Cal App Allows Fraud Exception to Parol Evidence Rule in Loan Mod/Forbearance Case

The California Court of Appeals, Fifth Appellate District, recently held that the fraud exception to the parol evidence rule applies to fraudulent inducement claims, in connection with a loan forbearance and modification effort.


A copy of the opinion is available at http://www.courtinfo.ca.gov/opinions/documents/F058434.PDF

A number of commercial borrowers filed a complaint which alleged causes of action involving fraud, negligent misrepresentation, rescission, and reformation concerning a written forbearance agreement with Defendant Fresno-Madera Production Credit Association.

The borrowers alleged they were induced to enter into the forbearance agreement by “defendant’s oral misrepresentations of the terms contained in the written agreement.” These alleged misrepresentations included promises made prior to and at the execution of the written agreement, wherein the borrowers alleged that the lender stated the forbearance would be for two years, and the collateral property would consist of two orchards, not the borrowers’ residence or truck yard. The executed agreement provided only that the lender would forbear from collection until July 1, 2007, and included the borrowers’ residence and truck yard as collateral property. Following a failure to make the payments due under the agreement, the lender recorded a notice of default; however, the borrowers then repaid the loan.

The lender’s motion for summary judgment was granted by the lower court based on the borrowers’ failure to perform pursuant to the written forbearance agreement, and the parol evidence rule’s barring “any prior or contemporaneous oral agreement” which changes or adds to “the terms of an integrated written agreement.”

The Appellate Court stated that the only issue on appeal was “whether evidence of defendant’s oral statements, proffered by plaintiffs in opposition to the motion, was properly excluded by the trial court.”

The Court reviewed the policy basis of the parol evidence rule, noting that the rule stems from the concept of contract “integration” whereby “the parties to an agreement incorporate the complete and final terms of the agreement in a writing.” Extrinsic evidence is thus excluded “because it cannot serve to prove what the agreement was” as the writing itself determines this “as a matter of law.” However, the Court noted that there are exceptions to this rule, such as “to establish illegality or fraud.” (Emphasis added by the Court). However, the Court noted that this exception has been limited by the California Supreme Court decision in Bank of America etc. Assn v. Pendergrass (1935) 4 Cal.2d 258, which limits the fraud exception “making it inapplicable when the evidence is offered to show a promise contradicting the written agreement.”

In their appeal, the borrowers pointed to more recent California decisions, including Pacific State Bank v. Greene (2003) 110 Cal, App. 4th 373, which drew a distinction between parol evidence of a “prior promise made without any intention of performing it” which contradicts the terms of a written contract, and “parol evidence of a contemporaneous factual misrepresentation of the terms contained in a written agreement submitted for signing.” The Appellate Court held that in the latter case, extrinsic evidence would not be admitted to “alter, vary, or add to the provisions of an integrated agreement” but would be allowed to prove that the written contract was not in fact the integrated agreement intended by the parties.

Based on the above analysis, the Appellate Court held that the Pendergrass standard “did not intend its limitation on the fraud exception to the parol evidence rule to extend beyond evidence of promissory fraud.”

In the instant case, the Court found that the borrowers' “extrinsic evidence of the alleged misrepresentations made by defendant’s representative should have been admitted in opposition to defendant’s motion for summary judgment.” Accordingly, the Appellate Court reversed the judgment of the trial court, with directions to vacate the order granting summary judgment, and to enter a new order to denying summary judgment except as to select causes of action.

Global Warming

Where is it???????

Yesterday the news reported that Florida was the only state in all 50 states without snow on the ground.   (Hawaii - has a mountain top that get's snow.)

Today the news reported New Haven CT had 30 inches of snow in one day.

Sounds more like the ICE AGE to me.

MORTGAGE INTEREST RATES EASE FURTHER THIS WEEK

Mortgage rates retreated this week, marking the second week in a row they've headed lower. Interest rates began a sharp ascension in early November, and experts have warned that the trend is likely to continue. The recent change of pace was attributed to last Friday's jobs report, which was weaker than market forecasts. Freddie Mac says 30-year rates this week dropped to 4.71 percent while 15-year rates fell to 4.08 percent. Bankrate says the larger jumbo 30-year fixed rate edged down to 5.57 percent.

