InfoBytes, January 29, 2010
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Federal Issues
Treasury, HUD Issue Updated HAMP Guidance. On January 28, the U.S. Department of the Treasury (Treasury) and the U.S. Department of Housing and Urban Development (HUD) issued updated Home Affordable Modification Program (HAMP) guidance for mortgage servicers (Supplemental Directive 10-01). The new Directive is intended to “make it easier and quicker to convert trial modifications to permanent modifications and enable servicers to use their resources more effectively.” Significantly, it requires full verification of borrower eligibility prior to offering a trial period plan. Pursuant to the Directive, a servicer may evaluate a borrower for HAMP only after the servicer receives (i) the Request for Modification and Affidavit (RMA) Form, (ii) IRS Form 4506-T or 4506T-EZ, and (iii) Evidence of Income. This requirement applies to all trial period plans with effective dates on or after June 1, 2010. In addition, the Directive provides guidance to assist servicers in making HAMP eligibility determinations for borrowers currently in active trial period plans, including those borrowers subject to the temporary review period. For a copy of Supplemental Directive 10-01, please see https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1001.pdf. For a copy of the joint press release, please see http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-021.
FHA Mortgagee Review Board Takes Action Against Six Lenders. On January 25, the Federal Housing Administration’s (FHA) Mortgagee Review Board permanently withdrew the approval of three mortgage lenders, suspended the approval of a fourth, placed two on probation, and also assessed various civil money penalties to the entities involved. In one case, FHA withdrew approval and levied a $71,000 civil monetary penalty because the lender allegedly did not comply with employment requirements, charged impermissible fees, did not disclose all required fees on Good Faith Estimates, and submitted false certifications to the U.S. Department of Housing and Urban Development (HUD). In another case, the withdrawn lender was penalized $124,000 in connection with, among other things, allegedly failing to adopt and maintain a Quality Control Plan and for allowing borrowers – rather than their employers – to provide verifications of employment to the lender. A third lender had its approval withdrawn because it allegedly breached a prior settlement agreement with HUD. A fourth lender was suspended for allegedly failing to notify HUD of the indictment and subsequent guilty plea for bank fraud of its partial owner and Chief Executive Officer, as well as for failing to comply with FHA’s annual recertification requirements. FHA also put two lenders on six-month probation periods for allegedly misleading advertising practices and assessed civil monetary penalties in the amounts of $7,000 and $11,000. For a copy of the announcement, please see http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-019.
HUD Revises FAQs on RESPA Rule. On January 28, the U.S. Department of Housing and Urban Development (HUD) again revised its “Frequently Asked Questions” (FAQs) regarding its 2008 amendments to Regulation X, the Real Estate Settlement Procedures Act’s implementing regulation. The amendments became generally effective on January 1, 2010. For a copy of the revised FAQs, please see http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf.
OTS Announces New Chapter in the Trust and Asset Management Handbook Relating to Document Custody. On January 26, the Office of Thrift Supervision (OTS) issued Regulatory Bulletin 38-01 to announce a new section in the Trust and Asset Management Handbook which will facilitate the OTS’ examination of an OTS-regulated institution’s administration of document custody services. Document custody services are principally associated with mortgage-backed and asset-backed securities, and are used most commonly by Ginnie Mae, Fannie Mae, and Freddie Mac. Document custodians (i) store physical documents related to the loan (e.g., mortgages, notes, and HUD forms), and (ii) certify that these documents support the loans and loan pools that back the issued securities. Document custodians are required by contract to (i) be subject to federal banking regulation and oversight; (ii) have physically secure, fire resistant storage facilities; (iii) employ knowledgeable personnel; (iv) meet certain financial requirements; (v) maintain certain insurance coverage; (vi) have adequate written policies and procedures; (vii) have an adequate disaster recovery and business continuation plan; (viii) have and maintain an adequate document tracking and reporting system; and (ix) have adequate control, compliance and audit programs. The objective of the OTS examination procedures is to assess the adequacy and effectiveness of the administration by savings associations of document custody services. Specifically, the procedures are intended to promote (i) the establishment of effective policies, procedures, and internal controls; (ii) provide for a review of management and staff competence; (iii) ensure that actions and decisions are documented and supported; and (iv) provide for an audit of the identification and correction of any deficiencies. For a copy of the policy statement, please see http://files.ots.treas.gov/74869.pdf.
