Posted by kevin on May 1, 2016 under Foreclosure Blog | 
The NJ Court Rules require that before an attorney submits a document to the court in any lawsuit, he or she must do a reasonable inquiry to ascertain that the factual allegations contained in the document have evidentiary support. In other words, you have to do your due diligence. The rules dealing with foreclosure complaints go a little further. The require the attorney to communicate with an employee of the lender or servicer who confirms that accuracy of the contents of the complaint, and, on top of that, the attorney must check the file to confirm that the employee is telling the truth. Sounds great on paper, but in practice in NJ, you have to wonder how seriously this obligation is taken.
The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector. Its jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, other financial companies operating in the United States. It appears that the CFPB takes the due diligence requirements seriously.
In its April 25, 2016 press release, the CFPB stated that it entered into a consent order with NJ debt collection law firm Pressler & Pressler, LLP, two of its principal partners, and New Century Financial Services, Inc., a NJ based debt buyer, to stop churning out unfair and deceptive debt collection lawsuits based on flimsy or nonexistent evidence. The consent orders bar the companies and individuals from illegal practices that can deceive or intimidate consumers, such as filing lawsuits without determining if debts in question are valid. The orders also require the firm and the named partners to pay $1 million, and New Century to pay $1.5 million to the Bureau’s Civil Penalty Fund.
More specifically, the CFPB alleged that Pressler & Pressler used an automated claim-preparation system and non-attorney support staff to determine which consumers to sue. Attorneys generally spent less than a few minutes, sometimes less than 30 seconds, reviewing each case before initiating a lawsuit. This process allowed the firm to generate and file hundreds of thousands of lawsuits against consumers in New Jersey, New York, and Pennsylvania between 2009 and 2014. The CFPB contend that the respondents violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair and deceptive acts or practices in the consumer financial marketplace.
On the other side of the issue, insideARM.com defended vigorously the actions of the law firm and lender, and pointed out that the settlement ultimately involves no consumer redress, no invalidation of judgments and no findings of the use of improper affidavit practices. That article, however, forgot to mention the $2.5 million in penalty payments to the CFPB’s Civil Penalty Fund made by Pressler and Pressler and New Century. Oversight? Or just a puff piece for the so-called “industry”
Will the courts follow the ruling of the CFPB and allow meaningful discovery on due diligence, or just accept without scrutiny the word of lender’s counsel that they did everything according to Hoyle. We shall see.
Posted by kevin on May 12, 2015 under Foreclosure Blog |
I do not know what the future of the Consumer Financial Protection Bureau will be. Clearly, a lot depends on who wins the next presidential election. But, I do know the the CFPB is necessary.
I love to listen to Larry Kudlow on the radio and watch him on CNBC. He is a Reagan republican who worked for Bear Stearns for awhile. He believes in free trade, smaller government, and less regulation. He believes in the free market. He is articulate and energetic. I agree with a lot that he says, except when it comes to governmental regulation of financial institutions.
Well, I do believe in free markets to an extent. But I do not believe that we should be living in a “caveat emptor” society. Believe me, I have seen enough chicanery (over my entire 35 year career but especially in the last 8-9 years) to come to the conclusion that regulation is necessary to not only protect taxpayers but also to protect the players on Wall Street and the too big to fail banks from themselves.
There is something perverse going on here, however. You would think that after the $25 billion settlement and other multi-billion dollar settlements, the players would understand that they have to fly right. But every month or two, there is a new scandal, investigation, settlement. Just this past week, Ocwen entered into a $150 million settlement of a class action in Florida which alleged kickbacks on force placed insurance. The class members got $140 million which comes out to a less than princely sum of $350 per claimant, and Ocwen denied any liability.
The CFPB went after Wells Fargo and JP Morgan Chase and Genuine Title Co. Over 100 Wells Fargo employees took kickbacks from Genuine to get the title work associated with the loans. WF had to pay $24 million in penalties and another $11 million to consumers. JPMC engaged in the same behavior but at a lesser magnitude.
Obviously, monetary penalties are not stopping the players from playing. What will? Short of jail terms and long term suspensions from the industry, the only other method is enforcement of strong but fair regulation of the industry. Lord knows judges in judicial foreclosure states are not stepping in to fill the void.
Not just regulation, but regulation and enforcement. It does no good to have the regs on the books if the enforcement is weak or intermittent. The SEC dropped the ball. The Fed has eviscerated Truth in Lending by drafting regs and especially staff commentaries that are so pro-industry that you have to shake your head. But let’s be practical. Do you really expect an SEC staff attorney or Fed examiner making $75,000 per year coming down hard on Wall Street or Too Big To Fail Banks when that regulator is probably looking at the regulated class for his or her next job at $150-200K per year. I don’t think so.
So, maybe you just throw up your hands and blather about the conflicts of interest and inherent corruption of the system. Or maybe, you do something about it. At this point, the CFPB may be one of the few regulators who have remained untainted, at least at this time. Therefore, it must stay in business.
