State laws affecting our businesses have also been evolving. Some changes have occurred on a nationwide basis at the state level due to the establishment and/or amendment of minimum standards under federal law, such as state licensing requirements. Some states may seek to incorporate federal requirements as a requirement imposed on a state-licensed entity, while other states may seek to impose their own additional requirements to the extent not preempted under federal law. Additionally, there have been growing trends in state lawmaking focusing on the servicing of mortgage loans related to, for example, data privacy, loan modifications and anti-foreclosure measures.
Recent Regulatory Developments
There have been various legal and regulatory developments in Nevada regarding liens asserted by HOAs for unpaid assessments. In September 2014, the Nevada Supreme Court held that an HOA non-judicial foreclosure sale can extinguish a mortgage lender’s previously-recorded first deed of trust on a property if that foreclosure is to recover assessments categorized as super-priority amounts. In June 2015, the U.S. District Court for the District of Nevada issued an opinion holding that federal law prohibits an HOA foreclosure proceeding from extinguishing a first deed of trust assigned to Fannie Mae. A Nevada state court subsequently reached the same conclusion. The Nevada Supreme Court also reversed a lower court summary judgment decision invalidating an HOA foreclosure sale on the basis that the HOA refused the lienholder’s tender of the super-priority portion of the lien and that the HOA sale was commercially unreasonable. The Nevada Supreme Court ruled that these were issues of fact and remanded for further proceedings. Additional litigation in both state and federal courts and appellate courts is pending with respect to these issues. Case law is quickly developing, is not harmonious as between federal and state courts and varies by judge within each jurisdiction. Also, legislation in Nevada, which became effective on October 1, 2015, requires HOAs to provide notice to lienholders relating to the default and foreclosure sale and also to provide creditors with a right to redeem the property for up to 60 days following an HOA foreclosure sale. In January 2017, the Nevada Supreme Court ruled that the state’s non-judicial HOA foreclosure statutes in effect prior to the 2015 amendments do not unconstitutionally violate due process and are not a government taking. This opinion conflicts with a 2016 decision of the Ninth Circuit, holding that the statute was unconstitutional. Credit owners may assert claims against servicers for failure to advance sufficient funds to cover unpaid HOA assessments and protect the credit owner’s interest in the subject property. We service numerous loans in Nevada and are involved in litigation and other legal proceedings affected by, or related to, these HOA matters.
On April 26, 2018, the CFPB finalized an amendment to its “Know Before You Owe” mortgage disclosure rule that addresses when mortgage lenders with a valid justification may pass on increased closing costs to consumers and report them on a closing disclosure. The amendment was designed to provide greater clarity and certainty to the mortgage industry. It took effect June 1, 2018. On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed into law by the President. Among its many provisions were those addressing the following topics:
Loan Officer Licensing - Amends the SAFE Act to temporarily allow loan originators that meet specified requirements to continue to originate loans after moving (1) from one state to another, or (2) from a depository institution to a non-depository institution. This provision is effective November 24, 2019.
No Wait for Lower Mortgage Rates - Amends the TILA requirement that a lender provide a borrower with a mortgage disclosure or a revised disclosure at least three business days prior to a mortgage closing. Eliminates the three-day waiting period in situations where a creditor extends to a borrower a second offer of credit that lowers the APR on the mortgage. Also encourages the CFPB to provide clearer guidance on the applicability of TRID to mortgage assumptions. This provision took effect June 23, 2018.
Restoration of the PTFA - Repeals the sunset provision of the PTFA and restores it as it was in effect prior to its expiration on December 30, 2014. The PTFA provided bona fide tenants residing in properties foreclosed with certain protections, including a 90-day notice before the tenant could be evicted. The PTFA also allowed bona fide tenants the right to remain in the property until the pre-foreclosure lease expired. This provision took effect June 23, 2018.
Veteran Home Loan Refinancing Reform - Adds protections for veterans who refinance their purchase or construction home loans. Under the Act, the VA will not guarantee or insure the refinancing of a loan to purchase or construct a home unless the insurer provides a certification of the recoupment period for expenses incurred by the borrower in refinancing the loan. Further, all costs and fees must be recouped within 36 months of the loan issuance, and the recoupment must occur through lower monthly payments due to the refinancing. Furthermore, the insurer must provide the veteran with a net tangible benefit test and abide by certain rules regarding the required minimum reduction in the interest rate on the refinanced loan. Per VA Circular 26-18-13, this provision was effective with applications taken on or after May 25, 2018.