Predictable results in an unpredictable industry
alfn angle: in this issue
FROM THE PRESIDENT
SPOTLIGHT: SHECHTMAN HALPERIN SAVAGE
President & CEO Matt Bartel introduces this issue of the ALFN ANGLE and details some of this quarter’s contributions Meet two leaders from New England ALFN member Shechtman Halperin Savage, LLP Malcolm Cisneros discusses negligent servicing disputes escalating in the first & fourth appellate districts
features & contributions
THE RED(TAPE), WHITE & BLUE OF ADVOCACY
Andrew Boylan lays out the full picture when it comes to advocating on the Hill, in the courts, and back at home.
REGULATING THE REGULATOR
Corey Danzig examines the impact of H.R. 957 and what increased oversight in the CFPB might look like.
American Legal & Financial Network (ALFN) 12400 Olive Blvd., STE 555 St. Louis, MO 63141 314.590.0859 (phone) 314.744.7738 (fax) www.alfn.org
Cade Holleman, M.A. AVP, Government Affairs & Communications email@example.com
NY FLIPS THE SWTICH ON LEGISLATION
Woods Oviatt discusses proposed legislation in New York State designed to address so-called ‘zombie properties’
Adam Wilde, Esq. | Codilis & Associates C. Tony Crnic, Esq. | Klatt Law Erica Fujimoto | Affinity Consulting Brian McGrath | ProVest
FRIEND OF THE COURTS: ALFN AMICUS BRIEFS
ALFN RESPONDS TO PROPOSED RULE CHANGES
James V. Noonan and Cade Holleman take a comprehensive look at the ALFN Amicus Brief program Adam Wilde outlines the ALFN’s response to proposed rule changes from the CFPB
ON THE BOOKS: OHIO HOUSE BILL
MAX YOUR MEMBERSHIP
Members of the ALFN LRPG discuss regulatory challenges Ben Hoen presents the potentially costly impact of an OH bill
Cade Holleman, M.A. AVP, Government Affairs & Communications firstname.lastname@example.org
Liz Potter SVP, Business Development & Member Relations email@example.com
Ashleigh Bouselli Administrative & Event Coordinator firstname.lastname@example.org
ALFN SVP Liz Potter talks about advocacy-at-large
Vol. 2 / Issue 2 / Spring 2015 WHOSE JOB IS IT AND HOW DO WE KNOW IT’S BEING DONE?p16 THE RED(TAPE), WHITE & BLUE OF ADVOCACY p12 SUPPORTIVE BRIEFS: ALFN & THE AMICUSp22
SNAP SHOT: NEVADAp8
MEMBER SPOTLIGHT: SHECHTMAN HALPERIN SAVAGEp6
ON THE BOOKS: OHIOp30
The ALFN ANGLE is a quarterly digital magazine published by the American Legal & Financial Network (ALFN) on behalf of its attorney/trustee, associate, and mortgage servicing members. Reprint permission is available by request. To contribute or advertise, please contact the ALFN directly.
ARCHIVED ONLINE AT ALFN.ORG
ALFN WEBINARS NEVER STOP LEARNING CLASS ON AYS WEDNESD
HOSTING AN ALFN WEBINAR JUST MIGHT SURPRISE YOU: + AVERAGE ATTENDANCE OF 200+ INCLUDING MORTGAGE SERVICERS + PRESENTERS RECEIVE CONTACT INFORMATION FOR ALL ATTENDEES + POSITION YOURSELF AS A SUBJECT-MATTER OR STATE-SPECIFIC EXPERT + EXPOSURE TO OVER 6,000 MORTGAGE SERVICING INDUSTRY PROFESSIONALS + BUILD CREDENTIALS OF YOUR YOUNGER ASSOCIATES + EACH MEMBER RECEIVES ONE COMPLIMENTARY WEBINAR OPPORTUNITY* *Each ALFN member has the opportunity to conduct one complimentary webinar each calendar year. Additional webinars are offered at a nominal $1,000 fee. Participants of ALFN Committees, Groups and those participating at the request of the ALFN are exempt. Shop the ALFN Media Kit (alfn.org/media_kit) or contact us at email@example.com for more details.
welcome BOLD PERSPECTIVES FROM UNIQUE ANGLES The ALFN is pleased to be hosting our annual Advocacy Day this month in Washington, DC in partnership with NARCA (National Association of Retail Collection Attorneys). The line-up for this event continues to expand, and we will be well represented with meetings on the Hill, meetings with the CFPB, and a special luncheon with the FHFA & CFPB’s Office of Minority & Women Inclusion (OMWI). The OMWI luncheon is an industry first, and we are looking forward to providing more opportunities for businesses owned and operated by women and minorities. We are also pleased to have partnered with the MBA (Mortgage Bankers Association) for the opening reception of their National Advocacy Conference on April 14, as they will be providing our Advocacy Day attendees a complimentary pass to attend this reception. As our event comes to a close, attendees may add the full MBA National Advocacy Conference for a discounted fee. You will find this issue of our ANGLE to focus squarely on what we are doing to advocate in the courts, on the Hill and in the industry at large. Member advocacy is something we take seriously, and we will continue to give members opportunities to make your voices heard and pave the way for effective change. Within this publication we have synopsized some of the Amicus Briefs that have been drafted by the ALFN and submitted over the past several months, all of which are issues that have a significant impact on mortgage servicing operations and creditors’ rights. In this issue you will also enjoy reading about CFPB reform and the introduction of H.R. 957, a bill introduced by Representative Stivers that would incorporate an Office of the Inspector General into the Bureau. During our meetings on the Hill during Advocacy Day this is something we will be speaking about. It is also our goal to open more communication with the leaders at the CFPB, to see how we can continue being more proactive in shaping the amendments and rules that the Bureau produces that ultimately have an effect on our daily operations. Some of the more recent advocacy efforts we have conducted include our comments to the CFPB on the proposed amendments to Reg. X & Z (RESPA & TILA). We were pleased to work in tandem with the USFN on this, with both associations submitting individual briefs. Robert F. Kennedy once said, “The purpose of life is to contribute in some way to making things better.” We intend to continue doing just that, and providing our members a forum for making things better in our industry and abroad. Advocacy Day is just one of the annual events where we can help make this happen, and we greatly appreciate the support of our members for the event this year, and look forward to representing your best interests in DC this month. MATT BARTEL PRESIDENT & CEO, ALFN
COREY DANZIG is Chief Compliance Counsel for Ohio-based default services law firm, Felty & Lembright. Danzig originally joined the Firm as an Associate in Felty & Lembright’s foreclosure practice, handling foreclosure and real estate title matters throughout Ohio's 88 counties. In her current role, Danzig’s responsibilities include coordinating the Firm's compliance with all Federal and State laws, managing the Firm's relationships with its vendors, and handling the Firm’s clients’ due diligence and audit requests. Corey's experience also includes bankruptcy law and commercial and construction litigation. Corey received her undergraduate degree from Boston University and her J.D. from Cleveland State University, Cleveland-Marshall College of Law. Danzig can be reached at cdanzig@ feltyandlembright.com
ANDREW J. BOYLAN is an Associate Attorney and Director of the McCarthy Holthus’ Risk Management and Compliance Department. After graduating from the University of San Diego, where he earned his undergraduate degree in Political Science and Spanish, he received his Juris Doctorate degree from the University of San Diego School of Law and his MBA from the University of San Diego Graduate School of Business Administration. He is a member of the United Trustee’s Association and has spoken on regulatory compliance issues at numerous mortgage industry events including the Five Star Conference and Expo and the American Legal & Financial Network Regional Training. Mr. Boylan is admitted to practice law in the States of California and Washington. Boylan can be reached at aboylan@ mccarthyholthus.com
ADAM WILDE is a Supervising Attorney with Illinois-based Codilis & Associates. He concentrates his practice in mortgage foreclosure, creditor rights, real estate transactions and litigation. Adam is a frequent author, speaker and presenter on foreclosure and creditors’ rights legal issues affecting the mortgage servicing industry. He has spoken at numerous industry events, including ANSWERS and ALFN Webinars. Wilde earned his undergraduate degree from De Paul University and received his J.D. from Drake University College of Law where he was a Dean Scholar, Public Service Recipient. Wilde currently serves on the ALFN ANGLE Editorial Board, ALFN Legislative & Regulatory Policy Group (LRPG), and a recent task force on CFPB commentary. Wilde can be reached at adam.wilde@ il.cslegal.com
William G. Malcolm is a shareholder with California-based ALFN member Malcolm Cisneros. Malcolm can be reached at firstname.lastname@example.org
Natalie A. Grigg is a partner with New York-based ALFN member Woods Oviatt Gilman. Grigg can be reached at email@example.com
Phil Silvestri is of counsel with California-based ALFN member Malcolm Cisneros. Silvestri can be reached at firstname.lastname@example.org
Katerina Kramarchyk is an attorney with New York-based ALFN member Woods Oviatt Gilman. Krmarchyk can be reached at email@example.com
Ben Hoen is an attorney with Ohiobased ALFN member Weltman, Weinberg & Ries. He can be reached at firstname.lastname@example.org
James V. Noonan is a partner with Illinois-based ALFN member Noonan & Leiberman and also sits on the ALFN Board of Directors. He can be reached at JNoonan@noonanandlieberman. com.
alfn events ADVOCACY DAY
On December 19 the ALFN opened registration for the Association’s annual legislative and regulatory policy summit held April 13-14 in Washington, DC. Registration and event details can be found online at ALFNevents.org.