HUD Provides Guidance on How to Assist Borrowers Facing Imminent Default. On January 22, the Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2010-04 to provide guidance to Federal Housing Administration (FHA)-approved servicers on how to assist FHA borrowers facing imminent default. According to the guidance, a borrower is facing “imminent default” if the borrower is current or less than 30 days late on his or her mortgage and has experienced a significant reduction in income or some other hardship that will prevent him or her from making the next required mortgage payment within the month it is due. When determining whether a borrower is in danger of being in imminent default, servicers must document the borrower’s financial condition, as well as the type of hardship that has befallen the borrower. Qualifying hardships include, but are not limited to, a borrower’s (i) reduction in income, (ii) loss of income, or (iii) change in financial circumstances resulting from illness, disability, or a death in the family. If the servicer determines that a borrower is facing imminent default, the servicer may offer the borrower a formal or informal forbearance agreement calculated pursuant to the FHA’s standard loss mitigation procedures. Alternatively, the servicer may offer the borrower a modification under the Home Affordable Modification Program. For a copy of Mortgagee Letter 2010-04, please see http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-04ml.pdf.
FDIC Announces Settlement with Lender for Alleged Overlimit Fee Practices. On January 29, the Federal Deposit Insurance Corporation (FDIC) announced a settlement with a credit card lender whose overlimit fee practices the FDIC alleged violated Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive trade practices. According to the FDIC, the lender assessed cardholders who had been overlimit during two billing cycles an overlimit fee during the first cycle and again on the first day of the second billing cycle without providing proper notice of this billing procedure. Under the terms of the consent order setting forth the terms of the settlement, while the lender admits no wrongdoing or liability regarding the allegations, it agreed to a civil penalty of $140,000 and restitution totaling $10 million to 283,000 credit card holders. For a copy of the consent order, please see http://www.fdic.gov/news/news/press/2010/pr10019a.pdf.
OCC Announces First Approval of “Shelf Charter” to Acquire Failed Bank. On January 22, the Office of the Comptroller of the Currency (OCC) announced the first approval of a “shelf charter” for the acquisition of a failed bank. Pursuant to the approval, Bond Street Bank, N.A. (Bond Street) will acquire Premier American Bank and establish Premier American Bank, N.A. Under Bond Street’s shelf charter, the OCC granted investors a preliminary charter approval to bid on a failed institution. However, Bond Street’s charter remained inactive– that is, put “on the shelf” – until Bond Street was able to acquire a failed bank; before that time, Bond Street was a shell one-bank holding company. The shelf charter process involves (i) an initial review, where the OCC evaluates the qualifications of the proposed management team, the sources and amount of capital that would be available to the bank, and a streamlined business plan that describes how the acquired bank will be operated, and (ii) a conditional preliminary approval, where the OCC can grant conditional preliminary approval of a national bank charter, subject to certain conditions and requirements. The final approval for Bond Street to establish Premier American Bank, N.A. is subject to various conditions to ensure the safe and sound operation of the new bank. For a copy of the press release, please see http://www.occ.treas.gov/ftp/release/2010-8.htm. For a copy of the approval letter, please see http://www.occ.treas.gov/ftp/release/2010-8a.pdf.
