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Mortgage Servicing and Loan Modifications: 4.2.13 TILA Servicing Claims Chart

The chart below lists citations to each obligation imposed by TILA on mortgage holders and servicers involving the servicing of a mortgage loan. The chart indicates whether a specific remedy exists, provides a description of the remedy, and states the applicable statute of limitations.

MORTGAGE SERVICING CLAIMS CHART

TRUTH IN LENDING ACT (TILA)

Mortgage Servicing and Loan Modifications: 4.3.2 FDCPA Coverage

The Fair Debt Collection Practices Act (FDCPA) generally covers the activities of third-party debt collectors.439 The basic definition of “debt collector” is any person whose principal business is debt collection or “who regularly collects or attempts to collect, directly or indirectly, debts owed or due . . . another.”440 Courts must first consider whether “a person qualifies as a debt collector under the threshold definition set forth in 15 U.S.C.

Mortgage Servicing and Loan Modifications: 4.8.2 Successors Have the Right to Obtain Loan Information

Successors in interest need, and are entitled to, information regarding the mortgage secured by their home. This information is crucial to determining whether the successor wants to stay in the home and keep making the mortgage payments, with or without assuming the debt. Some successors may have fallen only a month or two behind on the mortgage (for example, when the borrower died) and may be able to cure the default if they can obtain an accurate reinstatement quote. Servicers will sometimes refuse to provide any such information regarding the loan.

Mortgage Servicing and Loan Modifications: 4.8.4.3 Loan Modification Program Rules Requiring Simultaneous Modification and Assumption

For most successors, it would be a risky financial decision to assume liability for a debt they cannot afford without knowing whether a loan modification will be approved. Perhaps in recognition of this fact, or perhaps intending to increase the number of beneficial loan modifications and avoid foreclosures, the government agency insurers and the government sponsored enterprises, Fannie Mae and Freddie Mac, require servicers to evaluate successor homeowners for loan modifications before they have assumed liability on the debt.631

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: 4.2.5.7 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: 4.2.5.3.1 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

Mortgage Servicing and Loan Modifications: 4.2.5.4.6 Modified statements for consumers in chapter 13 cases

In addition to any other requirements under section 1024.41(f) discussed in the previous section that may apply, another set of requirements applies specifically to the modified statements given to consumers in chapter 13 cases (and chapter 12 cases).222 These modifications largely reflect the treatment of mortgages in chapter 13 cases and permit consumers to receive statements that contain account information tailored to the circumstances of a chapter 13 case.

Fair Debt Collection: 7.2.2.6.1 Misrepresentations in validation notices

Regulation F (effective November 30, 2021) provides detailed regulations about the amount and itemization of debts that must be provided to consumers as part of the validation information.102 When considering a FDCPA § 1692e(2)(A) claim based on misrepresentations as to accruing interest and fees in a validation notice, plaintiffs should consider whether the collector complied with these regulations or adopted the language and layout of the model

Fair Debt Collection: 7.2.2.6.2 Misrepresentations in subsequent communications

Regulation F does not address itemization or dynamic balance disclosures in communications other than validation notices. Thus, when considering a FDCPA § 1692e(2)(A) claim based on false or misleading representations as to accruing interest and fees in a subsequent communication after the validation notice, one must consider the case law in the relevant jurisdiction.

Fair Debt Collection: 7.2.3.2 Non-Attorneys Impersonating Attorneys

FDCPA § 1692e(3) prohibits a debt collector from even indirectly impersonating an attorney.208 Non-attorney collection agencies can violate FDCPA § 1692e(3) by using a name that implies they are attorneys, such as “Lawyers Collection Services,”209 or by creating a fake law firm website.210 It can also be a FDCPA § 1692e(3) violation where a non-attorney collection agency’s phone calls have a caller ID of “law office.”

Fair Debt Collection: 7.2.3.3.1 Introduction

With the possible exception where the attorney clearly discloses it has not reviewed the consumer’s account,222 FDCPA § 1692e(3) is violated where a collection letter is on an attorney’s letterhead or is signed by an attorney, but the attorney has not meaningfully reviewed the account.

Consumer Bankruptcy Law and Practice: 3.2.3 Proper Venue for Bankruptcy Case

Under 28 U.S.C. § 1408, a debtor may commence a bankruptcy case in any federal judicial district in which the domicile, residence, principal place of business, or principal assets of the debtor have been located for 180 days prior to the petition, or for a longer portion of that 180 days than any other district.

Repossessions: 4.3.1.1 Generally

Acceleration is not favored in the law, and a creditor may not “by acts or omission permit another to assume that the covenant will not be strictly enforced, then ‘crack down’ on the obligor by rigidly insisting on enforcement, without giving some reasonable notice and opportunity to comply.”119 Accordingly, a creditor who has not insisted upon strict compliance with due dates in the past, but who has instead accepted late payments, must give reasonable notice to the debtor that it will insist on strict compliance in the future.

Repossessions: 4.3.1.2 Waiver

The waiver theory holds that by accepting late payments and by other conduct, the creditor has specifically modified the credit agreement and waived the contractual right to accelerate without notice upon late payment.125 Even though the credit contract has not been amended in writing, the modification is binding if evidenced by the creditor’s oral statement126 or merely by the creditor’s conduct or course of dealing.127 A waiver is effective if th

Repossessions: 4.5.2.4a Does State Right to Cure Statute Apply to National Banks and Their Assignees

Where a national bank originates a credit transaction, courts are divided as to whether the National Bank Act preempts application of a state right to cure statute to the national bank.252 An additional question is whether any national bank preemption right continues to apply where the national bank assigns the credit agreement to a non-bank and it is the assignee that is seeking to accelerate the credit.