Mortgage loan servicers have a wide range of responsibilities. However, does everything servicers do constitute “servicing”? Or do servicers do some things that are not “servicing”?

The answer is important because the Real Estate Settlement Procedures Act and its Regulation X impose strict obligations on servicers to respond to certain borrower communications related to “servicing,” but not to nonservicing. The courts, including two recent federal courts of appeals, are drawing fine lines between the two.

RESPA requires a mortgage loan servicer to respond in a timely manner to a borrower’s request to correct errors relating to “allocation of payments, final balances for purposes of paying off the loan, or avoiding foreclosure, or other standard servicer’s duties.” Section 1024.35 of Regulation X specifies that a servicer must acknowledge, investigate, and respond to a borrower’s “notice of error” within strict timeframes, so long as the notice is in writing and provides enough information for the servicer to identify the account and the asserted error. In addition, after receipt of a notice of error, a servicer is prohibited, for 60 days, from furnishing adverse information to a consumer reporting agency regarding any payment that is the subject of the notice.

Section 1024.35 then provides a list of covered errors that are subject to those requirements. The list includes errors that could arise in typical servicing activities – errors related to the acceptance, application, or crediting of borrower payments; and to disbursing amounts for taxes, insurance premiums, or other charges. The list of covered errors also includes those that could arise in default servicing – errors related to providing information regarding loss mitigation options, making foreclosure notices or filings, moving for foreclosure judgments or orders of sale, or conducting foreclosure sales.

Then, the Consumer Financial Protection Bureau (“CFPB”) included a catch-all provision to section 1024.35, such that a covered error includes “any other error relating to the servicing of a borrower’s mortgage loan.”

Courts have been considering the scope of those responsibilities since even before the CFPB issued that list in 2013. Recently, two circuit courts of appeals have indicated that some activities of servicers do not constitute “servicing,” particularly where loan modifications are involved.
Continue Reading Mortgage Servicing “Notices of Error” – Does The Catch-All Catch It All?

Businesses that place phone calls or send text messages to consumers may find some relief in a recent United States Supreme Court decision that limits the applicability of the Telephone Consumer Protection Act (“TCPA”). The TCPA prohibits any person from placing phone calls (including text messages) to a wireless number using an automated telephone dialing

A United States Magistrate Judge for the United States District Court, Western District of New York, today issued his report and recommendation on the defendants’ motion to dismiss in Petersen et al. v. Chase Card Funding, LLC et al., No. 1:19-cv-00741 (W.D.N.Y. June 6, 2019). The Magistrate Judge recommended dismissal of both the plaintiff’s

Today, the Supreme Court returned to the lower courts the question whether a 2006 order by the Federal Communications Commission (FCC) is binding on the district court. In PDR Network, LLC v. Carlton & Harris Chiropractic, the Court held that resolution of that question may depend on the resolution of two preliminary questions: (1) whether the order is the equivalent of a “legislative rule” that has the force of law; and (2) whether the party challenging the FCC’s interpretation had a prior and adequate opportunity to seek judicial review of the order.

As background, the petitioners in the case produced a reference guide about prescription drugs, and sent healthcare providers faxes stating that the providers could reserve a free copy of the e-book version of the reference guide. One fax recipient brought a putative class action, alleging that the fax was an “unsolicited advertisement” within the meaning of the Telephone Consumer Protection Act (TCPA). The district court dismissed the case, but the Fourth Circuit reversed, concluding that the Hobbs Act—which gives courts of appeals exclusive jurisdiction to determine the validity of certain final orders by the FCC—required the district court to follow the FCC’s 2006 interpretation of the term “unsolicited advertisement” as including “any offer of a free good or service.”

In an opinion written by Justice Breyer and joined by Chief Justice Roberts and Justices Ginsburg, Sotomayor, and Kagan, the Supreme Court vacated and remanded.
Continue Reading Supreme Court Declines To Answer Whether District Court Is Bound To Follow FCC’s Interpretation of TCPA

The U.S. House of Representatives on Thursday passed two bills that would reform the standards for bringing federal class actions and raise the bar for keeping lawsuits in state courts.

The first bill, the Fairness in Class Action Litigation Act of 2017 (HR 985), would impose several new requirements on class action and

The Federal National Mortgage Association (Fannie Mae) operates under a corporate charter, which authorizes Fannie Mae “to sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal.” 12 U.S.C. § 1723a(a). On January 18, the U.S. Supreme Court held that this “sue-and-be-sued” clause does not

New regulations under the federal Military Lending Act (“MLA”) that become effective next week will prohibit consumer loans to covered US Service members if those loans have a “military annual percentage rate” (“MAPR”) greater than 36 percent. The Defense Department’s regulations will impose that MAPR limit on additional types of consumer credit transactions (beyond just

The controversial decision in Madden v. Midland Funding, LLC, was “incorrect” and “reflects an unduly crabbed conception of [National Bank Act] preemption,” said the Solicitor General and the Office of the Comptroller of the Currency (“OCC”) in the amicus brief filed with the United States Supreme Court on Tuesday.  Still, the Solicitor General and the OCC advised the Court not to review the decision of the Second Circuit in Madden.  They concluded that this just isn’t the right case for the Court to resolve the important questions of whether and under what circumstances the National Bank Act preempts state usury laws for assignees of loans made by national banks.
Continue Reading Madden Update: Solicitor General Says the Second Circuit Got it Wrong—But that the Decision Should Still Stand for Now

Today, the Supreme Court issued its long-awaited decision in Spokeo, Inc. v. Robins.  In a win for the business community, the Court held that plaintiffs can’t satisfy Article III’s injury-in-fact requirement for standing to sue in federal court by merely alleging the violation of a statute, without any accompanying real-world injury.  For more details

A key question in enforcing arbitration agreements in class actions is whether arbitration will proceed on an individual or class basis.  But who will answer that question – the court or the arbitrator?  The Fourth Circuit recently held that, absent clear and unmistakable language in the arbitration agreement to the contrary, that threshold question about