ANALYSIS: SMALL BUSINESSES MAY BE GROWING AGAIN

It is no wonder the recovery has been so anemic: The U.S. economy has been trying to run on one leg, according to an analysis in the Wall Street Journal today. Large businesses—the good leg—have been growing robustly for at least a year. Production is rising, sales are higher, and profits are through the roof. But the recovery missed the second leg—small businesses, which account for about half of U.S. output and jobs. Encouragingly, there are now tentative signs that the second leg may finally be healing. Since the recession ended in mid-2009, we've been relying almost exclusively on larger businesses for our growth. The problem is, large businesses have been relentlessly cutting costs, especially labor costs, to improve their bottom lines. Profits are up, but employment is flat. However, there are clues that small businesses are finally getting back on their feet. In December, employment in small firms (fewer than 50 employees) rose by 117,000, the biggest gain in nearly five years. The small-business sector has other problems, though. Borrowing is particularly difficult for entrepreneurs starting up a company. Many of them rely not on regular lines of business credit at the bank, but on personal loans backed by their home equity or personal credit cards. If we do not have many new businesses, we will not have very much job creation. Given the reliance on home equity to finance start-ups, further declines in home prices could doom us to more years of high unemployment, even if the rest of the small-business sector gets moving again.

http://online.wsj.com/article/SB10001424052748704803604576077763574674434.html

In Their Fight with Banks over Mortgage Losses, Investors Side with Borrowers

The fight between big banks and investors who lost a fortune on mortgage-backed securities is shifting from private litigation to the public arena, The Washington Post reported yesterday. While the investors have been angry at the banks for several years for the losses, their legal efforts have not gotten far, mostly because of the difficulty of organizing enough peers for class-action lawsuits and of prying information from the lenders, but the recent uproar over the banks' foreclosure practices has given the investors a way to pressure lenders outside the courts. As Congress begins discussing potential mortgage servicing legislation, and as the group of 50 state attorneys general investigating problems with foreclosures continues to hammer out details of a settlement with the banks, the investors find themselves fortuitously aligned with borrowers who are facing foreclosure and who have the sympathy of lawmakers. The Association of Mortgage Investors, a Washington, D.C.-based group that represents hedge funds, state pension funds, charitable endowments and other investors, is calling for improvements to servicing and transparency that the banks have resisted in the past. The team leading the 50-state investigation has been meeting with the country's major servicers in recent weeks and with stakeholders such as the investors. Investors represent what may be the biggest risk to banks that initiated questionable foreclosures. While homeowners may succeed at getting individual foreclosures delayed or even overturned because of paperwork mistakes and other errors, the money at stake in such cases is minuscule compared with the billions in bad mortgages that banks could be forced to buy back if investor lawsuits are successful. The pressure from mortgage investors comes just weeks before the release of two key federal reports about the mortgage industry—a multi-agency report on the foreclosure problems and another by the Treasury Department on Fannie Mae and Freddie Mac.

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/12/AR2011011205564.html

Home Foreclosures in 2010 Top 1 Million for First Time

Banks seized more than a million U.S. homes in one year for the first time last year, despite a slowdown in the last few months as questions around foreclosure processing arose, Reuters reported today. Banks foreclosed on 69,847 properties in December, bringing the year's total to 1.05 million, topping the prior record of 918,000 homes seized in 2009, real estate data firm RealtyTrac said. The number of foreclosure filings, which includes default notices, auctions and repossessions, was a record 2.9 million last year, including 257,747 filings in December. December filings were 2 percent lower than November and 26 percent lower than December 2009. The firm said Nevada, Arizona and Florida continued to post the highest foreclosure rates in the country. Five states—California, Florida, Arizona, Illinois and Michigan—accounted for more than half of all foreclosure activity. In 2005, before the housing bust, banks took over just about 100,000 houses, according to the Irvine, Calif.-based company.

http://www.reuters.com/article/idUSTRE70C0YD20110113

Consumer Bankruptices Increase 9% in 2010

New data shows that U.S. consumer bankruptcies increased 9 percent nationwide in 2010 from the previous year according to the American Bankruptcy Institute (ABI).


Data from the National Bankruptcy Research Center (NBKRC) showed that the overall consumer filing total for the 2010 calendar year (Jan. 1 – Dec. 31, 2010) reached 1,530,078 compared to the 1,407,788 total consumer filings recorded during 2009. Annual consumer filings have increased each year since the Bankruptcy Abuse Prevention and Consumer Prevention Act was enacted in 2005.

