Lawyers Representing Consumers
with Mortgage Loans
BE AWARE OF POWERFUL NEW TOOLS
By Marc Dann
The Dann Law Firm Co. LPA
J
ust two years ago when
mortgage
loan
servicers
moved forward to foreclose
on a homeowner, even though
that homeowner was actively
engaged with the servicer in
attempting to modify their loan (a
phenomenon identified as Dual
Tracking in the National Mortgage
Settlement) that borrower had no
remedy or private right of action.
The same impediments prevented
a borrower bringing claims for
mistakes in escrow calculations
or unfair corporate advances or
late fees or against lenders who
failed to send easy to understand
monthly mortgage statements.
On January 10, 2014 the Consumer
Finance Protection Bureau enacted
a powerful new regulatory scheme
under the Real Estate Settlement
Protection Act (“RESPA”) 12 U.S.C
2601 et seq. and the Truth in
Lending Act (“TILA”) 15 U.S.C. 1026
et seq that set new high standards
for the conduct of mortgage loan
servicers. Lawyers who work with
clients who have potential issues
with their home mortgage lenders
and Bankruptcy Practitioners in
particular should be on the look out
for potential claims that their clients
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CONSUMER BANKRUPTCY JOURNAL
may have against their mortgage
loan servicer.
Awareness of potential liability
of mortgage loan servicers has
become even more important in
light of the recent decision by many
National Bank loan servicers to get
out of the loan servicing business
resulting in more and more
mortgage loans being serviced by
small, thinly capitalized non-bank
servicing companies. These new
loan servicers have less reputational
risk and are more prone to violate
the new servicing regulations. The
transfers of servicing rights in and
of itself often causes servicers to
fall out of compliance with the new
regulations
Regulations X and Z in a nutshell:
Powerful new regulations that
have been promulgated by the
Consumer Finance Protection
Bureau (“CFPB”) under RESPA
and the TILA that create, for the
first time, a private right of action
when mortgage loan servicers fail
to properly and promptly respond
to requests for information, correct
irregularities with application of
payments, assessments of fees and
charges, or to comply with new strict
Winter 2015
timelines for handling applications
for loan modifications, deeds in lieu
of foreclosures and short sales.
For conduct that occurred after
January 10, 2014 the new
regulations codified the strong
servicing
standards
originally
agreed to by the major mortgage
servicers in the 2012 National
Mortgage Settlement creating for
the first time a private right of action,
with shifting attorneys fees to allow
in dividual borrowers to enforce
the regulations through TILA and
RESPA in state or federal court.
The bottom line is that for the first
time borrowers have leverage to
force their loan servicers to meet
the high standards of conduct
established by the regulations.
Clients who could benefit from Reg
X and Z Case Review:
1.
Borrowers who have been
recently discharged from Chapter
13 or Chapter 7.
2.
Borrowers who have filed
Bankruptcy to avoid Foreclosure
but who had an application for loss
mitigation pending.
National Association of Consumer Bankruptcy Attorneys