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Mortgage Lending: 14.3.9.1 Claims That Arise After the FDIC Transfers an Obligation
Claims that arise after the FDIC transfers an obligation to another financial institution are unaffected by the exhaustion requirement.277 For example, in one case the FDIC transferred an obligation to a financial institution, which then transferred it to a bank.
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: 2.9.3.1 Overview of TILA Preemption Process
In addition to an exemption process, the federal TILA establishes a preemption process.
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
Mortgage Servicing and Loan Modifications: 11.12.1 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.
Mortgage Lending: 3.4 Other Abuses to Look For
This section discusses abuses that primarily occurred before and during the foreclosure crisis that started in 2007. Congress added significant ability-to-repay standards to the Truth in Lending Act in 2010, which were effective by January 10, 2014. As a result, the existence of unsuitable loans should be significantly reduced for covered loans going forward. The amendments are briefly described in § 4.4.1, infra.
Mortgage Lending: 3.3.2 Portion of the Loan Benefiting the Homeowner
First draw up a list of those components that are of value to the borrower. In a purchase money mortgage, the portion of the loan going to benefit the homeowner is primarily just the proceeds to pay for the home and related taxes. One issue in such a mortgage loan is the purchase price of the home, particularly when there are connections between the home seller and the lender, broker, appraiser, or other parties to the closing.76
Mortgage Lending: 5.2.3.3 Framing Other Violations As UDAP Violations
UDAP claims can be based on breach of contract in many jurisdictions.42 The main advantage of asserting a UDAP claim is that it may offer better remedies than a contract claim standing alone.
Mortgage Lending: 5.10.1 Elements of a Fraud Claim
Common law fraud is a powerful claim against those arranging or extending abusive credit. (“Fraudulent misrepresentation,” “intentional misrepresentation,” and “common law fraud” are often used interchangeably.388) Fraud claims are decided by juries, whose judgments about truthfulness and deceit will reflect general community standards.
Mortgage Lending: 5.11.1 Nature of the Duty
The duty of good faith and fair dealing between parties to a contract is based on common law,488 the Uniform Commercial Code (UCC),489 and other laws.490 Unlike unconscionability, which is ordinarily determined by examining the contract’s terms at the time the contract was made, the duty of good faith is imposed on parties to an existing contract491 to prohibit improper behavior in the perform
Fair Debt Collection: 15.1.2.2 Preemption by Federal Banking Laws, Higher Education Act, and the Bankruptcy Code
Federal banking laws—the National Bank Act (NBA) and the Home Owners Loan Act (HOLA)—may preempt state tort claims that challenge loan terms as unfair or violative of state law.17 However, the federal preemption regulations explicitly preserve state tort law as long as it is not inconsistent with the powers granted to banks,18 and a tort claim that alleges collection harassment or deception is likely to escape preemption.19 The Dodd-Frank Wall Street Ref
Unfair and Deceptive Acts and Practices: 6.4.4 Violations of State Credit Laws
Most states have laws such as retail installment sales acts, consumer leasing acts and banking laws that regulate credit transactions. These laws often require disclosures, prohibit certain terms and practices, and cap interest rates and late charges.150
Unfair and Deceptive Acts and Practices: 6.9.1.1 Introduction
A variety of banking practices have been found to be unfair or deceptive. Before bringing a UDAP claim against a federal depository institution, however, it is important to assess whether the claim is subject to preemption by federal banking laws.565
Banking and check cashing practices are discussed in detail in NCLC’s Consumer Banking and Payments Law.566 This section focuses solely on UDAP claims.
Repossessions: 2.3.2.3 Scope of State Consumer Credit Laws
Special care must be given to analyzing the scope of state consumer credit laws.243 It is not always easy to select the right statute covering the client’s particular credit transaction. A credit sale of a television may be covered by the state’s retail installment sales act, but an installment sale of a motor vehicle by a separate motor vehicle financing act. These sales may be covered by neither statute if what appears to be an installment sale is really a cash sale paid for by a loan provided by a finance company.
Repossessions: 14.1.3.3 State Consumer Statutes Governing Leases
State consumer statutes are another important supplement to UCC Article 2A. Most states have enacted laws specifically regulating rent-to-own (RTO) transactions.58 These laws provide only minimal consumer protections and often exempt RTO transactions from coverage by UCC Article 9 or other state consumer credit statutes.
Mortgage Lending: 5.7 State Credit Services Laws
Most states have statutes, often called a Credit Services Organization Act, that deal with abuses by credit repair organizations.188 Most of these laws also apply to organizations that assist or offer to assist consumers in obtaining extensions of credit in return for the payment of money or other consideration.