The Middle District of Florida hit a record all time high is 201.
NBKRC’s data also showed that the 118,146 consumer filings recorded in December 2010 represented a 4 percent increase from the 113,274 filings in December 2009. The December 2010 consumer filings also represented a 3 percent increase from the November 2010 total of 114,587. Chapter 13 filings constituted 30 percent of all consumer cases in December, a slight increase from November.

A study released earlier this year found that Americans aged 65 and older are filling for bankruptcy more than any other demographic according to a recent study by John Pottow, professor of law at the University of Michigan Law School. The study showed the number filers age 65 and over doubled from 2.1% in 1991 to 4.5% in 2001. The trend continued in 2007, as the proportion of filers in this age group rose further to 7.0%.

Ransom

The U.S. Supreme Court today held in Ransom v. F.I.A. Card Services, N.A., that a chapter 13 debtor who owns a car outright may not take a means testing ownership deduction.
 The 8-1 opinion by Justice Elena Kagan, with only Justice Antonin Scalia dissenting, focused on the statute's "text, context, and purpose." Ransom attempted to take a standard $471 monthly car ownership deduction despite having no car payment. The Court upheld the decision of the U.S. Court of Appeals for the Ninth Circuit affirming the bankruptcy court's refusal to confirm Ransom's chapter 13 plan. The Supreme court explicitly stated that it was not deciding whether a debtor who has a lower actual payment could deduct the full means testing allowance, only that a debtor with no payment could not take the deduction.

In the wake of Ransom, lower courts will have to decide whether debtors with old, paid-off cars can buy new ones on credit before filing, thus gaining a means testing deduction. The Court did not explicitly state that its analysis applies in chapter 7, but it suggested that it did, in part by its "compare" citation of Fifth and Seventh Circuit decisions to the contrary in chapter 7 cases. However, the Court also relied on the "statutory context" that in chapter 13, means testing deductions fill in "amounts reasonably necessary to be expended" by above-median-income debtors. The opinion noted that bankruptcy law has a "core purpose of ensuring that debtors devote their full disposable income to repaying creditors."


For Now I would say go buy that new car then file!!!!

Justice Kagan's Debut Opinion- Ransom

http://www.supremecourt.gov/opinions/10pdf/09-907.pdf

Supreme Court Justice Elena Kagan announced the first opinion of her tenure this morning, which turned out to decide the first case she heard argued in the current term last October 4.


As often happens for new justices, Kagan was assigned to write her first decision in a less-than-blockbuster case, Ransom v. FIA Card Services, a bankruptcy dispute over which routine expenses debtors can deduct from their monthly income and thereby keep out of the hands of creditors. Kagan managed to make it interesting nonetheless, with the non-technical, very accessible summary she read from the bench for spectators.

Kagan ruled against the debtor, and in favor of the credit card company. She was joined by all her colleagues except for dissenting Justice Antonin Scalia, thus depriving her of the unanimity that the Court tries to achieve for a justice's opinion-writing debut.

http://www.foxnews.com/politics/2011/01/11/justice-kagan-hands-opinion-scalia-dissents/#

Retired Justice Sandra Day OConnor Justice Sonia Sotomayor Justice Ruth Bader Ginsburg and Justice Elena Kagan

FDIC MAY HAVE STRICTER SERVICING RULES IN THE WORKS FOR BANKS

Reports have surfaced that the FDIC is contemplating stricter requirements that would force banks to disclose what potential ramifications a loan modification on a first lien they service would have on an underlying lien. Industry analysts have speculated that servicers may be reluctant to modify a primary loan because the bank that services the loan also holds the second lien. Such an arrangement could be considered a conflict of interest and prompts some to wonder if investors would be swayed if they knew of the arrangement beforehand.

http://www.dsnews.com/articles/fdic-may-have-stricter-servicing-rules-in-works-for-banks-2011-01-11

