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Fair Debt Collection: 11.15.2.2.3 When does harm have a close relationship to harm traditionally recognized as a basis for a lawsuit?

Ramirez provides more detail about one of the two alternative tests for Article III standing articulated in Spokeo: that the harms the plaintiff suffered have a close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts.1464 Ramirez states that Article III “does not require an exact duplicate in American history and tradition.”1465

Fair Debt Collection: 11.15.2.2.5 Procedural vs. substantive requirements—does it make a difference?

The Spokeo decision dwelt on a characterization of the case’s FCRA violations as merely “procedural.” Although the Spokeo Court did not clearly indicate the role of the distinction between procedural and substantive violations, many decisions have given meaning to this distinction, often by giving greater weight or conclusive weight to Congress’s judgment in enacting a statute that creates substantive protections and grants a private remedy for violations.1495

Truth in Lending: 9.3.3.2.1 General

In general, the TILA rules discussed in this section apply to residential mortgage loans, which are defined to include closed-end, dwelling-secured loans (although timeshares are excluded from many provisions).137 However, the loan affordability and income verification rule has some additional scope applications.

Mortgage Servicing and Loan Modifications: 12.3.7.1 Overview

In June of 2021, the Department of Veterans Affairs (VA) issued a waterfall of loss mitigation options to help borrowers resolve their COVID-19 hardships.416 Prior to their June update, the VA had provided protective language on forbearance, but did not offer expanded post-forbearance options.417

Mortgage Servicing and Loan Modifications: 12.3.7.3 VA Forbearance Provisions

Pursuant to VA Circular 26-23-8, VA borrowers with pandemic-related hardships are entitled to forbearance as long as they make their requests by May 31, 2023.420 The agency’s guidance, consistent with interagency guidance from the FHA, VA, and USDA, clarifies that borrowers are entitled to determine the length of forbearance up to 360 days.421

Mortgage Servicing and Loan Modifications: 12.3.7.4 VA Post-Forbearance Options

On July 23, 2021, the VA issued a revision of the post-forbearance options available to borrowers facing COVID-19 hardships through VA Circular 26-21-13. The circular included the VA’s COVID-19 Home Retention Waterfall (“VA waterfall”), which provides the VA’s “preferred order” of options for servicers addressing borrowers with pandemic-related hardships.425 In addition to the circular, the VA provided two helpful charts that reflect their waterfall.426

Mortgage Servicing and Loan Modifications: 12.3.8.1 Overview

The United States Department of Agriculture, through its Rural Housing Service, operates a guaranteed and a direct loan program. These programs are detailed both in this treatise and in NCLC’s Home Foreclosures.445

Through its public announcements and the interagency guidance discussed above, the USDA has provided relief for USDA-homeowners facing COVID-19 hardship, described below.446

Mortgage Servicing and Loan Modifications: 12.3.8.4 USDA Post-Forbearance

In September of 2021, the USDA implemented post-forbearance options for guaranteed borrowers facing COVID-19 hardships. The specific options for COVID-19 apply to owner-occupant borrowers exiting COVID-19 forbearance who were no more than 120 days behind on their loans as of March 1, 2021.453 Servicers should first consider the options available for borrowers who face a natural disaster.

Mortgage Servicing and Loan Modifications: 12.3.9.1 Overview

State legislatures, governor’s offices, court administrators, and state regulatory agencies have responded in several ways to assist borrowers impacted by the COVID-19 pandemic. In many instances the relief has been limited to imposing moratoria on foreclosure activities. However, several states have gone further and established requirements for substantive relief for borrowers. In a few instances, this relief has included directives to implement forbearance and post-forbearance options for affected borrowers.

Mortgage Servicing and Loan Modifications: 12.3.9.2 State-Ordered Foreclosure Moratoria

States acted well within their constitutional authority when they ordered a stay of foreclosures in response to an economic or health crisis.458 Beginning in March 2020, many governors’ offices, state administrative agencies, and courts ordered temporary stays of foreclosure activity.459 These orders expired over the next two years as state emergency declarations terminated. Actions taken by a servicer contrary to the orders while they were in effect may limit the impact of those actions.

Mortgage Servicing and Loan Modifications: 12.3.10 Portfolio and Private Label Securities

As discussed above, CARES Act protections do not generally apply to mortgage loans held in lender portfolios or in private label securities (PLS).473 While these loans are generally “federally-related” for Real Estate Settlement Procedure Act (RESPA) coverage,474 they do not meet the definition of “federally-backed” under the CARES Act.475 Only a few states have provided relief for borrowers with non-federally backed loans.

Mortgage Servicing and Loan Modifications: 12.1.2.1 Overview

Disaster declarations occur at presidential (federal) levels, state, or local levels. Governing officials may issue a disaster declaration when they deem it necessary to exercise emergency powers in order to preserve life, property, and public health. As an example, many states issued local emergency declarations in or around March 2020 so that emergency powers could be exercised in response to the COVID-19 pandemic outbreak.

Mortgage Servicing and Loan Modifications: 12.1.2.2 Federal Disaster Declarations

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act)3 was enacted in 1988 to support state and local governments and citizens when disasters happen.4 The Stafford Act establishes a process for requesting and obtaining a presidential disaster declaration, defines the type and scope of assistance available from the federal government, and sets the conditions for obtaining that assistance.

Mortgage Servicing and Loan Modifications: 12.1.2.3 Local and State Declarations

The first step for local activation of emergency services is a declaration by the relevant local public official—for example, a town mayor or state governor. A township local official may issue a disaster declaration or an emergency declaration after determining that local resources are not sufficient to manage the event. The disaster declaration allows the locale to request resources from the state.

Mortgage Servicing and Loan Modifications: 12.1.3.1 Case Planning and Resources

This subsection covers some of the common themes that arise when assisting clients during or after a disaster event and recommends strategies that advocates may utilize to build the attorney-client relationship. Issues related to housing, scams and unscrupulous commercial practices, disaster relief programs, and healthcare access are just a few of the legal areas for which clients will require assistance. These types of issues often adversely impact the mental health and wellbeing of survivors.

Mortgage Servicing and Loan Modifications: 12.1.3.2 Client Intake—What to Look for and What to Expect

The first step in creating the attorney-client relationship with the disaster survivor is intake. Simple intake questions covering a range of relevant legal issues can be listed in a script to ensure that all necessary questions are asked at the outset. It is important that the intake script requests all available contact information including phone numbers and email addresses. After a disaster, clients often have unreliable cell phone service or access to electricity. Make sure at intake that the applicant knows how to reach your office in case you are unable to reach them.

Mortgage Servicing and Loan Modifications: 12.1.3.3 Terminology for Disaster Survivors and Client Self-Determination

The common terminology for people impacted by disasters varies between “disaster victims” and “disaster survivors.” Advocates should recognize that their choice of terminology may reinforce victim mentality in traumatized individuals who are already working through the psychological effects of experiencing a catastrophic event. When possible, advocates should work to empower their clients so that they feel capable of handling the wide range of non-legal issues they must also resolve after a disaster.

Mortgage Servicing and Loan Modifications: 12.1.3.5.1 Generally

Partnerships and coordinated efforts are a crucial aspect of delivering holistic services to disaster survivors. The best partnerships begin during “blue skies” when there is no active disaster. Without a ticking clock, partners can plan for coordinated services and contingencies. This subsection focuses on vulnerable populations, but the suggestions are broadly applicable.