Courts
California Federal Court Dismisses Suit Challenging Rejection of Modification Request. On January 20, the U.S. District Court for the Northern District of California dismissed various state law claims challenging a lender’s refusal to refund a $750 fee it charged to consider a loan modification request that it eventually denied. Stevens v. JPMorgan Chase Bank, N.A., No. 09-03116 (N.D. Cal. Jan. 20, 2010). In the case, plaintiff contacted defendant to obtain a loan modification. According to plaintiff’s allegations, defendant responded that plaintiff would “likely” qualify and that the “only obstacle” would be a subsequent appraisal of the property that did not support the value of the loan. Defendant allegedly charged plaintiff $750 to cover the cost of an appraisal, title search and processing. When the appraisal indicated that the value of the home was substantially lower than the amount of the loan, defendant denied the modification request and refused to reimburse the $750 fee. Plaintiff sued, asserting various state law claims, including violations of the California Unfair Competition Law (UCL), false advertising, fraud, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing. Each of the claims was based on the alleged representation that plaintiff was “likely” to qualify for a loan modification. Plaintiff also pointed to a report issued by the U.S. Department of Treasury (Treasury), which indicated that defendant had approved modifications for only 20% of its loans, suggesting that the statement that a modification was “likely” was fraudulent, misleading, and unfair and deceptive. The court dismissed each claim, but permitted the plaintiff leave to amend. According to the court, the complaint failed to state any claim because, among other things, it did not allege that defendant guaranteed a loan modification or that the fee would be reimbursed. The court also found that the nationwide modification statistics in the Treasury’s report were irrelevant to the possible success of plaintiff’s individual loan modification. For a copy of the opinion, please see http://www.buckleysandler.com/Stevens_v_Chase.pdf.
California Federal Court Refuses to Grant Interlocutory Appeal of Decision Allowing RESPA Claim Against Appraiser to Proceed. On January 8, the U.S. District Court for the Northern District of California denied a motion to certify an interlocutory appeal of an order denying a defendant appraiser’s motion to dismiss plaintiffs’ claims that the appraiser provided inflated appraisals in violation of the Real Estate Settlement Procedures Act (RESPA). Spears v. Washington Mutual Bank FA, No. C-08-00868, 2010 WL 54755 (N.D. Cal. Jan. 8, 2010). In Spears, after the district court denied the defendant’s motion to dismiss plaintiffs’ RESPA claim, the defendant appraiser moved for certification of an interlocutory appeal. The court denied this motion as well, finding that defendant failed to file the motion timely, and that, in any event, the motion lacked merit. Specifically, the court held that the defendant appraiser did not demonstrate that a “substantial ground for difference of opinion” existed among the courts with regard to the appraiser’s arguments for dismissing the borrowers’ RESPA claim. For example, in response to the defendant appraiser’s argument that plaintiffs lacked standing because they failed to allege an overcharge, the court acknowledged that district courts have disagreed on the issue, but held that the recent decisions of two appellate courts holding that no overcharge allegation is required to have standing for a RESPA claim showed that no substantial ground for difference of opinion exists. Additionally, the court was not persuaded (i) that allegedly inflated appraisals do not constitute a “thing of value” under RESPA, (ii) that RESPA’s safe harbor provision barred the plaintiffs’ claim, or (iii) that a case holding that optional discounts do not constitute "required use" was applicable to the facts of the instant case because the use of the appraiser allegedly was required. For a copy of the opinion, please see http://www.buckleysandler.com/Spears_v_Wa_Mu.pdf.
Firm News
John Kromer will be a participant in a panel entitled "Federal Registration of Mortgage Loan Originators and NMLS" on February 10 at the 2010 NMLS User Conference in San Diego, CA.
Sara Emley will speak at the Investment Adviser Association/ACA Insight 2010 Adviser Compliance Forum on February 25 in Arlington, VA. Her topic is “Current Hot Topics for Managers with Individual Clients.”
Kirk Jensen spoke on January 9 at the winter meeting of the Consumer Financial Services Committee of the American Bar Association’s Business Law Section in Park City, Utah. He gave one presentation entitled "Consumer Financial Protection Agency: Past, Present and Future," and another entitled “Government Enforcement Trends and Servicing Best Practices.” Kirk has also been named chair of the Residential Real Estate Subcommittee of the ABA Litigation Section’s Real Estate Litigation Committee.
Jeff Naimon spoke on January 10 at the winter meeting of the Consumer Financial Services Committee of the American Bar Association’s Business Law Section in Park City, Utah on Truth in Lending Act case law developments.