Report: Consumers Still Struggling with Loans

U.S. consumers continue to struggle to pay back home equity, auto and other loans as high unemployment drags on the economy, Reuters reported today. The American Bankers Association said in a report released today that the overall loan delinquency rate ticked up slightly for the second straight quarter. It had been dropping steadily since hitting 3.35 percent in the second quarter of 2009. The overall rate increased to 3.01 percent in the third quarter of 2010 from 3.00 in the second quarter. The ABA defines a delinquency as a payment that is 30 days or more overdue. The association attributed the lack of downward movement to the unemployment rate, which remains high, but said delinquency rates are likely to improve soon. Among the areas where consumers had a more difficult time repaying their debts was in auto loans. The delinquency rate for loans provided by a bank increased from 1.67 percent to 1.74 percent and delinquencies on loans arranged through a dealer or other third party increased from 3.01 percent to 3.02 percent. The delinquency rate on credit cards issued by banks also increased moving to 3.64 percent in the third quarter from 3.62 percent during the previous time period.

http://www.reuters.com/article/idUSTRE70A1U720110111

Judges Berate Bank Lawyers in Foreclosures

With judges looking ever more critically at home foreclosures, they are reaching beyond bankers to heap some of their most scorching criticism on the lawyers, the New York Times reported today. In numerous opinions, judges have accused lawyers of processing shoddy or even fabricated paperwork in foreclosure actions when representing the banks. New York judges are also trying to take the lead in fixing the mortgage mess by leaning on the lawyers. More broadly, the courts in New York state, along with Florida, have begun requiring that lawyers in foreclosure cases vouch for the accuracy of the documents they present, which prompted a protest from the New York bar. The requirement, which is being considered by courts in other states, could open lawyers to disciplinary actions that could harm or even end careers. Stephen Gillers, an expert in legal ethics at New York University, agreed that the involvement of lawyers in questionable transactions could damage the overall reputation of the legal profession, "which does not fare well in public opinion" throughout history. "When the consequence of a lawyer plying his trade is the loss of someone's home, and it turns out there are documents being given to the courts that have no basis in reality, the profession gets a very big black eye," Gillers said.


http://www.nytimes.com/2011/01/11/business/11lawyers.html?_r=2&ref=business

MA Sup Jud Ct Invalidates Foreclosure Sales for Lack of Proof of Mortgage Assig

The Massachusetts Supreme Judicial Court recently held that two foreclosure plaintiffs, "who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure," and that "[a]s a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied."


The Court emphasized that the asset securitization trustee plaintiffs both "asserted in their respective complaints that they had become the holder of the respective mortgage through an assignment made after the foreclosure sale." The factual discussion of each case in the opinion specifically states that the servicer of the mortgage loan was the record mortgagee, and that the mortgage was assigned the trustee after the foreclosure sale occurred.

The trial court judge ruled that the foreclosure sales were invalid because, in alleged violation of Mass. G.L. c. 244, § 14, the notices of the foreclosure sales named the asset securitization trust trustees as the mortgage holders where they had not yet been assigned the mortgages. The trial court judge found, based on each plaintiff's assertions in its complaint, that the plaintiffs acquired the mortgages by assignment only after the foreclosure sales, and thus had no interest in the mortgages being foreclosed at the time of the publication of the notices of sale or at the time of the foreclosure sales.

The plaintiffs moved to vacate the trial court's judgments. In so doing, the plaintiffs submitted hundreds of pages of documents to the trial judge, attempting to establish that the mortgages had been assigned to them before the foreclosures. Many of these documents related to the creation of the securitized mortgage pools in which the mortgages were included. Nevertheless, the trial judge denied the plaintiffs' motions, concluding that the newly submitted documents did not alter the conclusion that the plaintiffs were not the holders of the respective mortgages at the time of foreclosure.

Importantly, the Court noted that each plaintiff did not provide the trial judge with any mortgage schedule identifying the subject loans as among the mortgages that were assigned in the purchase and sale and trust agreements.

Moreover, Massachusetts is not a "mortgage follows the note" state. The Massachusetts Supreme Judicial Court here noted:

In Massachusetts, where a note has been assigned but there is no written assignment of the mortgage underlying the note, the assignment of the note does not carry with it the assignment of the mortgage. Barnes v. Boardman, 149 Mass. 106, 114 (1889). Rather, the holder of the mortgage holds the mortgage in trust for the purchaser of the note, who has an equitable right to obtain an assignment of the mortgage, which may be accomplished by filing an action in court and obtaining an equitable order of assignment. Id.

