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Mortgage Servicing and Loan Modifications: 5.8.5 Intentional Infliction of Emotional Distress

To state a claim for intentional infliction of emotional distress, the homeowner must allege that the defendant’s conduct was extreme and outrageous, that the conduct was intentional or reckless, and that the conduct actually caused severe emotional distress. Extreme and outrageous conduct has often been described as conduct that is so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community.204

Mortgage Servicing and Loan Modifications: 5.8.8 Libel

The tort of libel235 has been the traditional non-statutory remedy for inaccurate consumer reports.236 Libel is the written, printed publication of defamatory language. It requires prejudice to the consumer’s reputation or livelihood, resulting from a communication to a third party, such as a credit reporting agency.

Mortgage Servicing and Loan Modifications: 5.8.11 Promissory Estoppel

Typically, promissory estoppel requires showing: (1) a promise by the party to be estopped; (2) reasonable and foreseeable reliance upon that promise by the party asserting estoppel; (3) injury (in other words, a substantial detriment) to the party asserting estoppel; and (4) damages.254 A number of courts have upheld promissory estoppel claims when a servicer extended a trial period plan but refused to honor the promise to implement a permanent loan modification upon successful completion of the trial plan.

Mortgage Servicing and Loan Modifications: 4.2.1 Overview

The Truth in Lending Act (TILA) is primarily a disclosure statute that compels creditors extending credit to consumers to disclose the cost of credit. Amendments to TILA made over a number of years, however, have expanded its scope by adding substantive consumer protections. Even before enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act),8 the former agency with rulemaking authority over TILA, the Federal Reserve Board, implemented regulations addressing mortgage servicing.

Mortgage Servicing and Loan Modifications: 4.2.2 Scope of TILA

The Truth in Lending Act (TILA) is designed to provide consumers with accurate information about loan transactions in order to facilitate the informed use of credit. TILA has been amended to include a variety of substantive protections that seek to protect mortgage loan borrowers from abusive lending. The Act also contains certain provisions that apply to the servicing of mortgage loans.

Mortgage Servicing and Loan Modifications: 4.2.3 Interest Rate and Payment Change Notices

For most adjustable rate mortgages, consumers must be notified about upcoming interest rate changes that will affect their payments. Advance notice of interest rate and payment changes permits borrowers to adjust their finances to account for any increase in payment, gives borrowers the opportunity to explore other options (e.g., refinancing, sale), and allows borrowers to work with their servicer if expected increases are unaffordable.

Mortgage Servicing and Loan Modifications: 4.2.4.3.1 Introduction

The Dodd-Frank Act amendments to the Truth in Lending Act also mandate that servicers credit periodic payments on closed-end consumer credit transactions secured by a consumer’s principal dwelling as of the date of receipt.57 Like the FRB rule, there is an exception when a delay in crediting the payment does not result in any charge to the consumer or in the reporting of negative credit information to a consumer reporting agency.58 There is also an exception, as in the FRB rule, that if a servicer s

Mortgage Servicing and Loan Modifications: 4.2.4.3.2 Partial payments

The CFPB rule offers new and specific guidance to servicers on how to deal with partial payments (i.e., payments less than periodic payments).73 Nothing in the rule compels a servicer to accept a partial payment, and it therefore may be returned to the borrower if permitted under the terms of the uniform mortgage or deed of trust and state law.74 If the servicer does not return a partial payment, the final rule permits the servicer to either

Mortgage Servicing and Loan Modifications: 4.2.4.3.3 Non-conforming payments

A separate subsection of the Dodd-Frank Act and the CFPB rule address non-conforming payments.80 Non-conforming payments are payments that have been accepted by the servicer and are distinguished from partial payments that are placed in suspense, which are considered not to have been accepted.81 Any non-conforming payment must be credited within five days of receipt.

Mortgage Servicing and Loan Modifications: 4.2.4.4 Pyramiding of Late Fees

Under the former FRB rule, a servicer could not impose any late or delinquency fee when the only delinquency was attributable to the late or delinquency fee itself, and the payment was otherwise a full payment for the applicable period and was paid on its due date or during an applicable grace period.87 Effective January 10, 2014, the CFPB renumbered and adopted the FRB’s rule, making only non-substantive phrasing changes.88 The FRB intended that its rule be construed consistently with the Federal T

Mortgage Servicing and Loan Modifications: 4.2.5.7 Exemption for Charged Off Loans

The requirement to send periodic statements continues even after the loan reaches maturity.263 However, the 2016 mortgage servicing rule, effective October 19, 2017, added an exemption from the periodic statement requirements if a loan has been charged off and the creditor or servicer will not charge any additional fees or interest on the account.264 A condition for obtaining the exemption is that the creditor or servicer must pro

Mortgage Servicing and Loan Modifications: 4.3.1 Overview

The Fair Debt Collection Practices Act (FDCPA)437 offers potent remedies against abusive debt collection tactics such as fee padding, demands for incorrect amounts, and harassment. The Act is applicable to some but not all servicers. The key question is whether the servicer acquired the debt before or after it went into default.

Mortgage Servicing and Loan Modifications: 4.2.5.3.1 General requirements

The disclosures required by the periodic statement rule must be made by the creditor or servicer clearly and conspicuously in writing, or electronically if the consumer agrees, and in a form that the consumer may keep.115 The “clear and conspicuous” standard generally requires that the disclosures be made in a “reasonably understandable form.”116