Jeff Naimon spoke on January 12 in an American Bankers Association Telephone Briefing focusing on “RESPA and TILA Compliance in the NEW Mortgage World.”
Joe Kolar spoke to member institutions of the Federal Home Loan Bank of Chicago on the new RESPA and TILA rules on January 13.
Andrew Sandler was selected to receive a Good Apple Award at the Louisiana Appleseed’s Good Apple Gala for his vision aimed at expanding access to financial institutions for Latino immigrants and his leadership in bringing together Louisiana banks and Federal banking regulators to discuss barriers to access and solutions. The Gala was held on January 21 in New Orleans, LA.
Jonathan Cannon was quoted in a January 22 article in RESPA News entitled “Judge Issues Another Ruling in RESPA ‘Thing of Value’ Case Involving Inflated Appraisals.”
Margo Tank presented a one-hour, one-credit CLE telephone seminar entitled “Electronic Signatures and Records—What’s the Current Law?” on Tuesday, January 26. The seminar will be replayed on Friday, February 5 at 12PM. For more information, visit http://www.vacle.org/php-bin/ecomm4/products.php?product_id=2400.
Mortgages
Treasury, HUD Issue Updated HAMP Guidance. On January 28, the U.S. Department of the Treasury (Treasury) and the U.S. Department of Housing and Urban Development (HUD) issued updated Home Affordable Modification Program (HAMP) guidance for mortgage servicers (Supplemental Directive 10-01). The new Directive is intended to “make it easier and quicker to convert trial modifications to permanent modifications and enable servicers to use their resources more effectively.” Significantly, it requires full verification of borrower eligibility prior to offering a trial period plan. Pursuant to the Directive, a servicer may evaluate a borrower for HAMP only after the servicer receives (i) the Request for Modification and Affidavit (RMA) Form, (ii) IRS Form 4506-T or 4506T-EZ, and (iii) Evidence of Income. This requirement applies to all trial period plans with effective dates on or after June 1, 2010. In addition, the Directive provides guidance to assist servicers in making HAMP eligibility determinations for borrowers currently in active trial period plans, including those borrowers subject to the temporary review period. For a copy of Supplemental Directive 10-01, please see https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1001.pdf. For a copy of the joint press release, please see http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-021.
FHA Mortgagee Review Board Takes Action Against Six Lenders. On January 25, the Federal Housing Administration’s (FHA) Mortgagee Review Board permanently withdrew the approval of three mortgage lenders, suspended the approval of a fourth, placed two on probation, and also assessed various civil money penalties to the entities involved. In one case, FHA withdrew approval and levied a $71,000 civil monetary penalty because the lender allegedly did not comply with employment requirements, charged impermissible fees, did not disclose all required fees on Good Faith Estimates, and submitted false certifications to the U.S. Department of Housing and Urban Development (HUD). In another case, the withdrawn lender was penalized $124,000 in connection with, among other things, allegedly failing to adopt and maintain a Quality Control Plan and for allowing borrowers – rather than their employers – to provide verifications of employment to the lender. A third lender had its approval withdrawn because it allegedly breached a prior settlement agreement with HUD. A fourth lender was suspended for allegedly failing to notify HUD of the indictment and subsequent guilty plea for bank fraud of its partial owner and Chief Executive Officer, as well as for failing to comply with FHA’s annual recertification requirements. FHA also put two lenders on six-month probation periods for allegedly misleading advertising practices and assessed civil monetary penalties in the amounts of $7,000 and $11,000. For a copy of the announcement, please see http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-019.
HUD Revises FAQs on RESPA Rule. On January 28, the U.S. Department of Housing and Urban Development (HUD) again revised its “Frequently Asked Questions” (FAQs) regarding its 2008 amendments to Regulation X, the Real Estate Settlement Procedures Act’s implementing regulation. The amendments became generally effective on January 1, 2010. For a copy of the revised FAQs, please see http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf.
