Category Archives: Legal

Florida mortgage delinquency, foreclosure rates slightly worse than national average

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In the first quarter of 2022, Florida ranked almost exactly in the middle of the pack in three key categories of the national homeowner economy: delinquent mortgages, total non-current mortgages, and foreclosure rates, according to a report issued by Jacksonville-based Black Knight Data & Analytics, Inc., a mortgage and loan data broker.

Nationally, the delinquency rate fell in May to a low of 2.75 percent, while Florida stayed slightly higher at 2.9 percent. Delinquencies are defined as any loan with overdue payments of 30, 60 or 90 days, but do not include loans in foreclosure. Year-over-year, Florida’s non-current mortgage rate fell by 43.9 percent, an improvement good enough to rank 6th in the nation over last year, when families were struggling to make ends meet during the pandemic.

Despite the negative impact of inflation on the national economy, there has not been a noticeable uptick in homeowners struggling to make payments. As of May, early-stage delinquencies – that is, borrowers who have missed just a single mortgage payment – have edged only marginally higher (+0.2%) month over month, but serious delinquencies (those 90 or more days past due but not yet in foreclosure) saw strong improvement – falling 7% from April – even though the total number of those loans is still 45 percent above pre-pandemic levels.

Florida foreclosures, at 0.4 percent of all loans, are in line with the national average at 0.3 percent.

Black Knight’s report also said that despite the volatility in interest rates, homeowners across the nation are currently sitting on a $1.2 trillion gain in “tappable equity” since the start of 2022.

“That’s the largest such quarterly growth ever recorded,” said Black Knight President Ben Graboske. “In total, American mortgage holders have more than $11 trillion in tappable equity, also a history-making total.”

One major contributing factor to the recent spike in home prices and the decline of affordability is a record-low number of homes listed for sale. Black Knight’s report says that despite a rise of 27,500 new listings on the real estate market from March to April, “the total number of active listings remains 67% below pre-pandemic levels, with 820,000 fewer listings than would be typical at this point in most homebuying seasons.” Black Knight’s data suggests that the number of homes hitting the market remains well below what would be considered “normal” levels.

View the full report from Black Knight here.

DFPI Proposes Rules For Commercial Financial Products And Services

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In 2020, California enacted the California Consumer Financial Protection Law, Cal. Fin. Code § 90000 et seq.  The CCFPL authorizes the Department of Financial Protection & Innovation to define unfair, deceptive, and abusive acts and practices in connection with the offering or provision of commercial financing or other financial products and services to small businesses, nonprofits, and family farms.  Cal. Fin. Code § 90009(e).  The DFPI is now proposing to exercise this authority by adopting rules defining various terms used in the statute.  The texts of the DFPI’s Notice of Proposed Rulemaking, Initial Statement of Reasons, and Proposed Rules are available herehere, and here.

The comment period ends August 8, 2022.  Comments may be submitted electronically to: with a copy to Samuel Park, Senior Counsel, at   Commenters should include “PRO 02-21” in the subject line.  Those wishing to mail comments should address them to:

Department of Financial Protection and Innovation
Attn: Sandra Navarro
2101 Arena Boulevard
Sacramento, California 95834

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of…

11th Circuit Holds TILA Statement May Be Subject To FDCPA

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The U.S. Court of Appeals for the Eleventh Circuit decided a case last week in which it held that monthly mortgage statements required under TILA may (but do not necessarily) constitute communications in connection with the collection of a debt and therefore may be subject to the FDCPA.  The Eleventh Circuit’s opinion reversed the district court’s dismissal of a borrower’s FDCPA claim against her mortgage servicer.

Summarizing its opinion, the Eleventh Circuit stated that a borrower makes a plausible claim (which is the standard on which the claim is judged on a motion to dismiss) that communications are made in connection with the collection of a debt “at least when—as here—[the communications] contain debt-collection language that is not required by the TILA or its regulations and the context suggests that they are attempts to collect or induce payment on a debt.”

In reversing the dismissal, the appellate court did not make a final finding or judgment about the merits of the borrower’s claims—in fact, it took care to point out that the ultimate result may differ: “Whether a communication was sent in connection with an attempt to collect a debt is a question of objective fact, to be proven like any other fact.”  Instead, the Eleventh Circuit accepted the claims made in the borrower’s complaint as true, as is required for the purpose of consideration of a motion to dismiss.  The borrower alleged that the mortgage servicer sent her monthly mortgage statements with inaccurate amounts for the deferred principal balance, the outstanding principal balance, and the amount of the interest-only payment that was due.  According to the borrower, those amounts had been the subject of previous state court litigation between the parties to determine whether a loan modification could be enforced by the borrower against the mortgage holder.  The borrower alleged the previous lawsuit had been decided in her favor and the modification was upheld, and her FDCPA claims therefore were based on the servicer’s failure or refusal to accurately reflect the modification (and previous judgment) in its accounting for her mortgage and on her statements.

The Eleventh Circuit made special note of the borrower’s allegation that the monthly statement included a delinquency notice listing overdue payments and the amount needed to bring the account current as well as debt-collection language such as

  • “This is an attempt to collect a debt.”
  • “You are late on your mortgage payments.  Failure to bring your loan current may result in fees and foreclosure – the loss of your home.”
  • “[The servicer] has completed the first notice or filing required to start a foreclosure.”

