Last month oral arguments were heard by the U.S. Supreme Court in the matter of Henson v. Santander Consumer USA Inc. The case focuses on Santander’s activity while they were collecting defaulted auto loans and if said activity is covered under the Fair Debt Collection Practices Act. The FDCPA only applies to “debt collectors” so the question becomes who is a “debt collector” under the FDCPA. Santander is arguing that they ceased to remain a debt collector the moment they purchased the assignment of the debt they were collecting. They argue at that moment they are not collecting debt that was owed or due another, rather they were collecting debt they were owed. This case will settle a circuit split amongst the appeals courts with the Third, Fifth, Sixth and Seventh Circuits, and the District of Columbia Court of Appeals holding that collectors of purchased defaulted debt are debt collectors within the meaning of the FDCPA, while the Fourth, Ninth and Eleventh Circuits all holding that collectors of purchased defaulted debt are not debt collectors within the meaning of the FDCPA. (more…)
Lending institutions can implement the use of disaggregated ethnic and racial categories in their home loan applications beginning January 1, 2017, an entire year ahead of HMDA’s original deadline.
The CFPB suffered a blow yesterday in the most significant attack against its authority to date. In PHH Mortgage’s appeal from a $109,000,000 disgorgement order issued by the CFPB in June of 2015, the U.S. Court of Appeals for the D.C. Circuit held that “the CFPB is unconstitutionally structured” and violates Article II of the Constitution. The court also found that the CFPB violated PHH’s due process rights and rejected the Bureau’s determination that its enforcement actions brought as administrative proceedings are not bound by any statutes of limitations.
Although commonly known, judgment creditors rarely utilize the charging order as a collection mechanism. This may change as a result of recent case law developments. (more…)
Legislation liberalizing Louisiana foreclosure law was signed by Louisiana’s governor on June 5. House Bill 697 becomes effective on August 1, 2015.
One particular area where lenders strive to use technology involves the creation of electronic records containing electronic signatures. Thus, the original documents are created on a computer and signed using an electronic signature; there is no original paper document with a handwritten signature. (more…)
Although healthcare properties have historically provided the smallest share of collateral used for backing CMBS transactions (currently only 0.47%), according to the most recent report from Moody’s Investors Service, “healthcare edged out all other real estate asset classes as the worst-performing property type in Q2 2014.” This is a stark turn for the sector. Between 1994 and 2013, healthcare, as a CMBS asset class, had the highest months to liquidation rate at 52.06 days, as compared to 26.71 days for hotel properties, 23.42 days for retail properties, 22.17 days for multifamily properties, 20.1 days for industrial properties, and 20.51 days for office properties. To be fair, a major reason for the poor Q2 healthcare figures was the inclusion of the abnormally large “105% loss severity on the Senior Living Properties Portfolio, which liquidated with a $117.7 million loss from the GMACC 1998-C1 transaction.” However, although an outlier due to size, the Senior Living Properties Portfolio insolvency was linked to changes in Medicare and Medicaid reimbursements, a common refrain in the healthcare industry today attributed by many (in varying degrees) to the implementation of the Patient Protection and Affordable Care Act. (more…)
ZONE(-ING) DEFENSE — With March Madness in full swing, now is a great time to review how local zoning ordinances can turn a mortgage servicer’s foreclosure layup into a blocked shot. Many U.S. states rely on a judicial process for foreclosing on real estate title that is similar to a traditional lawsuit.1 This process means that even without debtor resistance, getting to the foreclosure sale may take months; add resistance and it may take years. In that interim, the servicer may decide not to pursue active property management or the appointment of a receiver to manage the collateral, as these measures tend to involve additional legal and management fees and expenses. On the surface, it may appear to the servicer that the property is being adequately managed by the current owner. But what lies beneath the surface? (more…)
In a prior post (“Emerging Statutory Threats to Recourse Triggers”), we tackled Michigan and Ohio statutes that invalidated non-recourse triggers sprung by certain types of insolvency events. As noted there, the statutes were motivated by two Michigan decisions, Wells Fargo Bank, N.A. v. Cherryland Mall Limited Partnership, 812 N.W.2d 799 (Mich. Ct. App. 2011) and 51382 Gratiot Avenue Holdings, LLC v. Chesterfield Development Company, LLC, 835 F. Supp. 2d 384 (E.D. Mich. 2011), which had permitted recourse based on “insolvency”, including the non-payment of the loan debt itself. The Michigan and Ohio statutes now bar these types of recourse triggers. (more…)
In the world of large loan modifications, servicers and borrowers have turned frequently in recent years to the A/B Note structure in situations where the collateral financed by a loan is valued at less than the outstanding balance of the loan. When set up thoughtfully, in most instances both servicer and borrower can benefit from the A/B Note structure. However, there is an underlying risk of inadvertently creating a windfall situation for borrowers under the A/B Note structure when making decisions based upon traditional risk metrics. It is important for servicers to get a handle on the mechanics, benefits, pitfalls, and strategies associated with the structure before considering implementation. (more…)
A. Statutory Overview
When foreclosing on commercial properties, lenders and servicers must assess the liabilities to which they may be exposing themselves under various state and federal laws and regulations. One such liability (that can often be overlooked) are the requirements imposed by the Americans with Disabilities Act (“ADA”) which, in certain circumstances, can paint a large target on the backs of “deep pocket” lenders who obtain title to commercial properties via a foreclosure or voluntary transfer. See 42 U.S.C. 12101, et seq. (more…)