HUD Provides Guidance on How to Assist Borrowers Facing Imminent Default. On January 22, the Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2010-04 to provide guidance to Federal Housing Administration (FHA)-approved servicers on how to assist FHA borrowers facing imminent default. According to the guidance, a borrower is facing “imminent default” if the borrower is current or less than 30 days late on his or her mortgage and has experienced a significant reduction in income or some other hardship that will prevent him or her from making the next required mortgage payment within the month it is due. When determining whether a borrower is in danger of being in imminent default, servicers must document the borrower’s financial condition, as well as the type of hardship that has befallen the borrower. Qualifying hardships include, but are not limited to, a borrower’s (i) reduction in income, (ii) loss of income, or (iii) change in financial circumstances resulting from illness, disability, or a death in the family. If the servicer determines that a borrower is facing imminent default, the servicer may offer the borrower a formal or informal forbearance agreement calculated pursuant to the FHA’s standard loss mitigation procedures. Alternatively, the servicer may offer the borrower a modification under the Home Affordable Modification Program. For a copy of Mortgagee Letter 2010-04, please see http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-04ml.pdf.
California Federal Court Dismisses Suit Challenging Rejection of Modification Request. On January 20, the U.S. District Court for the Northern District of California dismissed various state law claims challenging a lender’s refusal to refund a $750 fee it charged to consider a loan modification request that it eventually denied. Stevens v. JPMorgan Chase Bank, N.A., No. 09-03116 (N.D. Cal. Jan. 20, 2010). In the case, plaintiff contacted defendant to obtain a loan modification. According to plaintiff’s allegations, defendant responded that plaintiff would “likely” qualify and that the “only obstacle” would be a subsequent appraisal of the property that did not support the value of the loan. Defendant allegedly charged plaintiff $750 to cover the cost of an appraisal, title search and processing. When the appraisal indicated that the value of the home was substantially lower than the amount of the loan, defendant denied the modification request and refused to reimburse the $750 fee. Plaintiff sued, asserting various state law claims, including violations of the California Unfair Competition Law (UCL), false advertising, fraud, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing. Each of the claims was based on the alleged representation that plaintiff was “likely” to qualify for a loan modification. Plaintiff also pointed to a report issued by the U.S. Department of Treasury (Treasury), which indicated that defendant had approved modifications for only 20% of its loans, suggesting that the statement that a modification was “likely” was fraudulent, misleading, and unfair and deceptive. The court dismissed each claim, but permitted the plaintiff leave to amend. According to the court, the complaint failed to state any claim because, among other things, it did not allege that defendant guaranteed a loan modification or that the fee would be reimbursed. The court also found that the nationwide modification statistics in the Treasury’s report were irrelevant to the possible success of plaintiff’s individual loan modification. For a copy of the opinion, please see http://www.buckleysandler.com/Stevens_v_Chase.pdf.
California Federal Court Refuses to Grant Interlocutory Appeal of Decision Allowing RESPA Claim Against Appraiser to Proceed. On January 8, the U.S. District Court for the Northern District of California denied a motion to certify an interlocutory appeal of an order denying a defendant appraiser’s motion to dismiss plaintiffs’ claims that the appraiser provided inflated appraisals in violation of the Real Estate Settlement Procedures Act (RESPA). Spears v. Washington Mutual Bank FA, No. C-08-00868, 2010 WL 54755 (N.D. Cal. Jan. 8, 2010). In Spears, after the district court denied the defendant’s motion to dismiss plaintiffs’ RESPA claim, the defendant appraiser moved for certification of an interlocutory appeal. The court denied this motion as well, finding that defendant failed to file the motion timely, and that, in any event, the motion lacked merit. Specifically, the court held that the defendant appraiser did not demonstrate that a “substantial ground for difference of opinion” existed among the courts with regard to the appraiser’s arguments for dismissing the borrowers’ RESPA claim. For example, in response to the defendant appraiser’s argument that plaintiffs lacked standing because they failed to allege an overcharge, the court acknowledged that district courts have disagreed on the issue, but held that the recent decisions of two appellate courts holding that no overcharge allegation is required to have standing for a RESPA claim showed that no substantial ground for difference of opinion exists. Additionally, the court was not persuaded (i) that allegedly inflated appraisals do not constitute a “thing of value” under RESPA, (ii) that RESPA’s safe harbor provision barred the plaintiffs’ claim, or (iii) that a case holding that optional discounts do not constitute "required use" was applicable to the facts of the instant case because the use of the appraiser allegedly was required. For a copy of the opinion, please see http://www.buckleysandler.com/Spears_v_Wa_Mu.pdf.
