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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: 13.6.1 Overview of General Jurisdiction and Specific Jurisdiction
Due to the prevalence of mortgage securitization, it is common for out-of-state entities to be involved in cases related to home mortgages.141 If the homeowner brings an affirmative action against out-of-state entities, the court must have personal jurisdiction over those defendants.
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: 13.8.8 Limited Holder-in-Due-Course Rights When Homeowner Delinquent Prior to Instrument’s Transfer
To be a holder in due course the holder must take the instrument without notice that the instrument is overdue or that it has been dishonored, or that there is an uncured default on another instrument in the same series.364 Assignees taking a loan in default will have a hard time arguing that they were not on notice of a default.
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.
Mortgage Lending: 13.8.12 No Holder in Due Course When Note Comes with “Luggage” or Incorporates Mortgage Provisions
To be negotiable, a note must contain an unconditional promise to pay money and there must be no other undertaking. In order to have an unconditional promise to pay, the note itself must not contain an express condition.462 Additionally, the note cannot be “subject to” or “governed by” another document or obligation.
Mortgage Lending: 13.9.3.2 Does the Court or Arbitrator Decide Whether a Clause Is Enforceable?
A preliminary matter in any challenge to the enforceability of an arbitration clause is whether the enforceability determination is to be made by a court or by the arbitrator. In Rent-A-Center, West, Inc. v. Jackson,521 the Supreme Court held that “ordinarily” issues about whether parties have agreed to a valid arbitration clause are for a court—not an arbitrator—to decide.
Mortgage Lending: 13.9.3.5 Unconscionability; Prevention of the Vindication of Federal Statutory Rights
One of the most common ways to challenge an arbitration agreement is by showing that it is unconscionable or prevents the vindication of federal statutory rights.540 The Federal Arbitration Act states that an arbitration agreement is enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.”541 Unconscionability is one such ground.
Mortgage Lending: 13.9.2.3 Does Court or Arbitrator Determine Application of TILA Provision?
Courts determine the enforceability of an arbitration clause unless there is a clear and unmistakable delegation to the arbitrator of the determination of arbitrability.
Mortgage Lending: 13.11.3 Issues Impacting the Dollar Value of the Settlement
Reaching agreement on a number may seem like the biggest hurdle of the settlement process, but stipulating the components of the recovery may be just as important to determining the amount of recovery the consumer ultimately receives. For example:
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: 13.12.3 When to Agree to Confidentiality and How to Limit the Harms
Deciding when a consumer should agree to confidentiality requires weighing a number of factors. These include:
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