In the absence of a valid written assignment of a mortgage or a court order of assignment, the mortgage holder remains unchanged. This common-law principle was later incorporated in the statute enacted in 1912 establishing the statutory power of sale, which grants such a power to "the mortgagee or his executors, administrators, successors or assigns," but not to a party that is the equitable beneficiary of a mortgage held by another. G.L. c. 183, § 21, inserted by St.1912, c. 502, § 6.

In addition, the Court specifically stated as follows:

We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice. Where a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage. See In re Samuels, 415 B.R. 8, 20 (Bankr.D.Mass.2009). A foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage. See In re Parrish, 326 B.R. 708, 720 (Bankr.N.D.Ohio 2005) ("If the claimant acquired the note and mortgage from the original lender or from another party who acquired it from the original lender, the claimant can meet its burden through evidence that traces the loan from the original lender to the claimant"). The key in either case is that the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale (or the foreclosing entity must be one of the parties authorized to foreclose under G.L. c. 183, § 21, and G.L. c. 244, § 14).

A valid assignment of a mortgage gives the holder of that mortgage the statutory power to sell after a default regardless whether the assignment has been recorded. See G.L. c. 183, § 21; MacFarlane v. Thompson, 241 Mass. 486, 489 (1922). Where the earlier assignment is not in recordable form or bears some defect, a written assignment executed after foreclosure that confirms the earlier assignment may be properly recorded. See Bon v. Graves, 216 Mass. 440, 444-445 (1914). A confirmatory assignment, however, cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time. See Scaplen v. Blanchard, 187 Mass. 73, 76 (1904) (confirmatory deed "creates no title" but "takes the place of the original deed, and is evidence of the making of the former conveyance as of the time when it was made"). Where there is no prior valid assignment, a subsequent assignment by the mortgage holder to the note holder is not a confirmatory assignment because there is no earlier written assignment to confirm. In this case, based on the record before the judge, the plaintiffs failed to prove that they obtained valid written assignments of the Ibanez and LaRace mortgages before their foreclosures, so the postforeclosure assignments were not confirmatory of earlier valid assignments.

However, the Court specifically rejected the plaintiffs' request that its ruling only be prospective in its application. The Court held it did not make significant change in the common law, but rather "[t]he legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs' apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities."

MBA Requests Written Guidance re: FRB's Loan Originator Compensation Final Rule

The national Mortgage Bankers Association recently sent a request for written compliance guidance regarding implementation of the Federal Reserve Board’s final rule on loan originator compensation and steering, set to go into effect on April 1, 2011. (The FRB had previously provided oral guidance, but had not reduced its guidance to writing.)


Among other things, the MBA's letter points to:

(1) conflicts between the FRB's final rule and similar provisions in the Dodd-Frank Act;

(2) conflicts between the language of the rule and informal oral guidance provided by the FRB;

(3) the language of the Official Staff Commentary for the final rule stating that compensation may differ where it can be shown based on a bona fide analysis that average costs and time spent to originate these differing products justify compensation differences;

(4) the absence of any reference in the final rule or other justification for prohibiting different compensation for purchase money loans as opposed to refinance loans;

(5) the final rule's exemption for managers from the restriction on compensation based on rate or terms, and a de minimis proposal as to managers who also originate loans; and

(6) a list of Q&A's for consideration and written comment by the FRB.

A copy of the MBA's request is available at:

http://www.mbaa.org/files/Advocacy/2010/MBALettertoFederalReserveonLoanOfficerCompensation.pdf

As you may recall, the Federal Reserve Board earlier this year issued final rules that: (1) prohibit compensation that is based on the interest rate or other loan terms, subject to limited exception for the amount of credit extended; (2) prohibit a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party; and (3) prohibit loan originators from directing or "steering" a consumer to accept a mortgage loan with terms less favorable to the consumer in order to increase the originator's compensation.

The final rules also provide a safe harbor to facilitate compliance with the new anti-steering rule. The safe harbor is met if: (a) the consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and (b) the loan options presented to the consumer include the following: (1) the lowest interest rate for which the consumer qualifies; (2) the lowest points and origination fees, and (3) the lowest rate for which the consumer qualifies for a loan with no so-called "risky features," such as a prepayment penalty, negative amortization, interest-only payments, shared equity or appreciation, or a balloon payment in the first seven years.