Registration for ANSWERS 2015 is now open and available at alfnanswers. org. ANSWERS 2015 will be held this July 19-22 at the Hyatt Regency Lake Tahoe Resort & Casino in Incline Village, Nevada.
Save-the-date for TE@CH Jacksonville, scheduled for September 9, 2015. The southeast regional servicer training will be held at the Hyatt Regency Jacksonville Riverfront. Registration opens late summer 2015.
Save-the-date for TE@CH Dallas, scheduled for November 12, 2015. The southwest regional servicer training will be held at the Dallas Marriott Las Colinas. Registration opens late summer 2015.
member discounts MEMBER DISCOUNT ON PRINT MATERIALS
Members can now receive a 15% discount on printed products from PrintCOR Solutions. This program is available at no cost, no obligation, and no minimum orders. They can print on everything. Visit their website for more information at www.printcorsolutions.com. Contact Liz Potter to sign-up.
MEMBER DISCOUNTS ON TRAVEL, PRODUCTS, ETC.
On December 1, 2014 ALFN sent out a reminder that our members may receive discounts from national companies including FedEx, UPS, Verizon, ATT, Sprint, Office Depot, Staples, Ricoh, Xerox, and much more through the ALFN’s partnership with EC Purchasing, an ALFN Associate Member. ALFN members can access their discounts, at no cost whatsoever, through EC Purchasing’s website after registering and authenticating your ALFN membership. For details or questions on this member benefit, contact Liz Potter at email@example.com to discuss this or other member benefits.
legal updates LEGAL UPDATE: NORTH CAROLINA
On March 2, 2015 the ALFN published a Legal Update for the State of North Carolina. The Legal Update covered the NC Court of Appeals Publishing an Opinion in Glass v. Zaftrin Case and was provided by Tyler Skitt, Esq., Rogers, Townsend & Thomas, PC - ALFN member in North Carolina & South Carolina
LEGAL UPDATE: OHIO
On April 1, 2015 the ALFN published a Legal Update for the State of Ohio. The Legal Update covered the Amended House Bill 201 signed into law by Ohio Governor John Kasich, establishing new rules governing the recording of satisfaction of mortgages and was provided by Weltman, Weinberg & Reis Co, LPA ALFN member in Ohio.
alfn webinars MEMBER WEBINAR ON ANTITRUST ISSUES
On February 19, 2015 the ALFN hosted a Practice Building Webinar covering Antitrust: Why Compliance Matters. The
webinar was provided by Ira Blank, Esq. and Mike McCormick, Esq.
HOT TOPIC WEBINAR ON STATUTE OF LIMITATIONS
On March 11, 2015 the ALFN hosted a Hot Topic Webinar on Statute of Limitations: A Look at Key States and Emerging Issues. The webinar covered statute of limitations and related issues with a particular emphasis on the following states: Florida, New York, New Jersey and Nevada.
On March 27, 2015 the ALFN hosted an A DAY Webinar on CFPB Reform: HR 957. The webinar discussed CFPB REFORM and the creation of an office of inspector general and how ALFN & NARCA members can support the bill.
alfn publications MEDIA KIT: REMINDER
In early December the ALFN published its 2015 Media Kit, detailing promotional and sponsorship opportunities available to all ALFN members.
ALFN & INDUSTRY CALENDAR OF EVENTS
Concurrent to the 2015 Media Kit, the ALFN published an updated version of its annual industry calendar of events. The calendar, now paired with the Media Kit, includes all ALFN events and deadlines as well as details on other industry events likely to be attended by either the ALFN executive staff or its members.
WEBINAR INFORMATION & GUIDELINES
An updated version of the ALFN Webinar Information & Guidelines form has been published. Important updates include requirements about template usage,
MINI RECAPS OF RECENT ALFN UPDATES submission deadlines and new pricing on certain types of webinars beyond the one complimentary presentation included in membership.
ALFN ANGLE SUBMISSION GUIDELINES
A new guideline for ANGLE submissions was published and made available to members in mid-December 2014. Members should use this guide when submitting editorial content for use in the ALFN ANGLE.
LEGAL UPDATE SUBMISSION GUIDELINES A new guideline for ALFN Legal Update submissions was published and made available to members in mid-December. Members should use this guide when submitting Legal Updates for distribution to the ALFN and to understand the Association’s rules and restrictions on submissions.
ALFN GROUP RULES & RESPONSIBILITIES
Members interested in joining an ALFN Group should review the Rules and Responsibilities form detailing the Association’s expectations of members participating in any ALFN-organized Group. An updated version of the document was made available to members earlier this month and must be reviewed as part of the application process.
upcoming deadlines BOARD OF DIRECTORS ELECTION
We will have three open seats on the ALFN Board of Directors this year. These seats will be for three Non-Affiliated Attorney-Trustee class members. Any Non-Affiliated Attorney-Trustee Members who are interested in running for one of these open seats on the Board of Direc-
tors should complete this candidacy form and return it to firstname.lastname@example.org no later than Friday, April 24.
organizational updates MBA RECAP
Our Junior Professionals & Executives Group (JPEG) held a sponsored after hours cocktail event, attended by over 100 members, servicers and industry partners. The conference provided for a productive week of connecting, learning and enhancing our ALFN relationship with members, servicers, other industry leaders and the MBA.
highlight: special benefit for your clients SERVICER SCHOLARSHIPS AVAILABLE FOR ANSWERS
All ALFN members are encouraged to circulate information about the ANSWERS Servicer Scholarship program with their clients and mortgage servicing partners. Scholarships are available to select mortgage servicing professionals who may be eligible to receive scholarship funds that will dramatically reduce or in some instances completely cover the cost of attending ANSWERS 2015. The scholarship program is an effective tool members can use to drive value to their clients, earn valuable networking time and offer education to their current and potential clients. Complete scholarship details can be found on alfnanswers.org along with a request form for any mortgage servicing professionals interested in applying for scholarship funds in order to attend ANSWERS 2015, this July 19-22 at the Hyatt Regency Lake Tahoe Resort & Casino in Incline Village, NV.
about these updates The ALFN publishes a series of emails branded as ALFN Legal Updates. Legal Updates are a company-wide member benefit and should be received by a member’s full staff. Contact email@example.com to confirm that your full employee roster is receiving ALFN e-communications to stay on top of member benefits, emerging opportunities, and has access to the industry legal education ALFN provides at no-cost to members and mortgage servicers.
BALANCED, BOLD, & RAISING THE BAR. AN ALFN MEMBER IN MASSACHUSETTS, SHECHTMAN HALPERIN SAVAGE, LLP (SHS), BALANCES A MIX OF JUDICIAL AND NON-JUDICIAL STATES, BOLDY FOLLOWS THE BUSINESS, AND RAISES THE BAR ON SERVICE EVERY STEP OF THE WAY. MEMBER SPOTLIGHT: SHECHTMAN HALPERIN SAVAGE, LLP
After thirty years in the business, Shechtman Halperin Savage’s (SHS) Managing Partner of Default Servicing, Joseph A. Camillo, Jr., Esq. still credits the firm’s success to the long-term vision of managing partner Stephen J. Shechtman. “Stephen has done an incredible job over the years of exceeding client expectations and focusing on investments in people. We hire the best talent in the industry, many of whom have been with the firm for over a decade,” says Camillo of the firm’s high quality lawyers and their internal culture. Camillo continues, adding, “We’re a full-service firm. When you couple our default servicing department with our expertise in complex litigation and a host of other practice areas, we’re uniquely equipped to handle the complicated and diverse legal issues that arise during the course of representing financial institutions.” Being a full-service firm that covers a mixed-bag of judicial and non-judicial states, three of each for a total of six, to be exact (CT, RI, MA, NH, VT, ME), SHS offers something incredibly important in today’s business environment: an agility that keeps the firm nimble ensuring continuity on files—especially those that may be contested. When asked about their unique service footprint, Camillo explains, saying, “New England is a unique geographic area that is quite navigable and our expansion over the years was in response to our clients’ requests to grow with them and fulfill their evolving needs.” The firm’s resulting footprint is indicative of their general approach to business. Camillo says their focus is simple and straight-forward, saying that it’s all about “high quality, timely, and cost-effective legal services that raise the bar on clients’ expectations.” He adds, “Our goal is that once clients have worked with us, SHS becomes the standard and benchmark for legal services.” Pictured: Joseph A. Camillo, Jr., Esq., Partner/Manager, Default Servicing (L); Stephen J. Shechtman, Esq., (R) Managing Partner. Learn more at www.shslawfirm.com or contact firstname.lastname@example.org
This Member Spotlight originally appeared in the Spring 2015 Edition of the ALFN ANGLE and is reused and reprinted with permission from the American Legal & Financial Network (ALFN); more details at alfn.org.
