Consumer Bankruptcy Journal Fall 2015 - Page 16

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 16 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