Compensation that is based on a fixed percentage of the loan amount is permitted under the new rules. The FRB's new rules apply to closed-end consumer loan secured by a dwelling.

The final rules apply to mortgage brokers and the companies that employ them, mortgage loan officers employed by depository and non-depository lenders, and TILA "creditors" that do not lend their own funds, or warehouse line or deposit funds.

The final rules apply to closed-end transactions secured by a dwelling where the creditor receives a loan application on or after April 1, 2011.



The final rules are available at:

http://edocket.access.gpo.gov/2010/2010-22161.htm

FRB Issues New MDIA "Payment Shock" Disclosure Interim Rule, Proposes Higher Dollar-Amount Threshold for TILA/CLA

New Interim Rule Regarding MDIA "Payment Shock" Disclosures


In response to public comments, the Federal Reserve Board recently issued a new interim rule, amending the prior interim rule issued a few months ago regarding a mortgage lender's duty to disclose examples of how a loan's interest rate or monthly payments can change.

The FRB's new interim rule is available at:

http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20101222a1.pdf

Under the Mortgage Disclosure Improvement Act of 2008 (MDIA), mortgage lenders must alert borrowers to the risks of payment increases before they take out mortgage loans with variable rates or payments. The statutory amendments will become effective on January 30, 2011.

As you may recall, in September of 2010, the FRB issued an interim rule, implementing these provisions of the MDIA. Under the FRB's September interim rule, lenders' cost disclosures must include a payment summary in the form of a table stating the initial rate and corresponding periodic payment and, for adjustable rate loans, the maximum rate and payment that can occur during the first five years as well as a "worst case" example showing the maximum rate and payment possible over the life of the loan.

This new interim rule clarifies that:

1. Creditors' disclosure should reflect the first rate adjustment for a "5/1 ARM" loan, because the new rate typically becomes effective within 5 years after the first regular payment due date;

2. Creditors' disclosures should show the earliest date the consumer's interest rate can change, rather than the due date for making the first payment under the new rate; and

3. Which mortgage transactions are covered by the special disclosure requirements for loans that allow minimum payments that cause the loan balance to increase.

The FRB states that creditors have the option of complying with either the FRB's September 2010 interim rule as originally published, or as revised by this interim rule, until October 1, 2011, at which time compliance with this new interim rule will become mandatory.

The Board is soliciting comment on this interim rule for 60 days after publication in the Federal Register.

Proposed Increase in Dollar-Amount Threshold for TILA and CLA

The Federal Reserve Board recently proposed two rules that would expand the coverage of consumer protection regulations to credit transactions and leases of higher dollar amounts.

As you may recall, effective July 21, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the protections of the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA) apply to consumer credit transactions and consumer leases up to $50,000, from the current amount of $25,000. This amount will be adjusted annually to reflect any increase in the Consumer Price Index.

TILA requires creditors to disclose key terms of consumer loans and prohibits creditors from engaging in certain practices with respect to those loans. Currently, consumer loans of more than $25,000 are generally exempt from TILA. However, private education loans and loans secured by real property (such as mortgages) are subject to TILA regardless of the amount of the loan.

The CLA requires lessors to provide consumers with disclosures regarding the cost and other terms of personal property leases. An automobile lease is the most common type of consumer lease covered by the CLA. Currently, a lease is exempt from the CLA if the consumer's total obligation exceeds $25,000.

The notices published in the Federal Register are available at:

Regulation M: http://edocket.access.gpo.gov/2010/pdf/2010-31530.pdf

Regulation Z: http://edocket.access.gpo.gov/2010/pdf/2010-31529.pdf

Comments on the FRB's proposals must be submitted by February 1, 2011.

CFPB and State Regulators Announce MOU on Examinations, Enforcement

The federal Consumer Financial Protection Bureau implementation team, and the Conference of State Bank Supervisors recently signed a memorandum of understanding (MOU) to establish a foundation of state and federal coordination and cooperation for supervision of providers of consumer financial products and services.


A copy of the press release is available at:

http://www.csbs.org/news/press-releases/pr2010/Pages/pr-010411.aspx

Specifically, the state regulators and the federal CFPB announced they will work together to promote consistent examination procedures, to promote effective enforcement of state and federal consumer laws, and to minimize the regulatory burden and efficiently deploy supervisory resources.