snapshot: NEGLIGENT SERVICING DISPUTES ESCALATE MALCOLM CISNEROS DISCUSSES THE ESCALATION OF NEGLIGENT SERVICING DISPUTES IN FIRST AND FOURTH APPELLATE DISTRICTS
by William G. Malcolm & Phil Silvestri
It is well-settled law in California that a lender owes no duty of care to a borrower when their involvement “does not exceed the scope of its conventional role as a mere lender of money.” In recent years, this standard was applied to loan servicers to allow our clients to avoid claims of negligent servicing, and in particular, negligent processing of loan modification applications. In contrast to the general rule, in February 2013 First Appellate District issued its decision in Jolley v. Chase Home Finance, LLC, in which the Court held that a borrower could assert a colorable claim for negligent servicing as it relates to a construction loan modification application. Thankfully, both state and federal courts chipped away at this opinion as soon as it was published. The Fourth Appellate District, in Lueras v. BAC Home Loans Servicing, L.P. flatly rejected the Jolley analysis, holding that “a loan modification is the renegotiation of loan terms, which falls squarely within the copy of a lending institution’s conventional role as a lender of money.” The Ninth Circuit limited Jolley to the point of near obsolescence in Benson v. Ocwen Loan Servicing, LLC finding that the “duty of care imposed on construction lenders… does not apply in the residential loan context.” At this point,
it appeared that we had seen the last of negligent servicing claims. Apparently unfazed by the opinions of a fellow District and the Ninth Circuit, the First Appellate District escalated the dispute shortly after in Alvarez v. BAC Home Loans Servicing, LP. In Alvarez, the First District explicitly extended Jolley to residential loan servicing, holding that a loan servicer owed a duty of reasonable care to a borrower when reviewing for a loan modification application. The Court acknowledged the Lueras case but instead followed the reasoning of an unpublished 2010 U.S. District Court case, Garcia v. Ocwen Loan Servicing, LLC to reach its opinion. The Garcia court followed a six-part test established in Biakanja v. Irving in determining that a duty of care exists when undertaking a review for a loan modification. In following this reasoning, the court highlighted the weak bargaining power of a borrower. Additionally, the court went so far as to cite to a 2009 article that indicates “servicers may actually have positive incentives to mis-inform and under-inform borrowers.” The Court summarized their reasoning, stating “[t]he borrower’s lack of bargaining power, coupled with the conflicts of interest that exist
in the modern loan servicing industry provide a moral imperative that those with the controlling hand be required to exercise reasonable care in their dealings with borrowers seeking a loan modification.” Finally, the Court concluded, without explanation, that “[r]ecognizing [a general duty of care] will not…have a chilling effect on borrowers’ ability to obtain loan modifications.” While we are glad the Court believes their opinion will not have a chilling effect, ultimately this decision created rights and duties that didn’t exist previously. The duty of care imposed appears to be an end-around of the alternate civil remedies included in the California HOBR and the CFPB’s servicing rules under RESPA. Further, the Court imposed a higher duty of care on those the service loans than those who originate loans despite the fact that these processes are nearly identical. Unfortunately, until the Supreme Court weighs in, those who practice in California are in for a wild ride. William G. Malcolm and Phil Silvestri are with California-based ALFN member Malcolm Cisneros. Malcolm can be reached at email@example.com and Silvestri can be reached at psilvestri@ mclaw.org.
Decades of mortgage industry experience Long-term strategic counsel Tailored advocacy Bi-partisan credibility
Complicated mortgage resolution
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YOU GOTTA TALK TO BE HEARD. THE 2015 ADVOCACY ISSUE. IN AN INDUSTRY WHERE A CLEAR CUT WAY OF DOING BUSINESS HAS BEEN TURNED UPSIDE DOWN, ADVOCACY EFFORTS TAKE A FRONT SEAT FOR MEMBERS OF THE AMERICAN LEGAL & FINANCIAL NETWORK.
Introduction by Adam J. Wilde, Esq. ANGLE Editorial Board Member
ADVOCACY (NOUN): THE PUBLIC SUPPORT FOR OR RECOMMENDATION OF A PARTICULAR CAUSE OR POLICY. 2015 ALFN LEGISLATIVE & REGULATORY POLICY GROUP (LRPG) MEMBERS ANDREA TROMBERG GLADSTONE LAW GROUP 2015 CHAIRWOMAN MATTHEW KAHL BUTLER & HOSCH 2015 CO-CHAIR MIKE CATALFIMO CARTER CONBOY BOARD LIAISON ADAM SILVER MCCALLA RAYMER DALE MARTIN MALCOLM CISNEROS COREY DANZIG FELTY & LEMBRIGHT GREGORY SPINK BROCK AND SCOTT, PLLC HEIDI BILLINGTON RUBIN LUBLIN JON BRODER MYMOTIONCALENDAR JONATHAN GREEN BAKER DONELSON KEVIN BROWN ROGERS TOWNSEND MARIA MOSKVER WALZ GROUP LLC MATHIAS HUNOVAL THE HUNOVAL LAW FIRM, PLLC MATT ABAD KLUEVER & PLATT, LLC MICHAEL R. BRINKMAN GERNER & KEARNS CO., LPA MICHELLE GILBERT GILBERT GARCIA GROUP, PA PETRA REDCHUK ELIZABETH R. WELLBORN, P.A. ROSANNA HENRY MACKIE WOLF ZIENTZ MANN PC VICTOR KANG RUBIN LUBLIN
As attorneys, much of what we do, day in and day out, is advocate on behalf of our clients. Through our pleadings and through our arguments before the bench, attorneys advocate. We are not limited to the courtroom and, of course, our advocacy goes far beyond appearing before the court and filing a motion. Many of us look to change policies and laws, finding ourselves immersed in bar associations, court committees, and legislative efforts all for the advocacy of our clients. But advocacy should not be tackled alone. A collective voice is a much stronger advocate. Part of our membership in the ALFN sets forth an expectation that the ALFN’s collective voice continues to advocate on behalf of its members and their clients. The ALFN recognizes this need. Annually, the ALFN hosts Advocacy Day, now in its fifth year. This year includes an exciting partnership with the National Association of Retail Collection Attorneys (NARCA). Advocacy Day puts together concentrated sessions with members of the legislature, financial services regulators, and ALFN members to discuss current and evolving topics. The ALFN also advocates directly on Capitol Hill as part of the event. This year, attendees will arrive in Washington, D.C. with over 60 meetings scheduled with members of Congress. Twenty of those meetings will be with members who sit on either the House Financial Services Committee, the Senate Committee on Banking, Housing & Urban Affairs, or are in party leadership. Advocacy Day also includes high-level interactions with four members of the House Financial Services Committee: Representatives Patrick McHenry, Mick Mulvaney, Steve Stivers and Ann Wagner, all to discuss key issues important to ALFN and NARCA members. In a very special session and now in its second year, the ALFN has coordinated a unique meeting for diverse-owned firms. The session, focused on diversity policies and procedures of regulated entities, includes Stuart Ishimaru, Director of the Office of Minority & Women Inclusion at the Consumer Financial Protection Bureau (CFPB) and his counterpart Sharron Levine, Director of the same Office at the Federal Housing Finance Agency (FHFA). In the courts, the ALFN continues to lead as an active voice on industry-related legal issues across the country that have the potential to impact members and their clients. Last year alone, the ALFN filed four amicus briefs on behalf of its members relating to mortgage servicing issues. Most recently, the ALFN put together a task force to address the CFPB’s most recent proposed amendments to the 2013 Mortgage Servicing Rules under Regulation X and Regulation Z. The task force reviewed and interpreted the proposed rules and submitted official comments to the CFPB. Advocacy takes many forms and the ALFN strives to be a strong voice for members on the Hill, with regulators, and through the courts. Over the next few pages, dive into the issues with us and get up to speed on the efforts of the ALFN to advocate, educate and lead the conversation.
BY ANDREW BOYLAN, ESQ.
