April 29, 2024
Below you will find several key developments in the financial services industry, including related developments in information privacy and data security, from the past week. We add an “Amicus Brief(ly)1” comment to each item, where we briefly (see what we did there?) note for friends (and again?) of CounselorLibrary the important takeaways from the developments outlined in the email. Our legal reporters – CARLAW®, HouseLaw®, InstallmentLaw™, PrivacyLaw®, and BizFinLaw™ – provide more comprehensive, real-time updates of federal and state laws, regulations, litigation, and other industry items of interest. For a personal guided tour and free trial of any of these legal reporters, please contact Michael Willer at 614-855-0505 or mwiller@counselorlibrary.com.
On April 24, the Consumer Financial Protection Bureau released an edition of Supervisory Highlights focusing on recent examinations of mortgage servicers that were completed from April through December 2023. CFPB examiners found certain unfair and deceptive acts and practices and regulatory violations, including:
In response to the CFPB’s findings, mortgage servicers took corrective action, including providing remediation to borrowers and changing their policies and procedures.
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The Mississippi governor recently enacted Senate Bill 2543, which amends Section 75-67-181 of the Mississippi Code to provide for an annual adjustment of the maximum loan amount under which Mississippi Consumer Alternative Installment Loan Act licensees may impose finance charges permitted under the Act. The new law provides that, in lieu of the interest and charges in Section 75-17-21 (governing the maximum finance charges by licensees under the state’s Small Loan Regulatory Law), on loans of $5,100 or less, a licensee under the state’s CAILA may contract for and charge a monthly finance charge not to exceed an annual percentage rate of 59% per annum on the unpaid balance of the amount financed. Beginning with calendar year 2024 and for each subsequent calendar year, on or before July 1, the Mississippi Department of Banking and Consumer Finance will issue a memo authorizing a new maximum loan size permitted under this section. The new amount will be calculated by applying any increase or decrease in the CPI for the previous calendar year to the previous maximum loan size and rounding that amount upward to the nearest $10 increment.
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On April 22, the Federal Housing Finance Agency published in the Federal Register a notice inviting comment on a proposal by Freddie Mac to begin purchasing certain single-family, closed-end second mortgage loans from lenders that are approved to sell mortgage loans to Freddie Mac. The new Freddie Mac product is intended to provide borrowers with a lower cost alternative to a traditional cash-out refinance. The FHFA notes that, in the current high interest rate environment, a traditional cash-out refinance requires refinancing the entire outstanding loan at a new, and possibly much higher, interest rate. When borrowers obtain a second mortgage to access the equity in their home, only the smaller, second mortgage would be subject to the current market interest rate, with the original terms of the first mortgage remaining intact. The FHFA will accept written comments on the proposed new product until May 22, 2024.
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Virginia’s governor recently signed House Bill 184 into law, with an effective date of July 1, 2024. The bill amends and reenacts Section 55.1-321 of the Code of Virginia governing foreclosure procedures. The bill adds two paragraphs to the existing provisions of Section 55.1-321.
The first new paragraph, A1, states that if a proposed foreclosure sale is initiated due to a default in payment under a security instrument that was, at the time it was recorded, subordinate to another security interest encumbering the same property and has not been elevated to a first priority lien by a recorded voluntary subordination agreement, then the subordinate mortgage lienholder must submit to the trustee an affidavit affirming whether monthly statements were sent to the property owner for each period that any interest, fees, or other charges were assessed. No interest, fees, or other charges may be assessed or charged for any period during which periodic statements were not sent, unless the subordinate lienholder identifies a specific exemption. The affidavit must also include an itemized list of the current amount owed, including any periods in which interest, fees, and other charges were waived because no monthly statements were sent during that period. The subordinate lienholder must provide a copy of the affidavit to the borrower with written notice that a request for sale will be made of the trustee upon the expiration of 60 days from the day of mailing the notice. The notice must be sent by certified mail, return receipt requested, to the last known mailing address of the borrower. The notice must advise that if the borrower believes that interest, fees, or other charges have been assessed in error, the borrower may, prior to the sale, petition the circuit court of the city or county where the property or some part thereof lies for an accounting and order declaring the proper balance secured by the subordinate mortgage. If the court determines that charges were assessed in error, the borrower will be entitled to recover attorneys’ fees and costs against the subordinate lienholder. Note that these provisions do not apply to subordinate lienholders that are the original creditor, a mortgage servicer acting on behalf of the original creditor, a national or state-chartered bank, or a federal or state-chartered credit union.
The second new paragraph, A2, provides that any purchaser at a foreclosure sale must certify that the purchaser will pay off any priority security instruments no later than 90 days from the date that the trustee's deed conveying the property is recorded in the land records. The borrower will have the right to petition the circuit court of the city or county where the property or some part thereof lies to recover from the purchaser any payments toward such priority lien amounts made by the borrower after the date of the foreclosure sale, plus attorneys’ fees and costs.
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On April 19, the Kansas governor signed Senate Bill 2560, which enacts the Kansas Earned Wage Access Services Act and the Kansas Money Transmission Act.
Under the EWASA, "earned wage access services" means the “business of providing consumer-directed wage access services or employer-integrated wage access services, or both.” The new law establishes registration and bond requirements for providers of earned wage access services, surety bond requirements, prohibited acts and practices, annual reporting requirements, record retention requirements, bases upon which registration may be denied, suspended, revoked, or refused, powers of the State Bank Commissioner, and penalties for violations of the Act. The Act does not apply to: (1) a bank holding company regulated by the Federal Reserve; (2) a depository institution regulated by a federal banking agency; or (3) a subsidiary of either (1) or (2) if the subsidiary directly owns 25% of the bank holding company or depository institution's common stock.
The new law also establishes licensing procedures for money transmitters and the powers, duties, and responsibilities of the State Bank Commissioner under the MTA.
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