Banking
OTS Announces New Chapter in the Trust and Asset Management Handbook Relating to Document Custody. On January 26, the Office of Thrift Supervision (OTS) issued Regulatory Bulletin 38-01 to announce a new section in the Trust and Asset Management Handbook which will facilitate the OTS’ examination of an OTS-regulated institution’s administration of document custody services. Document custody services are principally associated with mortgage-backed and asset-backed securities, and are used most commonly by Ginnie Mae, Fannie Mae, and Freddie Mac. Document custodians (i) store physical documents related to the loan (e.g., mortgages, notes, and HUD forms), and (ii) certify that these documents support the loans and loan pools that back the issued securities. Document custodians are required by contract to (i) be subject to federal banking regulation and oversight; (ii) have physically secure, fire resistant storage facilities; (iii) employ knowledgeable personnel; (iv) meet certain financial requirements; (v) maintain certain insurance coverage; (vi) have adequate written policies and procedures; (vii) have an adequate disaster recovery and business continuation plan; (viii) have and maintain an adequate document tracking and reporting system; and (ix) have adequate control, compliance and audit programs. The objective of the OTS examination procedures is to assess the adequacy and effectiveness of the administration by savings associations of document custody services. Specifically, the procedures are intended to promote (i) the establishment of effective policies, procedures, and internal controls; (ii) provide for a review of management and staff competence; (iii) ensure that actions and decisions are documented and supported; and (iv) provide for an audit of the identification and correction of any deficiencies. For a copy of the policy statement, please see http://files.ots.treas.gov/74869.pdf.
OCC Announces First Approval of “Shelf Charter” to Acquire Failed Bank. On January 22, the Office of the Comptroller of the Currency (OCC) announced the first approval of a “shelf charter” for the acquisition of a failed bank. Pursuant to the approval, Bond Street Bank, N.A. (Bond Street) will acquire Premier American Bank and establish Premier American Bank, N.A. Under Bond Street’s shelf charter, the OCC granted investors a preliminary charter approval to bid on a failed institution. However, Bond Street’s charter remained inactive– that is, put “on the shelf” – until Bond Street was able to acquire a failed bank; before that time, Bond Street was a shell one-bank holding company. The shelf charter process involves (i) an initial review, where the OCC evaluates the qualifications of the proposed management team, the sources and amount of capital that would be available to the bank, and a streamlined business plan that describes how the acquired bank will be operated, and (ii) a conditional preliminary approval, where the OCC can grant conditional preliminary approval of a national bank charter, subject to certain conditions and requirements. The final approval for Bond Street to establish Premier American Bank, N.A. is subject to various conditions to ensure the safe and sound operation of the new bank. For a copy of the press release, please see http://www.occ.treas.gov/ftp/release/2010-8.htm. For a copy of the approval letter, please see http://www.occ.treas.gov/ftp/release/2010-8a.pdf.
Insurance
HUD Revises FAQs on RESPA Rule. On January 28, the U.S. Department of Housing and Urban Development (HUD) again revised its “Frequently Asked Questions” (FAQs) regarding its 2008 amendments to Regulation X, the Real Estate Settlement Procedures Act’s implementing regulation. The amendments became generally effective on January 1, 2010. For a copy of the revised FAQs, please see http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf.