The Eleventh Circuit held that mortgage statements required by TILA could serve a dual purpose as a communication related to debt-collection under the FDCPA, and it made particular note that TILA did not require the mortgage servicer to state, “This is an attempt to collect a debt.”

States Encouraged By CFPB To Enforce Federal Consumer Financial Law

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The Consumer Financial Protection Bureau (“the Bureau” or CFPB) released an Interpretive Rule—which is exempt from notice-and-comment requirements of the Administrative Procedure Act—that sets out its view on the power of states to bring enforcement actions pursuant to the federal Consumer Financial Protection Act (CFPA). Of note, under the Bureau’s interpretation of the CFPA, states can enforce consent orders issued by the Bureau, and the limits applicable to the Bureau’s enforcement authority do not apply to states. The Interpretive Rule also may signal the Bureau’s apparent comfort with state regulators and state attorneys general bringing specific enforcement actions under CFPA without first consulting with the CFPB.

The CFPB also announced it would propose additional means to promote state attorney general enforcement of federal consumer financial law and ways to facilitate victim redress. The announcements are part of efforts by CFPB Director Rohit Chopra to support state enforcement activity.

The Interpretive Rule provides the following:

  • States can enforce the CFPA, including (1) the generic prohibition on unfair, deceptive, or abusive (UDAAP) conduct, (2) the provision making it unlawful for covered persons or service providers to violate any of the 18 federal consumer financial statutes listed in the CFPA, such as the Truth in Lending Act and Fair Debt Collection Practices Act, (3) any regulations it enacts under the CFPA, subject to some exceptions, and (4) consent orders and other final orders issued by the Bureau under sections 1053 and 1055 of the CFPA.
  • Unlike the limits imposed by the CFPA on the Bureau, states are not bound by the limits and thus can bring actions against real estate brokerages; retailers of manufactured or modular homes; accountants and tax preparers; attorneys engaged in the practice of law; persons regulated by a state insurance regulator; products or services that relate to specified employee benefit and compensation plans; persons regulated by a state securities commission; persons regulated by the Securities and Exchange Commission; persons regulated by the Commodity Futures Trading Commission; persons regulated by the Farm Credit Administration; and activities related to charitable contributions.
  • CFPB enforcement actions do not stop state actions. Nothing in the CFPA precludes complementary enforcement of federal consumer financial law by state regulators or state attorneys general.

Not mentioned in the Interpretive Rule are the CFPA’s notice requirements on when state officials can act under the CFPA, the CFPB’s ability to intervene, and whether CFPA remedies are available to states. By taking this action, the CFPB appears to be laying the groundwork for states to step in as first responders to alleged legal violations to fill in gaps in federal enforcement. Although not decisive, any future challenge to state authority may require a court to consider the Bureau’s interpretation of its organic statute with deference.

CFPB Says Using Complex Algorithms Is Not A Legal Defense For Discrimination

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The Consumer Financial Protection Bureau recently warned companies that, under federal anti-discrimination laws, they still owe consumers an explanation

of specific reasons for denying credit applications, even if they use complex algorithms to determine creditworthiness. The move is both a reminder of the agency’s continued focus on anti-discrimination enforcement as well as the enduring responsibility of companies using new technology in consumer interactions.

On May 26, the agency published a circular confirming its position that creditors’ adverse action notice requirements under the Equal Credit Opportunity Act apply when using artificial intelligence or other algorithm-based credit models-even if the company claims it does not fully understand how the technology it
uses to make those decisions works. Beyond denied credit applications, adverse actions can include closing or changing the terms of an existing credit account or denying a request to increase credit limits.

“Companies are not absolved of their legal responsibilities when they let a black-box model make lending decisions,” CFPB Director Rohit Chopra said in a press release.

“The law gives every applicant the right to a specific explanation if their application for credit was denied, and that right is not diminished simply because a company uses a complex algorithm that it doesn’t understand.”

The circular comes after the CFPB announced in mid-March that it would prioritize targeting unfair discrimination even if fair lending laws don’t apply, citing prohibitions against unfair, deceptive and abusive practices under the Consumer Financial Protection Act (CFPA). In a move signaling closer collaboration with states,
including state attorneys general, the CFPB is also empowering states to enforce provisions under the CFPA, recently publishing an interpretive rule clarifying that Section 1042 permits states to enforce any provision of the law. The interpretive rule notes a CFPB action would not preempt a parallel state action. Further evidence of federal-state partnerships is the fact that the CFPB has memoranda of understanding with nearly two dozen state attorneys general, all 50 states, the District of
Columbia and Puerto Rico.

In the end, creditors and lenders are still liable under federal law if they do not provide specific reasons for adverse actions, and a lack of understanding of how credit modeling technology works is not a legal defense for noncompliance. More broadly, companies are operating in a regulatory environment at the state and federal level that is increasingly focused on protecting consumers from algorithmic discrimination. Companies would be wise to review their algorithms for disparate
treatment and disparate impact.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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