Predatory and Unfair Lending: Law Firm Updates

For your reference, here’s a first reading list in our now ongoing coverage of the legal issues surrounding Predatory and Unfair Lending.

For daily updates, FOLLOW two new JD Supra channels on the subject: Predatory Lending Watch on Facebook and @LendingLaws on Twitter.

Expect a growing body of law firm commentary, analysis, and updates on this topic, especially as the newly created Consumer Financial Protection Bureau begins to implement the anti-predatory and unfair lending practices provisions of the Dodd-Frank Act:

U.S. Financial Reform: Mortgage Reform and Anti-Predatory Lending Act (Duane Morris LLP):

“Title XIV of the Act, designated the “Mortgage Reform and Anti-Predatory Lending Act,” establishes minimum standards for originating residential mortgages, regulates the compensation of mortgage brokers and expands consumer protections and lender disclosure requirements. It also creates an Office of Housing Counseling within the U.S. Department of Housing and Urban Development (HUD).” Read more»

Fair Lending Principles Must Underpin Loss Mit (Thomas Dowell):

“Mortgage loan servicers should recognize the likelihood of greater government and regulatory scrutiny of their fair lending efforts, and reinforce the applicability of fair-lending principles in the servicing arena. They must adopt and implement policies for reviewing and deciding loan modification applications and documenting these decisions consistently and thoroughly. Neglecting these issues can lead to significant enterprise risk.” Read more»

Loss Mitigation: Fair Lending Implications in Servicing and Modifications (Jonice Gray Tucker):

“Ms. Tucker’s presentation on the fair lending implications loss mitigation for loan servicing identifies the key legal and regulatory themes facing loan administration departments during the financial crisis. While the challenges to loan administration practices are rising along with foreclosures and defaults, there are impediments to the viability of ‘fair servicing’ actions, including the fact that loan servicers rarely have access to race and ethnicity data, and borrowers are often noncompliant with HAMP race-data collection.” Read more»

The Impact of the Mortgage Reform & Anti-Predatory Lending Act on the Conventional Residential Lending Industry (Richard Vetstein):

“The Mortgage Reform and Anti-Predatory Lending Act certainly changes the regulatory landscape for mortgage originators who focused on high-risk, sub-prime lending, setting tougher new standards and creating new federal remedies for consumers victimized by deceptive and predatory lending. Stripped down, the Act puts the onus on mortgage lenders and originators to ensure, based on verified and documentation information, that borrowers can afford to repay the loans for which they have applied. Pretty novel idea, huh?” Read more»

Mortgage Servicing Under Fire (Jonice Gray Tucker):

“Over the past decade, mortgage loan servicers have been subject to increasing scrutiny by federal and state regulators, as well as private litigants. The recent financial crisis has heightened public examination of mortgage servicing practices, with litigation and enforcement activity intensifying markedly during the past 18 months. Servicers are now facing a new frontier of legal claims based on novel theories that include attacks on previously unchallenged business practices.” Read more»

State Anti-Predatory Lending Update & Predictions for State Action (Andrea Lee Negroni):

“If there are so many federal and state anti-predatory lending laws and consumer protection laws, why does predatory lending continue? Why aren’t 10-20 years’ worth of laws more effective in preventing abuses and reducing the incidence of foreclosures facing subprime borrowers? Why are non-white subprime borrowers so much more impacted by the mortgage crisis than their white counterparts when statistics show that the majority of subprime loans are made to white borrowers?” Read more»

On the California Attorney General’s Creation of ‘Mortgage Fraud Strike Force’ (Jonathan Cannon):

“On May 23, 2011, California Attorney General Kamala D, Harris announced the creation of the California’s Attorney General Mortgage Fraud Strike Force. The task force will be staffed by Department of Justice attorneys and investigators, and it will monitor and prosecute violations throughout the mortgage industry, from mortgage originators to servicers to entities that market mortgage-backed securities to the investing public.” Read more»

What Are The Perils of Hard Money Lenders? (Doron Eghbali):

“Hard money lenders are increasingly populating our communities seeking to exploit the unfortunate void left by banks for lending, especially mortgages. Hard money lenders could be individuals or businesses charging relatively higher than market interest rates for their services or products.” Read more»

DOJ Settlement May Signal Expanded Liability and Aggressive Enforcement (Benjamin Saul):

“This article, which appeared in the ABA’s Section of Litigation, Consumer & Civil Rights Newsletter, discusses the Department of Justice’s 2010 settlement with two subsidiaries of American International Group (AIG), resolving allegations that the companies engaged in a pattern or practice of discrimination against African American borrowers. The $6.1 million settlement reflects the DOJ’s increasingly aggressive enforcement posture in fair lending cases, and to what extent that posture has implications for broadened lender liability.” Read more»

InfoBytes, July 15, 2011 – Weekly In-depth review of news & developments in the financial services industry (BuckleySandler LLP):

“On July 7, the U.S. Court of Appeals for the First Circuit partially granted the borrower’s request to vacate the district court’s decision to dismiss the borrower’s claims that his lender’s alleged predatory lending practices had violated Massachusetts law.” Read more»

FDIC Sanctions World’s Foremost Bank (Sutherland Asbill & Brennan LLP):

“Even though its exercise must await a Senate-confirmed Director, much has been made of the power of the new Bureau of Consumer Financial Protection to prohibit ‘unfair, deceptive or abusive acts or practices’ with respect to consumer financial products and services.2 What may have gone unnoticed, however, is that banking regulators have regularly used a similar general standard in Section 5 of the Federal Trade Commission (FTC) Act to sanction ‘unfair and deceptive’ consumer credit practices. The recent action of the FDIC in sanctioning World’s Foremost Bank is a reminder that the new powers of the Bureau are not so new at all.” Read more»

Credit Crunch Digest – March 2011 (Sedgwick LLP)

“The subprime lending crisis and ensuing credit crunch have resulted in significant losses and numerous lawsuits involving parties to the mortgage lending and securitization process. This digest collects and summarizes recent media reports regarding potential liability, government initiatives, litigation and regulatory actions arising from the subprime mortgage crisis and credit crunch, as well as the increasing number of reported cases of financial fraud.” Read more»

Additional Resources

Fighting Foreclosures and Evictions (Jeffrey Feuer):

“A booklet developed for the Street Law Project of the National Lawyers Guild. How tenants and former homeowners can fight back against evictions and foreclosures.” Read more»

Consumer Financial Issues In the Dodd-Frank Era (Richik Sarkar):

“Discussion of Consumer Financial Issues In the Dodd-Frank Era including: Bureau of Consumer Financial Protection; Mortgage Lending; and Preemption.” Read more»

Reformation and Regulations – Part I – Dodd-Frank Act & Mortgage Reform (Jonathan Foxx):

“In this article, I provide a chart of the Act’s reform and consumer protection features, as they relate to residential mortgage loan originations; and, I review the Mortgage Loan Regulatory Provisions and, where relevant, their integration into other parts of the Act.” Read more»


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