The MOU also calls for state regulators and CFPB to consult each other regarding the standards, procedures, and practices for conducting compliance examinations of providers of consumer financial products and services, including non-depository mortgage lenders, mortgage servicers, private student lenders, and payday lenders.

HUD Announces $2.5MM Fair Lending Settlement

The U.S. Department of Housing and Urban Development, the Metropolitan St. Louis Equal Housing Opportunity Council (EHOC), and First National Bank of St. Louis recently announced a conciliation agreement that will increase the bank's commitment to minority and low-income communities. As part of the agreement, the bank will invest more than $2.5 million over four years in St. Louis City, North St. Louis County, and St. Clair County, Illinois.


A copy of the conciliation agreement is available at:

http://www.hud.gov/offices/fheo/library/10-EHOC-First-National-BankSt-Louis-Agreement-121710.pdf


The agreement reportedly comes after HUD investigated and conciliated a fair housing complaint that was filed by EHOC, a fair housing organization, alleging that the Bank failed to locate branches and provide banking services in African-American neighborhoods.

Under the agreement, First National Bank of St. Louis will finance the construction of rental housing and community development projects in African-American neighborhoods, offer affordable mortgages, and promote consumer financial literacy education. The agreement also calls for the bank to conduct the following activities in the St. Louis area of Missouri and Illinois:

* Open a new bank branch in a majority African-American Census tract;

* Provide $2 million in community development loans and investments;

* Fund a Special Financing Program with $500,000 to provide mortgage rate discounts, down payment assistance, and closing cost assistance;

* Make available Spanish language services in all branches, particularly in loan negotiations;

* Increase its marketing, advertising, and outreach activities;

* Invest $100,000 to provide credit counseling and financial literacy training to residents;

* Offer residents free checking accounts with no fees or minimum balance; and

* Provide $100,000 for fair housing and community reinvestment activities.

HUD Issues HECM Guidance re: Delinquent Property Taxes and Hazard Ins Premiums

HUD recently issued guidance for reverse mortgage homeowners and their lenders on how to handle outstanding property taxes and unpaid hazard insurance premiums. The guidance is intended to assist elderly borrowers who have neglected to pay these expenses and may face foreclosure.


A copy of the mortgagee letter (2011-01) is available at:

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-01ml.pdf

Specifically, the mortgagee letter provides loss mitigation guidance for the resolution of Home Equity Conversion Mortgages (HECM) that are delinquent due to unpaid property charges, and mortgages wherein due and payable requests were previously deferred by HUD. The guidance applies to all HECMs where the mortgagor is delinquent in paying property charges, or the mortgagee has advanced corporate funds to satisfy an unpaid property charge on behalf of the mortgagor, or both.

The guidance includes sample letters that lenders may use to make certain borrowers understand that property tax and hazard insurance are required expenses that must be paid even though the homeowner owes nothing on their mortgage loans. HUD reportedly is planning to publish a proposal to add more preventative measures and consumer protections to the existing reverse mortgage regulations.

BK Case Law Update

In re: Euliano


While confirmation of a Chapter 13 plan is res judicata as to the treatment of a mortgage arrearage claim cured in the plan, the amount of the pre-petition arrearage is established by the proof of claim.

Treasury Eases HAFA Guidelines as Group Urges Action

http://makinghomeaffordable.gov/hafa.html

https://www.hmpadmin.com/portal/programs/docs/hafa/sd1018.pdf

http://www.car.org/media/pdf/C.A.R._HAFA___Short_Sale_Comment_Letter_12-10.pdf

MASSACHUSETTS COURT VOIDS FORECLOSURES, CITING NOTE TRANSFER ERRORS

http://www.massachusettslandusemonitor.com/files/Ibanez%20decision%20%28A0837218%29.PDF

The Massachusetts Supreme Court ruled Friday that U.S. Bank and Wells Fargo did not have the legal right to foreclose on two homes in the state, invalidating the seizure of the properties and raising further questions about foreclosure documentation – this time related to the proper transfer of ownership on mortgages packaged as securities.

At the core of the issue is that the lenders both failed to ensure the assignment of the mortgage notes were executed and recorded in the registry of deeds before the dates of the foreclosure sales.