Rules, laws, ordinances, standards, and regulations: these are the agents of change within our industry. These are the reasons why mortgage servicers’ costs-of-compliance are at unprecedented highs. And while we can’t change the fact that we operate in one of the nation’s most highly regulated industries, we can take action to help formulate the laws and alter how they will ultimately impact our industry. Since the 2013 CFPB Mortgage Servicing Rules were first released, countless amounts of time and effort have been expended by mortgage servicers toward implementing the new regulations. And while this has been a necessity to ensure full legal compliance, it should also serve as a wake-up call to the industry. A laissez-faire approach toward new law implementation can be very costly and time-consuming down the line. However, by adequately devoting resources upfront we can proactively help shape what is to come. LEGAL ADVOCACY EFFORTS The concept of “lobbying” has always been a part of our nation’s history. Today, the bulk of the activity is done by paid professionals. However, this type of formalized lobbying is not the only way to communicate with lawmakers. Individuals and organized groups can also effectuate change by engaging in the broader term of legal advocacy. There are many different ways to take action. New laws and regulations come from varying sources and from all levels of government: federal, state and local. Therefore, whether you’re speaking before a city council, lobbying at the capitol building, submitting comments on a proposed regulation change, or arguing a case before the Supreme Court, you are actively engaging in an effort to shape the law. The act of legal advocacy may initially seem like a daunting task, but it’s actually pretty simple. All it really involves is weighing in on the discussion based upon your professional viewpoint. Industry-group advocacy has proven to be very effective. It allows servicers to proactively discuss issues and it allows them to construct a legal position that’s in-line with the rest of the industry. In addition to the obvious benefit of “comfort in numbers,” it can give a smaller servicer a bigger voice and it can avoid
having that servicer’s business name be associated with any opposition to a proposed measure that is being labeled as “consumer friendly.” Lawmakers recognize the direct impact legal advocacy has on implementing effective change. It’s important to take a step back and realize that our lawmakers handle proposed changes to all areas of law. Although the use of specialized committees and designated support-staff helps to overcome, in part, a lack of knowledge in a particular field, despite their best efforts it is impossible for lawmakers to be proficient in all areas of law. Regardless of whether they fundamentally agree with your political platform, lawmakers still value your expertise. I had the opportunity recently to speak with former Congresswoman Nancy Lee Johnson from Connecticut, who earned a reputation as an effective legislator and an important swing vote for both parties. The non-partisan Almanac of American Politics hailed the Congresswoman as “one of the most active and productive legislators in the House.” In discussing her time in office, Congresswoman Johnson emphasized the value of having industry members come to Washington to speak with the legislature about the issues that they were facing. “This provided us with the opportunity to discuss both intended and unintended consequences of a piece of legislation,” she said. The Congresswoman stressed that she wouldn’t want any law to be made without having first heard both sides of an issue. She proclaimed, “This is what allowed us to fulfill our unique responsibility as representatives.” Without an increase in legal advocacy we can expect to see more regulatory and law changes that will leave our industry making reactionary efforts to ensure compliance. However, we have the ability to prevent that from happening by actively engaging in the legislative process. ALFN ADVOCACY DAY The ALFN provides advocacy opportunities for servicers and members with its annual Advocacy Day in Washington D.C. – a day designed to
offer attendees a look at the regulatory and legislative landscapes affecting the mortgage banking industry. Before attendees make their visits to Capitol Hill, there is a roundtable discussion to review the issues currently affecting the industry. This allows individual members to provide their insight on current issues and to learn the same from others. It also allows the group, as a whole, to develop a cohesive message that they can rally around and bring with them to Capitol Hill as they meet with their legislators. It’s easy to dismiss opportunities like association fly-ins by taking the mindset that one voice will not be heard, but that simply is not true. With the ALFN’s help, I was able to schedule meetings ahead of time with legislators from the various states where our firm conducts business. During the course of these face-to-face meetings it was evident that it was not just me talking, but more importantly my legislators listening. I had a message to bring to them and they wanted to listen and learn from it. Whether change is ultimately effectuated will depend upon varying political factors, but the most important takeaway is that by engaging in the process, you know that your industry’s voice will have been heard. ALFN COMMENTARY SUBMITTED TO THE CFPB Another example of an advocacy effort led by the ALFN was the recently-formed task force that submitted commentary to the CFPB on the Bureau’s proposed changes to the 2013 Mortgage Servicing Rules. I had the opportunity of working on the task force and can speak to the importance and relative ease of the process. The proposed changes covered nine major topics, including: successors-in-interest, definition of delinquency, requests for information, force-placed insurance, early intervention, loss mitigation, prompt payment crediting, periodic statements, and small servicers. While some of the suggested changes would be beneficial for ALFN members, many of the proposed amendments were identified by the task force as being problematic for varying reasons. The full
comments submitted by the ALFN are available online under the Docket ID: CFPB-2017-0033. When it comes to regulations being proposed at the federal level, it is important to take into account existing state or local laws that would be in conflict and therefore face federal preemption. The CFPB has made it clear that, “…the preemption provisions of RESPA and Regulation X do not prevent state governments from issuing regulations that are not in conflict with or that exceed Regulation X requirements, including with regard to mortgage servicers and mortgage servicing.” However, if a preexisting state or local law conflicts with a newly implemented federal law, preemption will apply. The CFPB intended the Mortgage Servicing Rules to set forth minimum federal require-
ments for compliance. The practical effect of this was that when the 2013 regulations were implemented, some jurisdictions were affected more than others depending upon what laws and regulations were already in place. To avoid disparate impact, it is essential to educate the CFPB on instances where proposed changes may have unintended consequences at certain state or local levels. One of the great advantages of the ALFN is that its members hail from all 50 states. This allows the association to provide important perspective and insight from varying jurisdictions across the country. ALFN AMICUS BRIEFS As discussed more thoroughly in Jim Noonan’s article from this edition of the ANGLE, another opportunity for legal advocacy afforded to ALFN
members is to participate in the filing of Amicus Briefs on behalf of the association. The ALFN’s Amicus Brief Group monitors appellate cases with the potential for major industry or practitioner impact. The group reviews and approves submitted cases as well as coordinates position development, authorship, and submission of amicus briefs on behalf of the ALFN. When a relevant case is identified, the Amicus Brief Group may reach out to ALFN members within that jurisdiction to request assistance. This affords members the opportunity to help shape pending case law that will ultimately affect their practice. Two of my fellow attorneys with McCarthy & Holthus, LLP, Casey Pence and Kristin Zilberstein, were recently asked to work with the ALFN’s Amicus Brief Group to participate in the filing
ADVOCATING AT THE STATE LEVEL New federal laws and regulations would impact ALFN members across the nation, but that does not discount the importance of advocating at the state level as well. Lawmakers are not shy about looking beyond their jurisdiction for new ideas. For example, in 2013 we saw the California “Homeowner’s Bill of Rights” go into effect, a package of bills that significantly revised the state’s laws governing mortgage lending and servicing. Later that year California’s neighbor to the east, Nevada, implemented its own “Homeowner’s Bill of Rights,” with slight deviations based upon the CFPB Mortgage Servicing Rules that had since been finalized. There are countless similar instances across the country where we’ve seen this occur at the legislative, regulatory and judicial level. This further exemplifies the
DURING THE COURSE OF THESE FACE-TO-FACE MEETINGS IT WAS EVIDENT THAT IT WAS NOT JUST ME TALKING, BUT MORE IMPORTANTLY MY LEGISLATORS LISTENING.
of a Brief regarding a pending case in the Pacific Northwest. When I asked them about the process, Zilberstein commented that, “ALFN Amicus Briefs provide a tremendous opportunity to possibly impact the law, which we may not normally have. After all, I think most of us went to law school so that we could impact the law.” Adverse case law can be far-reaching and, therefore, it is essential to inform the court of the potential affects that the rulings could have. Casey summed it up best, saying, “I value the opportunity to advocate for sound legal decisions that make sense for the communities impacted. We often must advocate for our client’s position in our jobs, and working on these broader values expands our knowledge of the law and of ourselves as lawyers.”
importance of engaging in all forms of legal advocacy at all levels of government. AGENTS OF CHANGE And so we return to the rules, laws, ordinances, standards, and regulations. Instead of continuing down the reactionary path, the ALFN calls you in to action, to become a voice for our industry, and most importantly to work toward allowing legal advocates to become the new agents of change for our industry. Andrew J. Boylan, Esq. is an attorney with Arizona-based ALFN member McCarthy Holthus. He can be reached at firstname.lastname@example.org
A LOOK AT CONGRESSIONAL EFFORTS TO INSTALL A DEVOTED OFFICE OF INSPECTOR GENERAL AT THE CONSUMER FINANCIAL PROTECTION BUREAU BY COREY DANZIG, ESQ.
Focused on increasing oversight, legislators have reintroduced laws installing an Inspector General (“IG”) at the nearly four-year old Consumer Financial Protection Bureau (“CFPB”). On February 12, 2015, Representative Steven Stivers (R-OH) sponsored H.R. 957, the Bureau of Consumer Financial Protection – Inspector General Act of 2015, with bipartisan support from Tim Walz (D-MN). In the Senate, Robert Portman (R-OH) reintroduced a companion Bill, S. 510. At press time, both Bills were awaiting Congressional committee action. These Bills are among the issues to be discussed by participants and panelists at Advocacy Day, hosted by the American Legal & Financial Network (ALFN) and the National Association of Retail Collection Attorneys (NARCA) on April 13-14, 2015, in Washington, D.C. If this legislation is enacted, a confirmed IG would solely and independently oversee and monitor the CFPB’s programs and operations. H.R. 957 and S. 510 propose that the President would appoint, with the advice and consent of the Senate, an Inspector General (“CFPB-IG”) at the CFPB. The Bills propose to replace the current framework where one IG monitors both the CFPB and the Board of Governors of the Federal Reserve System (“Board”) under the Inspector General Act of 1978, as amended (the “Act”). Currently, the Chair of the Board appoints the Board/CFPB IG without any required executive or congressional voice or authorization. The Board/CFPB IG reports to the Chair of the Board and the CFPB Director.
