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On November 7, Texas voters will have the opportunity to make some significant changes to the state’s homestead equity loan restrictions. As summarized below, Texas Proposition 2 will, if approved: (1) revise the strict fee limits for such loans; (2) add to the list of lenders that are authorized to make the loans; (3) eliminate the “once-a-home-equity-loan, always-a-home-equity-loan” rule; (4) allow borrowers to sign an affidavit of compliance regarding certain new refinancings of such loans; and (5) allow advances on lines of credit up to 80% loan-to-value (LTV) ratio.

The Texas Constitution imposes strict limits on the types of loans that validly may be secured by Texas homestead property. For home equity loans (other than purchase-money loans or rate/term refinances), the Texas Constitution imposes a long list of limitations and requirements, the violation of which invalidates the lien and can result in the forfeiture of principal and interest. A lender or holder has an opportunity to cure at least some of those violations. Since the limitations are part of the state constitution, relief can come only through legislative resolutions on which the public must then have the opportunity to vote.
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The Consumer Financial Protection Bureau (CFPB) has offered its new mortgage servicing rule for public inspection today, meaning it is scheduled to be published in the Federal Register on October 19, 2016.  The CFPB informally released the rule on its website in August.

The effective date of the rule is tied to its publication date,

Today the CFPB finalized the final mortgage servicing rules update that it proposed at the end of 2014.  The rule adds new protections for mortgage borrowers in financial distress, including provisions that require servicers to:

  • Provide some borrowers with foreclosure protections more than once over the life of the loan;
  • Provide protections to an expanded

The Texas Constitution is strict about protecting the homestead. In fact, until 1997, the Texas Constitution did not permit home-equity loans to be secured by borrowers’ homesteads. Even now, home-equity liens are allowed only under certain conditions, among which is the requirement that a home-equity loan be made on the condition that the lender or holder will forfeit principal and interest if the loan is constitutionally noncompliant and the lender fails to cure particular issues, using one of six listed corrective actions, within 60 days of receiving notice of the violation from the homeowner.  On May 20, 2016, the Texas Supreme Court announced two decisions (Garofolo and Wood) that will significantly affect home-equity lending in Texas.
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On May 12, 2016, the Consumer Financial Protection Bureau (“CFPB”) published annotated model forms (“TILA Mapping Forms”) for the Loan Estimate and Closing Disclosure.  The CFPB intends those annotations to indicate the statutory requirements in Chapter 2 of the Truth in Lending Act (“TILA”) on which it relied in implementing specific portions of those forms.  Unfortunately, the Mapping Forms are subject to such extensive disclaimers that the CFPB might as well have issued them over Snapchat – this “guidance” could disappear at any time.

The TILA-RESPA Integrated Disclosure/Know Before You Owe Rule (“TRID”) implements portions of the Real Estate Settlement Procedures Act (“RESPA”), TILA, and the Dodd-Frank Act.  Civil liability for violations of TRID is governed by the underlying statutes.  To the extent the CFPB promulgated a particular TRID requirement solely under RESPA or the Dodd-Frank Act, a consumer generally would not have a private right of action for a violation of the requirement.  However, a creditor – and in some circumstances, an assignee – is more likely to be subject to liability when a TRID violation involves a requirement the CFPB promulgated in whole or in part to implement Chapter 2 of TILA (also sometimes referred to as Part B of TILA).

The TRID Rule and its Commentary do not, however, address the extent to which a creditor or assignee may be held civilly liable for any particular TRID violation.  In the rule’s preamble, the CFPB briefly mentions the statutory authority on which it relied in connection with each TRID requirement, but that preamble discussion is often ambiguous, difficult to parse, and occasionally even contradictory.  The CFPB apparently published the TILA Mapping Forms yesterday in response to industry requests for clearer guidance.  While the Mapping Forms are helpful, they do not resolve all of the complicated TRID liability issues that creditors and assignees continue to face.  Perhaps most importantly, the Mapping Forms are subject to a general disclaimer that they do not represent the CFPB’s legal interpretation, guidance, or advice.  They also do not purport to bind the agency or create any enforceable rights, benefits, or defenses that can be asserted by any party, in any manner.  The CFPB declined to state what the Forms do represent, if anything.
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On April 11, 2016, the Government Accountability Office (“GAO”) released a hundred-plus page report analyzing the effects of the growth of nonbank servicers in the mortgage market. Although the report did not contain any shocking revelations about the increasing role of nonbank mortgage servicers, it did contain some surprising recommendations with respect to increasing the regulatory oversight of nonbank mortgage servicers. While the GAO recognized that nonbank mortgage servicers already are extensively regulated at both the state and federal levels, its report identified perceived gaps in that oversight. In particular, the report recommended Congress grant the Federal Housing Finance Agency (“FHFA”) additional authority to directly examine nonbank mortgage servicers of loans owned by Fannie Mae and Freddie Mac (collectively, the “GSEs”), akin to the prudential banking regulators’ jurisdiction over service providers to depository institutions. The report also suggested the Consumer Financial Protection Bureau (“CFPB”) collect data on the identity and number of nonbank servicers, possibly by requiring the registration of such entities at the federal level.

We summarize the major findings of the report below.
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On March 2, 2016, the Consumer Financial Protection Bureau (CFPB) undertook its first data security enforcement action in a consent order against Dwolla, Inc., a payment network provider that allegedly made deceptive representations about its data security practices. The consent order makes clear that, going forward, consumer financial services companies will have to navigate another