a single taxpayer pays mortgage interest of $8,000 in the first of home ownership, for example, that amount exceeds the current standard deduction of $6,300, and that taxpayer would itemize to claim a better tax break. If the standardized deduction is doubled, itemization is much less likely.

President-Elect Trump’s nominee for Secretary of the Treasury, Steven Mnuchin, has stated that the administration is planning to create the largest tax change since Reagan. Simplifying the tax code is one of the stated objectives, and a larger standard deduction is one method of simplification. In addition to the mortgage interest deduction, the charitable deduction would be affected in a similar manner.  Some say that as the standard deduction goes up, the incentive to give is reduced.

Any step that would reduce incentives for homeownership would likely encourage renting rather than buying. Home values might suffer, and the housing industry might suffer as well.

All Americans are interested in the changes that are about to happen, and those of us in the housing industry may be more interested than most! I have already seen prognosticators reducing their optimism about 2017, but I just got off the phone with a local wise man. He said that I should relax. 2017 is going to be a banner year, he said, because America is going to be great again. I hope he’s right!