18The CFPB-IG would, “upon invitation,” appear at the same Congressional committee hearings which the CFPB Director appears regarding CFPB semi-annual reports. Under H.R. 957, two percent of annual non-appropriated funding the CFPB receives from the Board would fund the CFPB-IG.” Upon enactment, the President and Senate would have 60 days to appoint and confirm a CFPB-IG. This legislation would categorize the CFPB as an “Establishment Agency,” one category of federal entities which IGs are Presidentially-appointed, Senate confirmed positions under the Act. Establishment Agencies include executive departments and regulatory agencies like the Federal Housing Finance Agency and the Federal Deposit Insurance Corporation. In the second category of federal entities, “Designated Federal Entities,” agency heads appoint IGs. Currently, the Board and the CFPB are grouped as one Designated Federal Entity. Designated Federal Entities include the Securities and Exchange Commission and the National Credit Union Administration. This legislation would task a sole CFPB-IG with the same oversight and monitoring functions which the Board/CFPB IG has over the CFPB. Under the Act, a CFPB-IG, like other IGs, would fight waste and prevent and detect fraud and abuse in its agency’s programs and operations. It would be responsible for the leadership, coordination, and recommendation of policies that promote “economy, efficiency, and effectiveness” of the CFPB’s programs and operations. A sole CFPB-IG would have a variety of statutory capabilities to meet its objectives, including conducting audits and investigations. It could review related proposed and existing legislation and regulations. If H.R. 957 is enacted, the CFPB-IG could access CFPB documents and records, have direct and prompt access to the Director, subpoena information and documentation, and obtain sworn testimony.” This CFPB-IG could investigate employees’ complaints including potential violations, mismanagement, gross waste of funds, abuse of authority, and danger to public safety. Besides additional hearings by Congressional committees regarding CFPB reports, the CFPB-IG would, semi-annually, issue its own reports to and attend hearings before Congress. Like statutory IGs, it would be obligated to report fraud, abuses, deficiencies, and other serious problems to the CFPB Director and Congress. Reports would include recommendations of new corrective actions and pending corrective actions’ progression. These reports would detail audits, investigations, and evaluations. A CFPB-IG would make recommendations involving the impact of related legislation and regulations on the CFPB’s programs and operations. It would have to immediately report serious or flagrant problems to the Director, who has seven days to report the same to Congress. PROPONENTS ADVOCATE THIS LEGISLATION AS A REASONABLE APPROACH TO CFPB OVERSIGHT Although the Board/CFPB IG currently performs these oversight tasks over the Board and the CFPB, proponents assert a confirmed CFPB-IG is a reasonable approach to increased oversight of the CFPB without compromising the CFPB’s rulemaking, supervision, and enforcement authorities. In a recent press release regarding H.R. 957, Congressman Stivers explained that the CFPB currently “has very little Congressional oversight.” He stressed that the CFPB is not subject to Congressional appropriations process because it receives its funding for its budget by the Federal Reserve. Recognizing the significance of government accountability, Congressman Stivers stated, “This legislation will allow for increased oversight of an agency that has been given broad authority.” Congressman Tim Walz agreed: “[The CFPB’s] work is important, but that doesn’t mean that they don’t need oversight.”
RECOGNIZING THE SIGNIFICANCE OF GOVERNMENT ACCOUNTABILITY, CONGRESSMAN STIVERS STATED, “THIS LEGISLATION WILL ALLOW FOR INCREASED OVERSIGHT OF AN AGENCY THAT HAS BEEN GIVEN BROAD AUTHORITY.”
Advocacy Day keynote speaker, Brian Montgomery, who is the Vice-Chairman and Co-Founder of the Collingwood Group, echoed these Congressmen’s insights. The Collingwood Group provides business advisory services and development opportunities for companies operating in the housing finance sector. From 2005 until mid-2009, Montgomery served as the Assistant Secretary of U.S. Department of Housing and Urban Development (“HUD”) and FHA Commissioner, a term which included six months into the Obama Administration. Among other things, he was responsible for the modernization and oversight of the FHA’s then $600 billion insurance fund. Montgomery maintained that a Senate-confirmed CFPB-IG would help promote the system of checks and balances: “The key thing you want is independence, impartiality, and transparency.” Montgomery continued, “This large bureau designed to protect consumers is walled off from the legislative branch of government….[It] does not strike me as healthy for the system [to not have should have its own Presidentially-appointed, Senate confirmed IG].” The Dodd-Frank Wall Street Reform and Consumer Protection Act (“DoddFrank”) provides limited oversight of the CFPB. The CFPB is autonomous from the Board, which funds the CFPB, in capped amounts as determined by the CFPB Director. The President appoints, with Senate confirmation, the CFPB Director for a five-year term, but the President can remove him only for inefficiency, neglect, or malfeasance of duty. Generally, courts must defer to the CFPB regarding the meaning and interpretation of Federal consumer financial laws. The Financial Stability Oversight Council can veto a proposed CFPB rule under certain circumstances and by a supermajority vote. As to the legislative branch, the CFPB is required to appear at semi-annual hearings and provide certain annual and semi-annual reports to selected Congressional committees. The CFPB is audited by the Comptroller General and the Government Accountability Office (which, in turn, reports its finding to Congress) and provides reporting to the Director of the Office Management and Budget. An independent, confirmed, sole watchdog over the CFPB is not intended to imperil the CFPB. Congressman Walz contended a confirmed IG at the CFPB would only support its efforts: “I fully support their cause, to stand up for you and believe the appointment of an independent Inspector General will only increase their ability to fulfill their important mission.” Similarly, Montgomery believes that, besides the other Bills pending before legislature to reform the CFPB, H.R. 957 and S.B. 510 would not make “tectonic changes” to the CFPB structure and leadership. Compared to federal regulatory agencies which are subject to Congressional appropriations and are struggling to modernize, Montgomery described this proposed legislation to reform the current CFPB oversight as, “hardly a Draconian move.” A SOLE WATCHDOG AT THE CFPB, WHICH CONTINUES TO EXPAND, COULD ALLOW FOR MORE FOCUSED OVERSIGHT AND MONITORING Installing a sole IG at the CFPB could mean concentrating resources to effectively monitor the CFPB’s programs and operations. Dodd-Frank vested the CFPB, which continues to “grow and evolve,” with broad authority over consumer financial products and services. Dodd-Frank consolidated many consumer financial protection authorities shared by seven federal agencies into the CFPB. These activities are performed through six separate divisions. Its rulemaking, supervising, and enforcement activities concern approximately 18 federal consumer financial protection laws, as well as the Dodd-Frank provisions regarding Unfair, Decep-
tive, or Abusive Acts or Practices. The CFPB’s additional authorities include the monitoring and handling consumer complaint inquiries, which can now be publicly voiced through the public-facing Consumer Complaint database. The CFPB’s last financial report states, as of September 30, 2014, the CFPB had over 1,400 employees.For FY 2014, it requested transfers from the Board totaling, $533.8 million for operation and activities. It incurred approximately $498 million in obligations, spending $237 million for employee compensation and benefits. While there is no indication that the Board/CFPB IG does not have the resources to effectively oversee both the Board and the CFPB, the IG’s Strategic Plan indicates that its organization has grown “significantly” since its oversight responsibilities expanded to include the CFPB and the Board: “A majority of our staff is relatively new.” Senator Portman has long-encouraged a separate IG to oversee this ever-growing regulator. In a 2013 press release on S. 510’s prior version, Senator Portman associated the creation of a separate CFPB-IG to the 1998 creation of an independent IG for tax administration: “Given the important role we’ve seen an IG play in the IRS scandal, creating an independent IG dedicated to this large bureaucracy with vast powers is a commonsense step we can take to ensure greater transparency and accountability at the CFPB.” These Bills do not make any ground-breaking changes to the CFPB. A CFPB-IG placed by the executive and legislative branches would enhance efforts to ensure that consumer financial products and services regulation is effective and well-balanced. Corey Danzig is Chief Compliance Officer of Ohio-based ALFN member Felty & Lembright. She can be reached at email@example.com
NY FLIPS THE SWITCH, BRINGS BACK ‘ZOMBIE’ BILL WOODS OVIATT DISCUSSES LEGISLATIVE DEVELOPMENTS IN NEW YORK STATE THAT MORTGAGE SERVICERS SHOULD WATCH
by Natalie A. Grigg, Esq. and Katerina M. Kramarchyk, Esq.
The New York State Attorney General, Eric Schneiderman, recently announced his intent to reintroduce the Abandoned Property Neighborhood Relief Act to the Senate in this year's legislative session. The Act was originally introduced in 2014 in response to the rising number of "zombie properties" across New York State but failed to pass.
sistencies include a variation in the definition of "owner" or who the party responsible for maintenance is, when the party becomes responsible for securing and maintaining the abandoned property, the time frame in which said party is required to register the vacant property with the municipality, the fees for registries, and the fees/penalties for failure to comply.
The purpose of the Act is to prevent properties from becoming prematurely vacant and falling into states of disrepair or illegal occupation during foreclosure proceedings. If passed, the Act would require mortgagees to take possession of vacant properties that are subject to foreclosure proceedings as soon as they become aware of the vacancy. The Act also requires mortgagees to affirmatively communicate to borrowers about their right to occupy their homes until the foreclosure proceeding is complete. If successful, a statewide electronic abandoned property registry would be constructed to provide municipalities with the ability to track vacant and abandoned properties and enforce codes and laws regarding property maintenance. The Act also enables the State to create a hotline for neighbors to report abandoned properties. Significantly for mortgagees, a new aspect of the Act enables municipalities to levy fines against banks and other lenders for noncompliance. These fees will then be placed into a fund for local governments to hire additional code enforcement officers to inspect and maintain properties.
By example, the Village of Massapequa Park in Nassau County requires mortgagees to notify the Village, in writing, when a foreclosure action is commenced against any property within the Village. Similarly, in 2014, the Town of Pittsford in Monroe County provides that a mortgagee is deemed an owner for premises and registration when it has commenced a mortgage foreclosure action. However, the Village of Pittsford has not been as quick to act, tabling their abandoned property law to review a newly circulated technical bulletin released by the Department of State. Still different, the Town of Amenia in Dutchess County requires that within 10 days of issuing a notice of default on the mortgage loan, mortgagees conduct an inspection of the property to determine its occupancy status. Should the property be vacant, it is the mortgagee's obligation to register it to the vacant property registry and pay the accompanying fees. Should the property be occupied, the Town imposes a monthly inspection duty upon mortgagees throughout the course of the foreclosure action until the home is sold, the mortgage becomes current, or the property becomes vacant (at which point, it is again the mortgagee's responsibility to register the property to the vacant properties list).
