- Federal judge grants the SEC request for appointment of a receiver for the $136 million EB-5 fraud case involving Path America LLC and its two subsidiaries to monitor the companies to ensure their assets are not lost during the proceedings.
- Ninth Circuit affirms JPMorgan Chase Bank’s win in $15.7 million suit against Meritage Homes Corp. over loan repayment.
- The CFPB brought suit against a law firm that does foreclosure work alleging that it scammed struggling homeowners by imposing large advance fees and failing to provide promised legal representation. The firm argues that the court should not grant the CFPB an early win because the bureau is attempting to create new federal law rather than enforcing current state law.
Tag Archives: loan
Monday’s Adjudication Roundup
- The Third Circuit upholds class certification in case against PNC Bank NA, in which individuals are alleging the bank participated in an illegal home equity lending scheme.
- Residential Credit Solutions Inc., a mortgage servicing company, will pay $1.6 million in restitution and fines, according to the CFPB, for many violations, but specifically for issues with loan modifications and treating consumers as if they had defaulted.
Wednesday’s Academic Roundup
- An Extrapolative Model of House Price Dynamics, Edward L. Glaeser & Charles Nathanson, HKS Working Paper No. RWP15-012.
- Old Suburbs Meets New Urbanism, Nicole Stelle Garnett, Notre Dame Legal Studies Paper No. 1512.
- Credit Scoring and Loan Default, Rajdeep Sengupta & Geetesh Bhardwaj, International Review of Finance Vol. 15, Issue 2, pg. 139-167, 2015. (Paid access).
- Product Market Effects of Real Estate Collateral, Azizjon Alimov.
- Reforming REIT Taxation (Or Not), Bradley T. Borden, Houston Law Review, Vol. 52, 2015, Forthcoming; Brooklyn Law School, Legal Studies Paper No. 416.
- Age, Demographics, and the Demand for Housing, Revisited, Richard K. Green & Hyojung Lee, June 4, 2015.
Monday’s Adjudication Roundup
- The United States Supreme Court held that Chapter 7 debtors cannot get rid of junior liens on underwater home loans under the bankruptcy code.
Gimme (Mortgage) Data
The CFPB announced that it is seeking feedback on potential changes to mortgage information reported under the Home Mortgage Disclosure Act (HMDA). Data collection seems like a pretty obscure issue, but some Republicans and financial industry interests have been attacking the CFPB for collecting so much data. Given the rapid changes in the consumer financial services sector, it seems to me that collecting more data about the types of products being offered to different types of consumers is essential to regulating that sector. For those unfamiliar with HMDA, it
was enacted in 1975 to provide information that the public and financial regulators could use to monitor whether financial institutions were serving the housing needs of their communities and providing access to residential mortgage credit. The law requires lenders to disclose information about the home mortgage loans they sell to consumers. HMDA was later expanded to capture information useful for identifying possible discriminatory lending patterns.
In the wake of the recent mortgage market crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) transferred HMDA rulemaking authority to the CFPB. The law directs the Bureau to expand the HMDA dataset to include additional loan information that would be helpful in spotting troublesome trends. (1)
The CFPB is considering requiring the following information pursuant to HMDA:
- total points and fees, and rate spreads for all loans
- riskier loan features including teaser rates, prepayment penalties, and non-amortizing features
- lender information, including unique identifier for the loan officer and the loan
- property value and improved property location information
- age and credit score (1-2)
There are additional data points under consideration, but these five alone would go a long way to identifyingpredatory trends as they are developing in the mortgage market. Lay people are probably unaware of the rate of change in the industry, but during boom times the kinds of products that are popular can change dramatically in a few months. It is hard enough for regulators to keep on top of such rapid changes, but it is even harder when they only have access to some of the relevant information. The CFPB’s proposal is a step in the right direction as it seeks to get a handle on the market that it regulates.
(Non-)Enforcement of Securitized Mortgage Loans
Professors Neil Cohen and Dale Whitman, two important scholars who know their way around the UCC and mortgage law, will take on a highly contested topic in an upcoming ABA Professors’ Corner webinar: “Ownership, Transfer, and Enforcement of Securitized Mortgage Loans.” I blogged a bit about this topic a couple of days ago, in relation to Adam Levitin’s new article. There is a lot of misinformation floating around the blogosphere relating to this topic, so I encourage readers to register.
The full information on this program is as follows:
Professors’ Corner is a FREE monthly webinar, sponsored by the ABA Real Property, Trust and Estate Law Section’s Legal Education and Uniform Law Group. On the second Wednesday of each month, a panel of law professors discusses recent cases or issues of interest to real estate practitioners and scholars.
