Congress is Nearing a $2 Trillion Stimulus Deal, Here's What it Means for Loan Servicers

The COVID-19 outbreak has resulted in unprecedented job loss for millions of Americans, creating economic uncertainty and challenges for loan servicers in 2020. Until the outbreak is controlled, missed payments on mortgages and student loans are likely to increase. Already, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) have issued 60 day moratoriums on foreclosures and evictions, which some states—and most banks and mortgage loan servicers—have adopted. Meanwhile, the Department of Education has announced that all borrowers with federal loans will have their interest rates automatically set at 0% for at least 60 days. Late Wednesday night, the Senate passed H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) after senate leadership reached an agreement with the White House earlier in the week. The legislation now moves to the House of Representatives for what many hope is unanimous consent. While we are still waiting on the House of Representative's approval, we've explored measures within the bill that will immediately impact student and mortgage loan servicers and outlined them below. More ›

First Circuit Reverses Course in Closely-Watched Pre-Foreclosure Notice Decision, Defers to Massachusetts Supreme Judicial Court

Earlier this year, Hinshaw reported on a decision by the First Circuit Court of Appeals which invalidated a Massachusetts foreclosure based on the Court's determination that the mortgage loan servicer's notice of default included additional language which did not strictly comply with Paragraph 22 of the mortgage. In the wake of that decision, the servicer filed a petition for rehearing on several grounds, but primarily because the Code of Massachusetts Regulations required use of what the Court had characterized as additional language. The banking community also filed several amicus briefs in support of Chase's petition. More ›

New York is Split on Whether Notice of Default Letters Trigger the Statute of Limitations

In Milone v. US Bank, N.A., a New York intermediate appellate court held that a letter to a borrower stating that the failure to cure a mortgage loan default "will result in acceleration" does not start the clock on the statute of limitations to foreclose and recover the entire debt. This ruling differs from that of another New York intermediate appellate court, which had ruled otherwise, setting up the possibility of the New York Court of Appeals weighing in on a key issue in New York foreclosure actions. More ›

Climate for Student Loan Oversight Gets Hotter with Recommendation of Top CFPB Student Loan Official for FTC Commissioner

While most mainstream media outlets are pulling a Jan Brady and reporting "Comey, Comey, Comey," the consumer financial services community should be chewing on a different name right now: "Chopra, Chopra, Chopra."

U.S. Senate Minority Leader, Chuck Schumer (D, NY), has recommended to the President, Rohit Chopra, former Consumer Financial Protection Bureau Student Loan Ombudsman for an open Democratic seat on the Federal Trade Commission. As the former CFPB Ombudsman, Chopra held a high post in the Bureau, interacting directly and routinely with Director Richard Cordray, and helping to prioritize—and importantly, publicize—student loan policy and enforcement initiatives for the Bureau that have long outlasted Chopra's tenure. Chopra has been known to draw comparisons between the mortgage and student loan industries, calling for greater data transparency in the student loan industry. More ›

Franz Kafka, Sisyphus, and Foreclosures: Bank of America Fined $45 Million by Bankruptcy Court For Violation of Automatic Stay

"Franz Kafka lives. This automatic stay violation case reveals that he works at Bank of America." Thus begins an opinion stretching over 100 pages in length in which United States Bankruptcy Judge Christopher Klein fined Bank of America over $45 million for what he found to be an egregious violation of the automatic bankruptcy stay.

According to the order, the Sundquists, at the behest of advice given them by Bank of America, defaulted on their real property loan in 2009 so that they could be considered for a loan modification. The court found that this was followed by a "'multi-year 'dual tracking" game of cat-and-mouse" by Bank of America, which included repeated requests for information which had grown stale and incomprehensible denials of applications. Most central to the court's holding was that, although the Sundquists filed a Chapter 13 bankruptcy petition in June 2010, Bank of America proceeded with a foreclosure sale even though it had notice of the Sundquists' bankruptcy case. Clearly meaning to send a signal which would be heard in the bank's highest offices (in addition to Kafka, the opinion also references the myth of Sisyphus and the Watergate scandal), the court was clearly moved by the emotional distress documented by the plaintiffs (which included discussions of suicide attempts). More ›

A Spike in Student Loan Defaults Likely to Trigger Follow-on Litigation Surge

The student lending industry should pay close attention to the onslaught of litigation that mortgage loan servicers have faced for years. I recently authored an article on this topic for Law360. A Consumer Federation of America analysis has indicated that student loan defaults have risen at least 14 percent since 2015. Such a trend will likely make student lending market participants susceptible to increased regulatory scrutiny, and could also result in a spike in follow-on private litigation. More ›