Until this Act passes it is important for lenders and servicers to be aware of the fact that many municipalities across New York State have already taken the vacant property issue into their own hands. Municipalities have started creating local laws to mandate that mortgagees register vacant properties to a "vacant property registry," or to comply with specific notice or maintenance rules. However, the issue inherent in complying with these local laws is the lack of consistency not just across the State but, at times, within the same County or even from village to township. These incon-
To date, not including Schneiderman's Act, there are at least four other bills pending for consideration that center around the issue of vacant and abandoned properties. One proposed bill seeks to amend the Real Property Action and Proceedings Law ("RPAPL") to provide for a special proceeding to convey title of an abandoned dwelling to the city, town, or village in which the property is located. Another bill proposes to amend the RPAPL
expand the definition of abandoned property to include property that has had a zoning, housing, building or property maintenance code violation which has been outstanding for a period of at least one year from the date of the original order or notice of the violation. Yet another proposed bill seeks to amend the RPAPL to create special proceedings to convey title to abandoned dwellings to individuals whose income is below the EPIC income level provided such individual pays taxes, restores the abandoned property, and agrees to reside in the property for at least five years. Lastly, passed legislation in 2014 amended the Not-for-Profit Corporation Law to increase the number of land banks from ten to twenty, and currently there is pending legislation to amend the county law and New York State Urban Development Corporation Act to allow a municipality to create a land bank to buy and sell vacant and abandoned properties. Last year, the AG's Act gained critical support by local leaders and lawmakers across the State around late May and early June, only weeks before the end of the Legislative Session. However, new studies suggest that from 2013 to 2014 the number of zombie properties increased by 50%, making New York one of the top three states with respect to this issue. It may be the case that since the Act is being introduced much earlier this year, and the issue has been acknowledged as being even more pervasive, the Act will have a better chance of passage in 2015. The impact on lenders and servicers could be, at a minimum, increased manpower to deal with registering, monitoring and maintaining vacant the registries and property maintenance, as well as increased fees and costs for property maintenance. Natalie A. Grigg, Esq. and Katerina M. Kramarchyk, Esq. are attorneys with New York-based ALFN member Woods Oviatt Gilman. Grigg can be reached firstname.lastname@example.org and Kramarchyk at email@example.com
ALFN BRIEFS SUPPORT INDUSTRY POSITIONS
THE AMICUS PROCESS: CAPTURING AND LEVERAGING MEMBER ENERGY AND TALENT For nearly three years the ALFN has coordinated the filing of amicus briefs in cases with the potential to significantly impact members and their clients. Over the last twelve months, as many longstanding issues have wound their way through the court system, the ALFN’s amicus brief efforts have accelerated dramatically.
By James V. Noonan, Esq. and Cade Holleman, M.A.
A volunteer group of ten practitioners receive and vet initial requests for support from members or mortgage servicing partners of the ALFN. The Association’s Board of Directors has final approval of all cases, and may initiate the process in some cases where an immediate action is required. In most cases, the ALFN coordinates amongst practitioners onthe-ground along with subject matter experts from across the country to draft briefs representing members’ interests, and the interests of the mortgage lending and servicing industry at large, and ultimately an official ALFN position on the issue in question. “Being a friend of the court is a cornerstone in the ALFN’s efforts to advocate on behalf of our members, servicing partners, and their professional interests. Taking a look back at our efforts over the years, you can see that the ALFN works effectively to be a thought leader shaping the mortgage servicing landscape,” said Matt Bartel, President & CEO of the American Legal & Financial Network (ALFN). A RECORD ON FILE Last year, the ALFN filed a record four amicus briefs in cases from Florida to Nevada, all of which had or will have a significant impact on mortgage servicing operations and creditor’s rights. In the first quarter of this year, a small working group of ALFN members completed the first filing for 2015 in an Oregon bankruptcy case. In June of last year, the ALFN submitted an amicus brief in Bayview Loan Servicing, LLC v. SFR Investments
Pool 1, LLC, in the Ninth Circuit Court of Appeals. The case, as many members will recall, addressed the legality of Nevada’s rule that a non-judicial auction of a homeowner association’s super priority lien extinguishes the interest of the holder of a first deed of trust. It was the one of the most talked about cases in the industry, causing a ripple effect throughout many jurisdictions. Although the court ultimately sided against the lender, the amicus brief, drafted by ALFN member, Michael Brooks of Brooks Hubley, set the standard for excellence that was only matched by the brief authored by member T. Robert Finlay, of Wright Finlay and Zak, in the state companion case, SFR Investments Pool 1, LLC v. U.S. Bank, N.A. In that decision the Nevada Supreme Court held that a homeowner association’s super-priority lien is a "true super-priority" lien and can be foreclosed through a non-judicial process. Mr. Finlay, on behalf of the ALFN, filed a brief in the Supreme Court of Nevada in support of the lender’s petition for leave to appeal. In Florida, the ABG oversaw the submission of an amicus brief with the state Supreme Court in Bartram v. U.S. Bank, an appeal from a Florida appellate court which certified to the state’s highest court and “as a matter of great public importance” the question of when the statute of limitations expires on a mortgage loan that has been accelerated after default. This particular case of was of such importance to Florida practitioners and their clients that the ALFN coordinated a record seven-firm drafting group led by Robert Edwards of Robertson, Anshutz & Schneid, PL. A second drafter, Jessica Quiggle, also from RAS contributed to the brief. Other individuals involved in the drafting process were: Melissa Giasi and Richard McIver of Kass Shuler, P.A.; Shaib Y. Rios and Curtis J. Herbert of Brock and Scott PLLC; Andrea R. Tromberg of Gladstone Law Group P.A.; Elizabeth Wellborn, Esq. of Elizabeth R. Wellborn, P.A.; and Michelle Gilbert, Esq. and Jennifer Lima-Smith, Esq., both with Gilbert Garcia Group, P.A. Once it is decided, this case
may change the Florida foreclosure practice considerably and in numerous ways, including the manner and extent to which lender/mortgagees can and do evaluate loss mitigation applications going forward. Oral arguments are scheduled for October 7, 2015, and the industry eagerly awaits the Florida Supreme Court’s ruling, which is expected late this year or early 2016. According to ALFN lead counsel, Rob Edwards, “the Florida Supreme Court’s ruling in Bartram could determine whether to award ‘free’ homes and investment properties to defaulted borrowers whose defense counsel can, in a judicial system flooded with foreclosures, defer resolution of their cases for five years, then get them dismissed on any ground, however technical. This would constitute judicial forgiveness, not just of amounts past due at the time of the initial filing, but of all principal and interest payments scheduled to become due in the future through amortization of the loan over the next 20-some years or more. While appellate briefing on both sides was comprehensive, none of the primary parties was in the position afforded the ALFN to advance the specific interests of its members and affiliates in this multi-million (if not multi-billion) dollar issue that could have sweeping ramifications for the industry from the decision to lend in the first place, to loss mitigation resolution efforts to avoid foreclosure at the end. More than instrumental, the ALFN filled a void in making known to the Florida Supreme the potential gravity of its decision for ALFN members and affiliates, as well as for the economy as a whole, and particularly in Florida.” Finally, earlier this spring one of our servicing partners asked the ALFN to submit an amicus brief in an appeal it is taking from a bankruptcy decision. In Bank of New York v. Watt Select Portfolio Servicing is appealing to the U.S. District Court for the District of Oregon a bankruptcy court decision vesting title to property, which was encumbered with other liens, in a secured creditor without its consent.
This case can have a tremendous impact on secured creditors. As the court decision is currently written, the Bankruptcy Court can vest title in a property in the secured creditor potentially exposing the secured creditor to additional costs and expenses (nuisance, homeowner’s association etc.) It is akin to the super priority ruling from Nevada in 2014. Hopefully, the Court will understand the ramifications and reverse the decision consistent with existing law. A terrific brief was submitted by the Amicus team consisting of ALFN bankruptcy specialists, Kristin Zilberstein and Casey Pence of McCarthy Holthus LLP,; David C. Nalley of Reisenfeld & Associates LPA, LLC; and C. Anthony Crnic of Klatt, Augustine, Sayer, Treinen & Rastede, P.C. The brief focused on how the ruling undermines state property law. Recently, Appellant’s Reply Brief was filed, and it is anticipated that a ruling will be made in the summer or fall. As cases move through the appellate process it’s imperative that members monitor cases and work with the ALFN Amicus Brief Group to coordinate efforts where appropriate. The timelines for successfully filing amicus briefs is often very tight and when submitting it’s important that members include all of the pertinent information, including any discounted fee structure or willingness to work pro bono in tandem with other interested firms. Members can submit cases, make requests or learn more information about the process by contact ALFNamicus@alfn.org. James V. Noonan, Esq. is a partner with Illinois-based ALFN member Noonan & Leiberman and also sits on the ALFN Board of Directors. He can be reached at JNoonan@noonanandlieberman.com. Cade Holleman, M.A. is the AVP of Government Affairs & Communications with the ALFN. He can be reached at firstname.lastname@example.org.