December 2013 Professors’ Corner
“Ownership, Transfer, and Enforcement of Securitized Mortgage Loans”
Profs. Neil Cohen and Dale Whitman
Wednesday, December 11, 2013
12:30pm Eastern/11:30am Cental/9:30am Pacific
Register for this FREE program at https://ambar.org/ProfessorsCorner
Our nation’s courts have been swamped with litigation involving the foreclosure of securitized mortgage loans. Much of this litigation involves the appropriate interaction of the Uniform Commercial Code and state foreclosure law. Because few foreclosure lawyers and judges are UCC experts, the outcomes of the reported cases have reflected a significant degree of uncertainty or confusion.
In addition, much litigation has been triggered by poor practices in the securitization of mortgage loans, such as robo-signing and the failure to transfer loans into a securitized trust within the time period required by the IRS REMIC rules. This litigation has likewise produced conflicting case outcomes. In particular, recent decisions have reflected some disagreement regarding whether a mortgagor — who is not a party to the Pooling and Servicing Agreement that governs the securitized trust that holds the mortgage — can successfully defend a foreclosure by challenging the validity of the assignment of the mortgage to a securitized trust.
Our speakers for the December program will bring some much-needed clarity to these issues. Our speakers are Prof. Neil B. Cohen, the Jeffrey D. Forchelli Professor of Law at Brooklyn Law School, and Prof. Dale A. Whitman, the James E Campbell Missouri Endowed Professor Emeritus of Law at the University of Missouri School of Law. Prof. Cohen is the Research Director of the Permanent Editorial Board for the Uniform Commercial Code, and a principal contributor to the November 2011 PEB Report, “Application of the Uniform Commercial Code to Selected Issues Relating to Mortgage Notes.” Prof. Whitman is the co-Reporter for the Restatement (Third) of Property — Mortgages, and the co-author of the pre-eminent treatise on Real Estate Finance Law.
Please join us for this program. You may register at https://ambar.org/ProfessorsCorner.
U.S. District Court for the Eastern District of Texas Rules in Favor of MERS in Foreclosure Proceeding, Upholding its Power of Sale Over the Plaintiff’s Property
In Richardson v. Citimortgage, No. 6:10cv119, 2010 WL 4818556, at 1-6 (E.D. Tex. November 22, 2010) the U.S. District Court for the Eastern District of Texas, Tyler Division, granted the Defendants’, Citimortgage and MERS, motion for summary judgment against the Plaintiff, Richardson, in a foreclosure proceeding. The Court reiterated MERS’s power of sale and its role as an “electronic registration system and clearinghouse that tracks beneficial ownerships in mortgage loans.”
Plaintiff purchased his home from Southside Bank with a Note. As the Lender, Southside Bank could transfer the Note and it, or any transferee, could collect payments as the Note Holder. In the agreement, Plaintiff acknowledged that Citimortgage, the loan servicer, could also receive payments. A Deed of Trust secured the Note by a lien payable to the Lender.
Under a provision in the deed, Southside Bank secured repayment of the Loan and Plaintiff irrevocably granted and conveyed the power of sale over the property. The Deed of Trust also explained MERS’s role as its beneficiary, acting as nominee for the Lender and Lender’s and MERS’s successors and assigns. MERS “[held] only legal title to the interests granted by the Borrower but, if necessary to comply with law or custom, [had] the right to exercise any and all of the interests [of the Lender and its successors and assigns], including the right to foreclose and sell the property.”
Plaintiff signed the Deed of Trust but eventually stopped making mortgage payments to CitiMortgage and filed for bankruptcy protection. As a result, “MERS assigned the beneficial interest in the Deed of Trust to Citimortgage.” Citimortgage posted the property for foreclosure after receiving authorization from the United States Bankruptcy Court. Plaintiff brought suit, seeking declaratory and injunctive relief and challenging Citimortgage’s authority to foreclose on the property.
In granting Citimortgage and MERS’s motion for summary judgment, the court explained that Citimortgage could enforce the loan agreements, including the power of foreclosure, after it received the Note from Southside Bank. Furthermore, under the doctrine of judicial estoppel, Plaintiff could not challenge Citimortgage’s right to enforce the Note after he “represented that it was [his] intention to surrender [the] property to Citimortgage,” in bankruptcy court. Citimortgage subsequently acquired a “valid, undisputed lien on the property for the remaining balance of the Note.”
Plaintiff also challenged MERS’s role with “respect to the enforcement of the Note and Deed of Trust.” In response, the court explained that “[u]nder Texas law, where a deed of trust expressly provides for MERS to have the power of sale, as here, MERS has the power of sale,” and that the Plaintiff’s argument lacked merit.
The court described MERS as a “[book entry system] designed to track transfers and avoid recording and other transfer fees that are otherwise associated with,” property sales. It concluded that MERS’s role in the instant foreclosure “was consistent with the Note and the Deed of Trust,” and that Citimortgage had the right to sell the Plaintiff’s property and schedule another foreclosure.
