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Mortgage Lending: 11.7.8 Annual or Periodic Statements

A few states require that sellers under land installment contracts provide purchasers with annual or periodic statements that include certain information.276 In Maryland, the seller has an obligation to provide a periodic account statement in certain circumstances.277 Minnesota and Pennsylvania mandate that a seller is obliged to provide a statement only if the buyer requests it.278 Illinois provides that the seller must provide the buyer wit

Mortgage Lending: 13.6.2.1 Overview

Whether courts can exercise personal jurisdiction over a securitization trust that is located in another state is a significant question given how often mortgage obligations are securitized.160 In analyzing the question, it is important to separate the question of general jurisdiction from specific jurisdiction.161 In many cases against securitization trusts, it will be more fruitful to pursue specific jurisdiction than general jurisdiction.

Mortgage Lending: 13.8.1.2 The Elements of Holder-in-Due-Course Status

An assignee attains holder-in-due-course status, and thereby avoids most defenses the consumer could raise against the assignor, if it is: (1) assigned a negotiable instrument and (2) is a holder for value, who takes the instrument in good faith and without notice of various items listed in UCC § 3-302(a)(2).

Mortgage Lending: 5.10.4 Home Improvement Fraud

Home improvement fraud can be doubly harmful to consumers. Not only can they be cheated on the credit terms, but in addition they are often left with incomplete or incompetent repairs to their home. Properly handled, such cases have resulted in significant verdicts for consumers. Baker v. Harper437 resulted in a $9 million jury award against a second mortgage company and a contractor in a home improvement scam targeted against low-income, uneducated homeowners.

Mortgage Lending: 13.8.2.3 When the Contractor Refers the Consumer to a Lender

A holder of a note cannot be a holder in due course even when the home improvement contractor does not originate the credit, if the contractor refers the consumer to the lender or has a business relationship with the lender. In that situation, the FTC Holder Rule requires that the contractor arrange for the Holder Notice to be included in the note.327

Mortgage Lending: 13.8.9.1 Notice of Defenses

To be a holder in due course the holder must take the instrument without notice that the note lacks an authorized signature or has been altered;373 that someone else has a claim to the instrument; or that any party has a defense or a “claim in recoupment.”374

Mortgage Lending: 13.8.9.2 Bad Faith

The transferee must take the instrument in good faith,381 defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.”382 Subjective good faith is not enough. The holder must act in a way that is fair according to commercial standards that are reasonable.383

Mortgage Lending: 3.2.3 Storing and Organizing the Documents

Documents in mortgage lending cases may come from a number of different sources. In addition, what is not included in a set of documents may be more important than what is included. For this reason document handling procedures and chain of custody issues will be important if a case goes to trial.

Mortgage Lending: 13.8.2.2.1 Generally

When a home improvement contractor or any other seller of goods or services originates the credit, the Federal Trade Commission’s Trade Regulation Rule Concerning the Preservation of Consumers’ Claims and Defenses (the FTC Holder Rule) voids any claim of holder-in-due-course status for any assignee of that credit obligation.313 This rule applies even if the obligation takes the consumer’s home as security.

Fair Debt Collection: 11.8.1.2 Actual Damages and Settlement of Consumer’s Underlying Debt

A consumer’s damages claim may be used to leverage a reduction of the collector’s debt claim against the consumer. Canceling or reducing the underlying debt, if owed, can provide meaningful relief to the client, since the amount of the debt may well exceed the damages recoverable for debt collection abuse. Be mindful, however, as to whether a cancellation or reduction of a debt is taxable income to the consumer.

Fair Credit Reporting: 14.6.4.1 Importance of Resolving Credit Reporting Issues

There is no better time to clear up a consumer’s credit record than when settling a lawsuit with a creditor that has furnished negative information on the consumer.92 As a matter of routine, practitioners should demand that all settlements related to credit accounts include a provision dealing directly with what the creditor should and should not report to a CRA.

Mortgage Lending: 13.11.4 Non-Monetary Elements of Settlement Agreements

Settlement agreements can address other interests of the parties beyond compensation. These other terms can be valuable and provide expanded opportunities for reaching a mutually acceptable arrangement. But they may also be useless or even harmful if not carefully negotiated and drafted. For example:

Mortgage Lending: 13.12.1 Overview

The mortgage industry and other corporate parties often ask for confidentiality as a condition of compliance with discovery requests, settlement, or granting loan modifications.639 Consumers occasionally seek confidentiality as well, but less often. A confidentiality request may take the form of a contractual agreement between the parties, a request for the court to enter a stipulated protective order the parties have agreed to, or a motion for a protective order in response to a discovery request.

Mortgage Lending: 13.12.2 The Cost of Confidentiality in Settlement

Some parties see a confidentiality agreement as the price of settlement. Other times, after a settlement has been informally negotiated and accepted by both sides, the creditor attempts to add a confidentiality clause to the written version of the agreement.689 But confidentiality is never an automatic requirement, even in an offer of judgment.690 Confidentiality agreements involve substantial and complex issues.

Mortgage Lending: 13.12.4 Ethical Obligations of Counsel

In addition to the practical factors affecting confidentiality agreements, attorneys for all parties must consider the ethical implications.721 State rules of professional conduct usually limit the contents of a confidentiality agreement. Some states have issued opinions prohibiting specific practices.722 But all states have rules that can reasonably be interpreted to place limits on what attorneys may request or agree to.

Mortgage Lending: 13.9.2.2 Two Separate TILA Provisions Limit Arbitration

In covered mortgage loans, TILA prohibits any terms that require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction (hereinafter referred to as the “(e)(1) provision”).499 The parties can agree to arbitration or a similar procedure at any time after a dispute or claim under the transaction arises.500