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CFPB PROPOSES RULE CHANGES, ALFN COMMENTS MEMBER TASK FORCE REVIEWS PROPOSED RULE CHANGES AND DRAFTS COMMENTS IN COORDINATION WITH OTHER INDUSTRY TRADE GROUPS
By Adam J. Wilde, Esq.
The year of 2014 ended similar to how it began. Temperatures were plummeting and much of America was blanketed in snow. The world of residential mortgage servicing also seemed to be repeating itself. In January of 2014, mortgage servicers and their attorneys were gearing up for an industry shift, for January 10, 2014 the Mortgage Servicing Rules were set to take effect. Mortgage servicers were left with no choice but to amend their businesses to comply with the new regulations. As the year wound down, the CFPB published new proposed rules and amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z). The rule provided a comment period of 90 days. The CFPB received 157 comments to its proposed rulemaking. The ALFN sanctioned a task force and submitted comments on behalf of its members. This task force worked directly with the USFN regarding comments, though both organization’s comments submitted were independent and distinct. The following is a recap of the proposed rules and the ALFN’s position on those rules: SUCCESSORS IN INTEREST The CFPB proposed 3 sets of rules regarding successors in interest including application of all Mortgage Servicing Rules to successors in interest once confirmed as a successor in interest; proposed rules how a servicer can confirm a successor interest; and extended protection of rules to all successors in interest who acquire an ownership interest in a transfer protected from acceleration under the Garn St. Germain Act. ALFN POSITION: The ALFN opposes this position and highlighted that the rule, as presently written, would conflict with other federal laws and create a scenario where a servicer’s compliance with this new regulation would likely lead to a violation of other federal law, for example the FDCPA. DEFINITION OF DELINQUENCY CFPB proposed to define delinquency in the general definitions and apply that definition to the term used
throughout Regulation X and Z. ALFN POSITION: propose that a definition be included but also revised to include a monetary default and non-monetary default. Also addressed the unintended consequence of the 120-day rule and a borrower being in perpetual default. LOSS-MITIGATION Sets forth nine new requirements regarding loss mitigation including requiring servicers to evaluate borrowers for loss mitigation again if they cure delinquency and re-default; allows servicers to join a foreclosure of a senior lienholder absent the 120day prohibition; allows servicers to set a document deadline date that is reasonable; clarifies servicers must take steps to stop a sale from occurring; amends the written notice requirement regarding a complete packet; clarifies how servicers must treat information being obtained from third parties to not prejudice and not take negative action against a borrower; allows for servicers to offer short term repayment plans; clarifies servicers may stop collecting documents for loss mitigation options a borrower is determined to be ineligible for; and clarifies how loss mitigation procedures and timelines apply to transferee servicers.
ALFN POSITION: Opposes this change. The requirement for continued communication every 36 days is too onerous on servicers. The Rule also fails to clarify when the obligation shall cease (loan is accelerated, referred to foreclosure, judgment is entered, sale of property). Additionally, the communication post-acceleration can conflict with other laws especially when a borrower is represented by counsel. The ALFN supports the amendment regarding when bankruptcy would recommence. PERIODIC STATEMENTS/ DEFINITION OF A REINSTATEMENT Multiple proposed changes to 12 CFR 1026.41, Periodic Billing statements. Below are some of those proposals and ALFN’s position. A. (d)(1)-1 provides that if the balance of a mortgage loan has been accelerated but the servicer will accept a lesser amount to reinstate the amount due on the periodic statement shall only include the smaller amount, not the entire accelerated balance. ALFN opposes this as it may lead to confusion regarding amounts and could conflict with state law and may need a distinction if it is post-acceleration and referred to foreclosure.
ALFN POSITION: The ALFN supported some of the proposals and opposed others. Mainly, ALFN opposes the requirement to dismiss a foreclosure action when reviewing a loss mitigation application as unduly burdensome on the servicer as well as on the borrower as doing so could lead to increased costs on the borrower, but for the borrower’s submission of loss mitigation. Additionally, ALFN proposed the extension of the time limits when a servicing transfer is issued.
B. Proposed Rule 1026.41(e)(5) Certain Consumers in Bankruptcy: Limits the exemption that a servicer need not submit Periodic Billing Statements to a borrower in bankruptcy.
EARLY INTERVENTION REQUIREMENTS The CFPB proposes to amend the early intervention requirements to create rolling requirements to establish live contact not later than the 36th day after every delinquent payment due date instead of only once at the beginning of a default. Also amends the requirement regarding bankruptcy.
C. Proposed Rule 1024.41(e)(6): Bureau proposes to exempt charged-off loans from sending periodic billing statements. ALFN supports this proposed rule.
ALFN proposes that instead of making a requirement to provide, borrowers in bankruptcy who are interested in receiving Periodic Billing Statements may request in writing that they still receive a statement and that it be approved by the bankruptcy court.
Adam J. Wilde, Esq. is an attorney with Illinois-based ALFN member Codilis & Associates. He can be reached at Adam.Wilde@il.cslegal.com
LRPG MEMBERS TALK HOTTEST TRENDS, BIGGEST CHALLENGES FACING PRACTITIONERS ANDREA TROMBERG
GLADSTONE LAW GROUP ATROMBERG@GLADSTONELAWGROUP.COM ALFN LRPG CHAIRWOMAN
ROBO-SIGNING, COMPLIANCE, NATIONAL MORTGAGE SETTLEMENTS, NEW CASE LAW AND STATUTES, NEW CONTRACT STANDARDS, SANCTIONS, THE CFPB, LAWSUITS AGAINST FIRMS AND CLIENTS, AND THE LIST GOES ON AND ON. WHAT DO ALL THESE THINGS HAVE IN COMMON? Practitioners have had to survive these challenges while keeping a close eye on the bottom line in order to continue practicing in this industry, and there will be more to come. As I see it, the biggest challenge is navigating the uncertain and choppy waters known as the Statutes of Limitation (SOL). Due to the interplay of one or more of the above-mentioned obstacles in thousands of cases through the years, foreclosures were delayed and countless matters dismissed. The result is proving to be a significant obstacle resulting in the inability in many situations to proceed with foreclose. Adding fuel to the fire and putting our firms in greater jeopardy, foreclosure defense attorneys are beginning to find a new profit center by filing FDCPA lawsuits for collection of these time-barred debts. In Florida, the five-year statute of limitation is all too real a problem, and while we are aggressively working to sort out the maze of case law, including a pending case in the Supreme Court of Florida, time is running out. Florida is not alone. New York’s statute of limitation is six years. Should a pending matter be dismissed, the likelihood of the passage of six years in New York is great. Similarly, other states of interest such as New Jersey and Idaho, have its statute of limitation at six and five years from acceleration, respectively. The challenges we face going forward as a result of the SOL issues are vast and include: lenders “writing off” barred debt, FDCPA lawsuits, awards for attorney’s fees, CFPB complaints and even free houses to borrowers that have been able to avoid or delay foreclosure. The full impact has yet to be fully realized and will not be sorted out by the courts for possibly years to come. It is critical that the industry and its practitioners take this problem seriously, plan and prepare to avoid immense losses and mitigate the damage.
GREGORY D. SPINK
GREGORY.SPINK@BROCKANDSCOTT.COM BROCK & SCOTT ALFN LRPG MEMBER
MGILBERT@GILBERTGROUPLAW.COM GLIBERT GARCIA GROUP ALFN LRPG MEMBER
CONTINUING REGULATORY OVERSIGHT OF OUR DEFAULT SERVICING CLIENTS IMPACTS LAW FIRMS, WHO ARE SEEN AS HAVING EXACERBATED THE FINANCIAL CRISIS AND THEREFORE ARE IDENTIFIED AS HIGH RISK MANAGEMENT “VENDORS.” The regulators are FDIC, OCC, State Attorney Generals, and the latest and greatest, the CFPB. Implementation and interpretation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which set up the CFPB, on the heels of OCC investigation of servicers, correlated to the hiring of compliance officers and compliance teams within law firms. Practically every action taken in a firm is incorporated into a written policy and procedure that is tested, audited, implemented and documented. This is not necessarily a bad thing, as it does provide good corporate structure to law firms. The cost of varying compliance requirements among firm clients constitutes the biggest issue for firms.An ancillary challenge to the CFPB and other federal regulators’ actions is growing consumer protection regulations and legislation, like expansion of FDCPA protections on federal and state level, which fuels the borrowers’ attorneys fee-driven practices and adversely affects ethical attorneys.
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THE BIGGEST CHALLENGE FACING PRACTITIONERS IN 2015 AND YEARS MOVING FORWARD IS THE CONSUMER FINANCIAL PROTECTION BUREAU (CFPB) AND THEIR ABILITY TO ENFORCE THE FAIR DEBT COLLECTION PRACTICES ACT (FDCPA) AGAINST LAW FIRMS. The CFPB has the authority to create and implement rules regarding the FDCPA but also is charged with the responsibility of enforcing and deciding whether the FDCPA has been violated. As seen last summer, the CFPB sued a law firm in Georgia under the FDCPA regarding unfair and deceptive collection practices. In my opinion, the CFPB is using this lawsuit as a test case and if successful, will continue filing suits across the country against debt collection law firms. Currently there is legislation which would make law firms exempt from the FDCPA while litigating. Proponents of this legislation, cite that state bar associations can adequately protect consumers from deceptive law firm’s collections efforts through their ability to regulate and penalize attorneys under state ethics rules. The CFPB stands in direct contradiction to this means of regulating attorneys and believes state bar association are not well suited to regulate attorneys while collecting debts. The CFPB will use this first test case to prove they are better suited to regulate practicing attorneys than state bar associations. Practitioners’ ability to respond and defend to these types of suits will be a great challenge in 2015 and years to come, as well as ensuring compliance with the CFPB.
