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Mortgage Lending: 4.14.5 Scope of CFPB Rulemaking

CFPB rulemaking authority concerning UDAAP, disclosures, and the right to information relates to “covered persons” and “consumer financial products and services.” A consumer financial product or service is a product or service offered or provided for use by consumers primarily for personal, family, or household purposes.552 A financial product or service means one of a number of listed activities (with certain exceptions):

Mortgage Lending: 4.14.7 Federal and State Enforcement of CFPB Rules

The CFPB has authority to enforce its rules over banks and credit unions with $10 billion or more in assets (and all of their subsidiaries).567 Banking regulators have enforcement power over smaller institutions.568 CFPB enforcement authority also extends to other aspects of the mortgage industry (including brokers, lenders, and servicers), the “larger participants in a market for other consumer financial products or services,”569 and any oth

Mortgage Lending: 4.14.8 CFPB Rules’ Relationship to State Law

CFPB rules do not preempt state law, except to the extent that the state law is inconsistent with the CFPB rule and then only to the extent of the inconsistency.577 The Consumer Financial Protection Act specifies that state law is not inconsistent with a CFPB rule if it provides greater protections.

Mortgage Lending: 4.16.3 E-Sign and Preemption

E-Sign has an unusual reverse preemption provision that allows it to be overridden by a state’s adoption of a uniform version of UETA.610 For consumer transactions, this is most relevant to the issue of whether the E-Sign consent provision applies to documents required to be provided to the consumer in writing (writings required by federal law are always covered by E-Sign). However, almost all states either explicitly preserved E-Sign’s protections when they adopted UETA, or did not adopt a uniform version of UETA after E-Sign was passed.

Mortgage Lending: 4.16.5 Consumer Consent Requirements in Electronic Transactions

E-Sign overrides the requirement in many state credit statutes that the consumer be given a copy of the contract or other information in writing, but only if the consumer explicitly consents in the manner required by E-Sign.643 The consumer’s consent must meet a set of strict requirements which require specific disclosures and, most importantly, the consent must be provided by the consumer in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information tha

Mortgage Lending: 4.17.2 When Is PMI “Required”

A critical factor in whether the HPA applies is whether the insurance is required.689 But there is little case law directly addressing this issue. In Dwoskin v. Bank of America,690 an unpublished Maryland district court case, the lender purchased mortgage insurance on the plaintiffs’ loans after closing and without notifying the plaintiffs.

Mortgage Lending: 4.17.4.4 Final Termination

If the insurance has not already been canceled or automatically terminated, and if the borrower is current, the lender or servicer must cancel PMI when the loan reaches the month after the midpoint of the mortgage amortization period.746 The midpoint is halfway through the scheduled life of the loan.

Mortgage Lending: 4.17.4.5 Modified Loans

If the loan is modified, all of the cancellation and termination dates must be recalculated based on the modified loan terms.749 A loan modification, such as those made under traditional loss mitigation programs, does not qualify as a refinanced loan under the HPA,750 so a loan modification does not trigger any PMI-related disclosures.751 But the borrower will continue to receive the HPA-required annual disclosure.

Mortgage Lending: 4.17.6 Remedies

Servicers, mortgagees, and mortgage insurers can be liable for violations of the HPA. But the Act limits the definition of “mortgagee” to the original mortgage holder at consummation.774 “Servicer” is defined by reference to RESPA’s definition.775 An assignee of the mortgage or note may, therefore, be liable for violations if they also service the loan.

Mortgage Lending: 14.7.2 Requirements for Enforceability of Agreements

Courts have generally interpreted the requirements of enforceable agreements listed in section 1823(e) rigidly, requiring an “explicit” writing in the bank’s official records, or an “express written agreement” between the banking institution and the borrower.513 The Tenth Circuit, in Federal Deposit Insurance Corp. v.

Mortgage Lending: 3.2.5 Appraisals

A determination of the current fair market value of the client’s home is important for determining what claims the borrower may be able to assert as well as what outcomes are realistic for the borrower to expect. When dealing with abusive lending, property flipping, foreclosure rescue scams, or any other case involving the value of real estate, it is also a good idea to obtain an estimate of the home value at the time of the transaction (called a retrospective appraisal). This may be vital when alleging appraisal fraud or other misconduct related to the valuation.

Mortgage Lending: 9.2.1 FHA and VA Insured Loans

The Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) are authorized to insure loans for the purchase or improvement of houses and manufactured homes.8 State interest rate ceilings are preempted for these loans, unless a state opts out.9 For FHA-insured loans, the statute provides for preemption of state law applicable to the “amount of interest,”10 whereas the VA statute provides that, for VA-insured loans, preempt

Mortgage Lending: 11.7.6.1 Appraisals

None of the state land installment contract statutes contain provisions requiring appraisal of the property that is the subject of the contract. Only one state, Minnesota, requires covered sellers to give buyers a notice that highly recommends that the buyer obtain an independent, professional appraisal of the property to learn what it is worth.237 Illinois requires sellers to tell buyers that they may obtain an independent inspection and appraisal.238

Mortgage Lending: 9.6.5.1 State Law

Before 1980, states typically had a general usury law, found either in the state constitution or in a state statute that created a generally applicable cap on interest rates. But the general usury statute usually applied to few consumer credit transactions. Instead, most states had numerous “special” usury statutes that made exceptions for particular types of transactions, such as second mortgage loans and bank installment loans. These special usury statutes allowed higher rates but also placed additional restrictions on the loans.

Mortgage Lending: 9.8.4 National Banks

An adjustable rate loan originated by a national bank is subject to an additional requirement if the loan meets two criteria: it has a term exceeding one year, and it is secured by the consumer’s principal dwelling.

Mortgage Lending: 9.8.5 Federal Savings Associations

When making an ARM, a federal savings association must use an index that is readily available and independently verifiable.347 It must be a regional or national index, except that, until 2011,348 the federal banking regulator had the authority to excuse compliance with this requirement.349 Adjustments to the rate must correspond directly to the index.350 Unlike the ARM rule applicable to nati