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Mortgage Lending: Appendix MS to Part 1024—Mortgage Servicing Model Forms and Clauses

1. In general. This appendix contains model forms and clauses for mortgage servicing disclosures required by §§ 1024.33, 37, and 39. Each of the model forms is designated for uses in a particular set of circumstances as indicated by the title of that model form or clause. Although use of the model forms and clauses is not required, servicers using them appropriately will be in compliance with disclosure requirements of §§ 1024.33, 37, and 39. To use the forms appropriately, information required by regulation must be set forth in the disclosures.

Mortgage Lending: 12 C.F.R. § 701.21 Loans to members and lines of credit to members.

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(b) Relation to other laws—

(1) Preemption of state laws. Section 701.21 is promulgated pursuant to the NCUA Board’s exclusive authority as set forth in section 107(5) of the Federal Credit Union Act (12 U.S.C. 1757(5)) to regulate the rates, terms of repayment and other conditions of Federal credit union loans and lines of credit (including credit cards) to members. This exercise of the Board’s authority preempts any state law purporting to limit or affect:

Mortgage Lending: 14.1 Introduction

A host of legal issues confront borrowers when a bank fails and the Federal Deposit Insurance Corp. (FDIC) is appointed its receiver. First are procedural hurdles: when a bank fails the FDIC sets up an administrative claims process. Many claims against a failed bank will be barred if the claimant fails to exhaust this administrative claims process.

Second are special substantive defenses that the FDIC can assert. These special defenses are collectively but somewhat imprecisely known as the D’Oench doctrines.

Mortgage Lending: 14.2.3 The Federal Housing Finance Agency’s Role

If the Federal Housing Finance Agency (FHFA) is appointed as conservator or receiver for one of the government-sponsored enterprises such as Fannie Mae or Freddie Mac, it plays a role similar to that which the FDIC plays in the case of banks, and there is a similar administrative claims process.25 On September 6, 2008, the FHFA became conservator of Fannie Mae and Freddie Mac.26 The administrative claims process only applies when one of the government-sponsored enterprises is in receivership

Mortgage Lending: 14.3.2.2 The FDIC Must Publish and Mail Notice to the Failed Bank’s Creditors

Once the FDIC is appointed receiver of a failed bank, it must publish a notice to the depository’s creditors three times, informing them to present their claims by a claims bar date.38 The claims bar date must be at least ninety days after the date of the first publication of this notice.39 In addition, the receiver must mail a similar notice to any “creditor shown on the institution’s books.”40 Courts have held that notice to the creditor’s

Mortgage Lending: 14.3.5.2 Distinction Between a Claim and an Affirmative Defense

What constitutes an affirmative defense as opposed to a counterclaim is not entirely clear. Courts have the right to relabel a counterclaim as an affirmative defense and vice versa.129 In National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. City Savings, the Third Circuit adopted a definition of “defense” from Black’s Law Dictionary: “That which is offered and alleged by the party proceeded against in an action or suit, as a reason in law or fact why the plaintiff should not recover or establish what he seeks.

Mortgage Lending: 14.3.5.5 Practical Considerations

In light of the differences in federal circuit court decisions, it is important to evaluate which circuit a case is likely to be litigated in before determining whether to advise a consumer to exhaust the administrative claims process for an affirmative defense.

Mortgage Lending: 14.3.6.1 Courts Retain Jurisdiction over Pre-Receivership Suits

There is broad consensus among the federal circuit courts that the requirement of exhaustion of administrative remedies is significantly different for a suit that was filed before the bank went into receivership. The United States Supreme Court has held that subject matter jurisdiction is ordinarily determined at the time a case is filed, and is not affected by later events.177

Mortgage Lending: 14.3.9.3 Asserting TILA Claims Against Assignees

The Truth in Lending Act (TILA) has its own provisions regarding assignee liability.295 A rescission claim under TILA can be asserted against an assignee even if the TILA violation on which it was based is not apparent on the face of the documents.296 The bank to which the FDIC transfers a failed bank’s loans is an “assignee” for purposes of this rescission right.297 There is a strong argument that this statutory right of rescission against a

Mortgage Lending: 14.3.9.4 Claims Against Bridge Banks

Sometimes the FDIC creates a “bridge bank” or temporary bank where it “parks” the failed bank’s assets and obligations while it arranges for another institution to take them over.305 Typically, the FDIC acts as conservator rather than as receiver for a bridge bank.

Mortgage Lending: 14.3.10 Other Exceptions to Exhaustion Requirement

The claims process becomes an issue only when a bank actually fails. When the FDIC saves a bank from failure by orchestrating its sale to another bank, as it did in 2008 with Wachovia Bank, the claims process is never initiated and the issues with the administrative claims process discussed in this chapter never arise.

Mortgage Lending: 14.3.12 Other Constitutional Issues

Another possible constitutional issue is the delay built into the administrative claims process. In Coit Independence Joint Venture v. Federal Savings & Loan Insurance Corp.,335 the United States Supreme Court held that a claimant could not be required to exhaust an administrative claims process that did not set a reasonable deadline for the agency to decide the claim.

Mortgage Lending: 14.3.13 How to File a Claim

The FDIC provides instructions for filing a claim online or by mail and a proof of claim form that can be filled in electronically.343 If the claimant mails the proof of claim, the FDIC recommends that claimants send all documentation by certified mail or a commercial service that can provide a receipt of delivery. In addition, claimants should ensure that the proof of claim is the top document of the mailing. There is no need for a cover letter.

For questions about this process, claimants can call the FDIC Call Center:

Mortgage Lending: 14.3.15 The FDIC’s Right to Remove a Case to Federal Court

The statute allows the FDIC to substitute itself as a party in any pre-receivership or post-receivership suit filed in state court against the failed bank, and to remove the case to federal court within ninety days after the substitution.368 The ninety-day period begins to run “on the date the action, suit, or proceeding is filed against the Corporation or the Corporation is substituted as a party.”369 The “corporation” in the statute refers to the FDIC in any capacity.

Mortgage Lending: 14.3.16 The FDIC’s Right to Obtain a Stay

The statute provides that, upon the receiver’s request, a case filed before the bank’s failure will be stayed as to all parties for up to ninety days.376 A stay is mandatory upon the FDIC’s request377 but, at least according to the Third Circuit, the FDIC must request the stay during the first ninety days after its appointment as receiver, and the stay lasts only until the end of that ninety-day period.378 The FDIC has a right to thi

Mortgage Lending: 14.3.17 Class Claims

According to an FDIC letter, if a class action is pending against a bank on the date of its failure, each class member must file a claim or risk dismissal of those claims for failure to exhaust the administrative process.384 The letter states that class counsel may file the claim for a class member only if they submit a written power of attorney from that person.

Home Foreclosures: 8.11.1 Introduction

Many potential claims related to mortgage servicing or wrongful foreclosure are based on state statutory or common law, so the question of whether some federal law preempts these claims is important. This section provides an overview of preemption of state servicing and foreclosure laws by the National Bank Act (NBA), the Home Owners’ Loan Act (HOLA), the Federal Credit Union Act (FCUA), and regulations promulgated under those statutes.

Truth in Lending: 2.9.4.3 Dodd-Frank’s Preemption Standard

The Dodd-Frank Act rolls back much of this preemption of state consumer laws and sets higher standards for future preemption.942 In addition, Congress created a federal requirement that creditors pay interest on escrow accounts established in closed-end consumer credit transactions secured by a first lien on the consumer’s principal dwelling if prescribed by state or federal law.943 Relying on this provision, the Ninth Circuit ruled that a state statute requiring the payment of interest was not