ASK & ALFN ANSWERS
new laws ON THE BOOKS
FAILURE TO RECORD SATISFACTION OF MORTGAGE CAN BECOME COSTLY IN THE STATE OF OHIO
Amended Ohio House Bill 201 Became Law on March 23, 2015 ON DECEMBER 19, 2014, OHIO GOVERNOR JOHN KASICH SIGNED INTO LAW AMENDED HOUSE BILL 201 ESTABLISHING NEW RULES GOVERNING THE RECORDING OF SATISFACTION OF MORTGAGES. The law became effective on March 23, 2015. Mortgagees must now record a satisfaction of mortgage within 90 days after receiving a payoff, and the new law imposes stiff penalties for failing to comply.
First, if a satisfaction of mortgage is not recorded within 90 days, the current owner of the property may recover damages of $250 from the mortgagee or any successor or assignee of the original mortgagee. Additionally, after 90 days, the current owner may send a written notice to the mortgagee or any successor or assignee of the original mortgagee, demanding that the satisfaction be filed within 15 days of receiving the notice. If the mortgagee or any successor or assignee of the original mortgagee fails to record the satisfaction after receiving the notice, the cur-
rent homeowner may file a civil action and be entitled to recover reasonable attorney’s fees and costs plus statutory damages of $100 for each day of non-compliance, not to exceed $5000 in total damages. Finally, the new Bill does not limit the home owner’s recovery to these statutory damages. The current owner will not be precluded from recovering any other legal remedies or damages that may be available. The new law pertains to both residential and commercial mortgages, including retroactively to mortgages
which were paid in full prior to the passage of the Act. Though, with respect to commercial mortgages which were paid more than 90 days prior to the passage of the Act, the mortgagee is exempt from the $250 penalty, but is still be subject to the additional statutory damages and attorney fees in a civil action as described above. The new law also provides some safeguards for a delay in processing the satisfaction by the county recorder,
because the law permits the recovery of attorney’s fees in addition to the statutory damages, you can be sure that aggressive consumer advocates are gathering information right now to commence actions against mortgagees for failing to comply with these requirements. Ben Hoen, Esq. is an attorney with Ohio-based ALFN member Weltman, Weinberg & Ries. He can be reached at email@example.com
There is no grace period or safe-harbor provision written into the new law, and therefore strict compliance is required . . . the law permits the recovery of attorney’s fees in addition to the statutory damages, you can be sure that aggressive consumer advocates are gathering. which would not cause the mortgagee to be in violation of the law. A mortgagee may, by contract recover from the mortgagor, the cost of filing the satisfaction with the county recorder. INDUSTRY IMPACT: WHAT IT MEANS FOR SERVICING The housing marking is rebounding, as a result borrowers will be looking to sell and/or refinance more mortgaged properties. Lenders stressed with high volumes can easily overlook their obligation to timely file a satisfaction of mortgage. Filing can also be delayed or mishandled by the closing agent if the proper attention is not given to the process. It is imperative for mortgagees to review their processes to ensure that they become compliant with this new law. There is no grace period or safe-harbor provision written into the new law, and therefore strict compliance is required. Moreover,
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MAX YOUR MEMBERSHIP This month we embark on advocating for our industry in Washington D.C., an important and worthwhile investment of the time and talent of dedicated ALFN members. While members hit the Hill, another form of advocacy that the ALFN team conducts daily, is advocating for our members with business partners and the lenders and servicers in the industry. It is not unusual for one of us to be contacted each day by lenders and servicers seeking the ALFN’s assistance with education for staff or specific legal needs. We consistently reach out to the servicing community by promoting our webinars; relied upon by many, ALFN Webinars typically have an audience of hundreds of servicing personnel and business partners. We frequently have conversations with servicers on behalf of the ALFN membership to discuss how ALFN members can meet their needs throughout the country. With a database of over 6,000 industry partners, we are fortunate to be viewed by the servicing community as a go-to source for default servicing education. This year through our practice groups we continue to build on the variety of practice areas we cover in the industry, and have added a commercial practice group and also a collections practice group. The collective membership of the groups consists of many attorneys who have robust practices in each area and are contributing their expertise to the group and the ALFN in general.
THIS MONTH WE CELEBRATE THE OPPORTUNITY AND THE CHALLENGE OF ONE OF OUR CHIEF MISSIONS AS AN ORGANIZATION, WHICH IS TO ADVOCATE FOR A BETTER, MORE TRANSPARENT, AND MORE SUCCESSFUL MORTGAGE SERVICING INDUSTRY. BECAUSE THAT’S WHAT WE DO: WE REPRESENT, DEFEND AND EDUCATE AMERICA’S MORTGAGE SERVICING INDUSTRY. Additionally, the ALFN Marketing and Business Development Group has a specific mission of advocacy. This collection of dedicated members has gathered together to assist ALFN with advocating on behalf of all the membership for servicer participation at our annual leadership conference – ANSWERS 2015 in July and further servicer participation at all ALFN events. The MBDPG (Marketing and Business Development Practice Group) will also work with ALFN on social media outreach and other promotional initiatives throughout the calendar year. This is the first year for this dynamic group, founded on advocating for the members of ALFN.
LIZ POTTER CAN BE REACHED AT LPOTTER@ALFN.ORG
We have a rich history of advocacy at a variety of levels at ALFN. For me it is a distinct pleasure and privilege to advocate daily amongst industry peers on your behalf, our members. This month we celebrate the opportunity and the challenge of one of our chief missions as an organization, which is to advocate for a better, more transparent, and more successful mortgage servicing industry. Because that’s what we do: we represent, defend and educate America’s mortgage servicing industry.
MEMBERS ON THE MOVE FELTY & LEMBRIGHT HIRES NEW LITIGATION HEAD Felty and Lembright Co., L.P.A. (Ohio) recently announced Dean Kanellis has joined the Firm as Associate Attorney. In this role, Dean will head its Litigation team. “We are very proud to welcome Dean to Felty and Lembright. Dean is a seasoned and well-respected litigator whose vast experience and knowledge will make him a key addition to our Firm.” said Kriss Felty, Partner. Dean comes to Felty and Lembright with 20 years of experience in civil litigation. For the past 15 years, Dean has represented lenders and servicers in the real estate default matters, including residential foreclosure actions, appeals, condemnation proceedings, and contested forceable entry and detainer actions. This experience extends to commercial real estate, where he has handled construction litigation, mechanic’s lien litigation, commercial eviction, and related general litigation matters. A regular speaker and writer, Dean has presented on a variety of real estate default and related litigation issues. He has spoken at numerous seminars for the American Legal and Financial Network and has served as an instructor for Continuing Legal Education seminars throughout Ohio.
POTESTIVO & ASSOCIATES, P.C. ANNOUNCES THE HIRING OF JOSIE LEWIS, ASSOCIATE ATTORNEY Based at the firm¹s Rochester Hills Office, she will serve as an Associate Attorney supporting the firm¹s Litigation Department. Josie attended Western Michigan University, where she completed her B.A. in Political Science in 2002. Josie earned her J.D. at Western Michigan University Cooley Law School in 2006. She made the dean¹s list on several occasions throughout law school. Josie has been representing mortgage lenders and servicers for almost ten years, and has a background in collections. She formally worked as a post-judgment Collection Supervisor. She has received extra training in the Federal Debt Collection Practices Act and the Service members Civil Relief Act requirements, and has notably managed to recover several properties for clients that were lost due to tax foreclosures. Josie also presented a course about foreclosure law to the code enforcement officers in the City of Detroit, as well as a seminar to assist individuals with saving their homes through loan modifications. Josie is licensed to practice in the State of Michigan.
POTESTIVO & ASSOCIATES, P.C. ANNOUNCES THE HIRING OF MILICA BILIC, ASSOCIATE ATTORNEY Milica Bilic, Associate Attorney, has joined the firm’s Foreclosure Department in the Chicago, Illinois office of Potestivo & Associates, P.C. Milica graduated with a B.S. from Northern Illinois University in 2008, where she majored in Sociology and minored in Political Science. She later graduated from Western Michigan University Thomas Cooley Law School in 2014. There she focused on Public Law and Litigation, and was awarded the leadership achievement award.
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Milica previously practiced as an Associate Attorney at a corporate law firm representing corporate clients in administrative court. Prior to law school, Milica worked as a paralegal at a plaintiff’s personal injury firm. In addition to being a licensed member of the Illinois State Bar, Milica is involved with the Illinois State Bar Association, the Chicago Bar Association, and the Will County Bar Association.
THE 2015 ALFN MEDIA KIT AVAILABLE NOVEMBER 15 FIND IT AT ALFN.ORG/MEDIA_KIT
ONLY ONE MORTGAGE SERVICING ASSOCIATION HAS THE RIGHT PLATFORMS TO REACH THE RIGHT PEOPLE. AND FOR THE RIGHT PRICE, TOO.