Posted by kevin on March 9, 2015 under Foreclosure Blog |
Over the last few years, the major players including Bank of America, Citigroup, Goldman Sachs, JPMC, Morgan Stanley and Wells Fargo, have agreed to over $63 billion to settle cases involving mortgages or mortgaged backed securities. Just last week, the courts gave final approval to BOA’s settlement of claims related to Countrywide. The price tag was $8.5 billion. Two major cases are up for final approval in the next month- JP Morgan Chase and Wells Fargo.
I heard Bill Maher ravage Chris Christie because he settled a supposed $8.9 billion claim against Exxon Mobil for $225 MM. But, isn’t that settlement comparable to the settlements that DOJ has gotten against the major banks for taking down the economy. The $25 billion dollar settlement dealt with claims in excess of a trillion dollars. Moreover, the details of those settlements often indicate that the payments or credits to be made by the banks was illusory. In NJ, the vast majority of mortgage modifications or forgiveness was on second loans that were completely underwater. So, the banksters “forgave” loans that they had long written off, and got credit toward the settlement 100 cents on the dollar.
Sorry for the rant.
Although many publications say that mortgage foreclosure litigation is winding down, and that it is getting progressively more difficult to get a down the middle ruling, the next battlefield is going to be in the area of mortgage servicing. TILA (Truth in Lending) and RESPA (Real Estate Settlement Procedures Act) and the 2014 regulations administered by the CFPB open the door a bit to smack servicer violations. Figure that door is open as long as the Democrats control the White House. I suspect that federal district court judges will not be happy with the prospect of these cases, but the regs do provide a private right of action with attorneys fees.
We’ll see.
Posted by kevin on January 13, 2015 under Foreclosure Blog |
I have seen a plethora of articles which say that the Consumer Financial Protection Bureau (CFPB) looks to be pro-active in 2015. That is a good sign especially when you consider that the DOJ has done little in way going after the bailed out banks, and the Republicans have taken over the House and Senate.
On the agenda for 2015 are a review of debt collection practices by first parties (the owner of the debt) as opposed to third party collectors. Third party collectors are usually subject to the FDCPA and consumers have a private right of action to go after illegal activity by third parties. However, the FDCPA hardly ever applies to the owner of the debt. Employees of those organizations can engage in the same type of outrageous acts which could land a third party collector in court- but they skate. According to the articles that I have read, the CFPB wants to look into how debts are being reported by first parties to consumer reporting agencies. Moreover, the CFPB wants to review first party dispute resolution policies.
Other areas of concern are payday loans, arbitration clauses in credit agreements, student loans especially in cases dealing with for profit schools, and continued review of mortgage servicers.
I am especially interested in seeing what comes out of the student loan investigations. At this time, private lenders get all the benefits associated with the discharge exception in bankruptcy, but are not required (as with federal loans) to offer income based repayment plans. I do not know if that was an intended consequence of limiting the bankruptcy discharge or just something that fell between the slats. However, that law does present to private lenders a windfall. They get to go after the student and pound them for judgment and interest with little or no downside risk that the loan will be discharged in bankruptcy. While at the same time, the student loan creditor does not have to deal fairly with a student strapped with debt and just starting out.
The sense of urgency at CFPB seems to be fueled in part, however, by the reality that the Republicans have taken over the House and Senate. Senator Shelby, Chair of the Senate Appropriations Committee, and Congressman Hensarling, now Chair of the House Financial Services Committee, are no big fans of Dodd-Frank and the CFPB. They have promised to clip the CFPB’s wings. In fact, Hensarling has just attacked the CFPB for upgrading its offices. So, maybe the flurry of activity at CFPB is just trying to make themselves harder to hit moving targets.
Posted by kevin on November 1, 2014 under Foreclosure Blog |
On October 28, 2014, the Consumer Financial Protection Bureau issued a report on mortgage servicers/servicing. It wasn’t pretty.
The report found that servicers are engaging in significant delays which lead to higher payments to the borrower. In addition, the servicers are not, for the most part, properly notifying credit reporting agencies that borrowers are no longer delinquent.
The problem has been exacerbated because major bank, which were subject to the $25 billion dollar settlement, are getting out of the servicing business and selling their portfolios to non-bank servicers such as Ocwen or Greentree.
Higher costs are incurred when servicers keep borrowers in trial modifications for more than three months at interest rates that are higher than the ultimate permanent mod. If the trial mod payment does not cover the fully amortized payment, then the difference is added on to the principal. More trial mod payment, the greater the amount that is added on to principal.
Recently, the CFPB fined Ocwen $2.1 billion for taking advantage of borrowers. The New York attorney general is investigating Ocwen for backdating letters.
I have always been leary about dealing with servicers on modifications, short sales and deeds in lieu. Back in 2011, most attorneys who brought the foreclosures actions would work with me on getting a resolution of the case. Not any more. I make proposals to my adversaries only to be told that I must deal with the servicers. Then, the games begin.
On paper, MHA (formerly called HAMP) has decent guidelines that seem to protect the consumer. However, you have no recourse if the servicer does not follow the guidelines. In addition, you are left swinging in the breeze when servicers sit on your file for 3-4 weeks, and then demand more or updated information, and then continue with this process for months. Currently, I have a modification that started last November and is still not into underwriting.
The CFPB is going in the right direction by holding the servicers’ feet to the fire. A change in the compostion of Congress, which looks likely, may have a negative impact on CFPB’s impact.