Litigation
California Federal Court Dismisses Suit Challenging Rejection of Modification Request. On January 20, the U.S. District Court for the Northern District of California dismissed various state law claims challenging a lender’s refusal to refund a $750 fee it charged to consider a loan modification request that it eventually denied. Stevens v. JPMorgan Chase Bank, N.A., No. 09-03116 (N.D. Cal. Jan. 20, 2010). In the case, plaintiff contacted defendant to obtain a loan modification. According to plaintiff’s allegations, defendant responded that plaintiff would “likely” qualify and that the “only obstacle” would be a subsequent appraisal of the property that did not support the value of the loan. Defendant allegedly charged plaintiff $750 to cover the cost of an appraisal, title search and processing. When the appraisal indicated that the value of the home was substantially lower than the amount of the loan, defendant denied the modification request and refused to reimburse the $750 fee. Plaintiff sued, asserting various state law claims, including violations of the California Unfair Competition Law (UCL), false advertising, fraud, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing. Each of the claims was based on the alleged representation that plaintiff was “likely” to qualify for a loan modification. Plaintiff also pointed to a report issued by the U.S. Department of Treasury (Treasury), which indicated that defendant had approved modifications for only 20% of its loans, suggesting that the statement that a modification was “likely” was fraudulent, misleading, and unfair and deceptive. The court dismissed each claim, but permitted the plaintiff leave to amend. According to the court, the complaint failed to state any claim because, among other things, it did not allege that defendant guaranteed a loan modification or that the fee would be reimbursed. The court also found that the nationwide modification statistics in the Treasury’s report were irrelevant to the possible success of plaintiff’s individual loan modification. For a copy of the opinion, please see http://www.buckleysandler.com/Stevens_v_Chase.pdf.
California Federal Court Refuses to Grant Interlocutory Appeal of Decision Allowing RESPA Claim Against Appraiser to Proceed. On January 8, the U.S. District Court for the Northern District of California denied a motion to certify an interlocutory appeal of an order denying a defendant appraiser’s motion to dismiss plaintiffs’ claims that the appraiser provided inflated appraisals in violation of the Real Estate Settlement Procedures Act (RESPA). Spears v. Washington Mutual Bank FA, No. C-08-00868, 2010 WL 54755 (N.D. Cal. Jan. 8, 2010). In Spears, after the district court denied the defendant’s motion to dismiss plaintiffs’ RESPA claim, the defendant appraiser moved for certification of an interlocutory appeal. The court denied this motion as well, finding that defendant failed to file the motion timely, and that, in any event, the motion lacked merit. Specifically, the court held that the defendant appraiser did not demonstrate that a “substantial ground for difference of opinion” existed among the courts with regard to the appraiser’s arguments for dismissing the borrowers’ RESPA claim. For example, in response to the defendant appraiser’s argument that plaintiffs lacked standing because they failed to allege an overcharge, the court acknowledged that district courts have disagreed on the issue, but held that the recent decisions of two appellate courts holding that no overcharge allegation is required to have standing for a RESPA claim showed that no substantial ground for difference of opinion exists. Additionally, the court was not persuaded (i) that allegedly inflated appraisals do not constitute a “thing of value” under RESPA, (ii) that RESPA’s safe harbor provision barred the plaintiffs’ claim, or (iii) that a case holding that optional discounts do not constitute "required use" was applicable to the facts of the instant case because the use of the appraiser allegedly was required. For a copy of the opinion, please see http://www.buckleysandler.com/Spears_v_Wa_Mu.pdf.
Credit Cards
FDIC Announces Settlement with Lender for Alleged Overlimit Fee Practices. On January 29, the Federal Deposit Insurance Corporation (FDIC) announced a settlement with a credit card lender whose overlimit fee practices the FDIC alleged violated Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive trade practices. According to the FDIC, the lender assessed cardholders who had been overlimit during two billing cycles an overlimit fee during the first cycle and again on the first day of the second billing cycle without providing proper notice of this billing procedure. Under the terms of the consent order setting forth the terms of the settlement, while the lender admits no wrongdoing or liability regarding the allegations, it agreed to a civil penalty of $140,000 and restitution totaling $10 million to 283,000 credit card holders. For a copy of the consent order, please see http://www.fdic.gov/news/news/press/2010/pr10019a.pdf.