Commercial / Real Estate Lending

Yesterday, in Sheen v. Wells Fargo (S258019), the California Supreme Court resolved an important issue for the mortgage servicing industry. The court unanimously held that lenders owe no tort duty to process, review, and respond to a borrower’s loan modification application.
Continue Reading The California Supreme Court Rules that Lenders Have No General Tort Duty to Process, Review, and Respond to a Borrower’s Application for a Loan Modification

If Mark Zuckerberg is to be believed, the Metaverse is the next step in our digital evolution, a  virtual reality space where users can interact with a computer-generated environment and socialize among user-created avatars.

And it’s already here.

The Metaverse is a new virtual frontier that combines many aspects of the virtual world we already know: social media, Zoom, online gaming, augmented reality, virtual reality, blockchain, and cryptocurrencies. The Metaverse allows its users to interact with each other in ways that mimics real-world interaction. Users can virtually surf, race, go to a bar, or engage in combat – the possibilities are endless.

Now, you can even buy land in this virtual frontier.

Just as in the real world, you can finance your virtual property with a virtual mortgage. In this virtual world, can virtual mortgages be foreclosed and how can loans be enforced? This new paradigm implicates both loan enforcement and bankruptcy.

Let us break down a few of the basics.Continue Reading Mining the Metaverse: Prospecting the Virtual Real Estate Boom and Implications For Lenders

This article was originally published on Law360

The COVID-19 pandemic has caused, and continues to cause, massive humanitarian and economic upheaval with no clear end in sight. Borrowers are already scrambling to increase liquidity from their banks. Some will continue to operate openly, honestly, and in the best interests of the company and its stakeholders. Others will not.

Notwithstanding that lenders and governments are attempting to mitigate the crisis’s effects,[1] loan defaults are anticipated to be increasing, and accordingly, so will loan enforcement lawsuits.

In lawsuits stemming from the COVID-19 crisis, where the default was caused by more than just a lack of money—fraud, mismanagement, neglect, waste, misconduct—litigants, and the courts, may increasingly turn to equity receivers to help protect collateral and manage struggling businesses.
Continue Reading Illinois Courts May Increasingly Embrace Equity Receiverships

As all lenders know by now, the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”) guaranteed Paycheck Protection Program (“PPP”) loans are the key piece of economic relief for small businesses during the COVID-19 crisis. Yet, in the rush to get those loans flowing into the economy, the Small Business Administration (“SBA”) issued an interim regulation that raises substantial unanswered questions about participating lenders’ compliance policies. Business Loan Program Temporary Changes; Paycheck Protection Program (proposed Apr. 2, 2010) (to be codified at 13 C.F.R. pt. 120). Those questions are starkly different yet similarly important for banks and other traditional lending institutions accustomed to operating under the Bank Secrecy Act (“BSA”) and those nonbank lenders who have never been under the BSA’s purview.

Banks and other traditional lending institutions already have AML (Anti-Money Laundering) and KYC (Know Your Customer) policies in place. For them, the SBA’s interim regulation seems, at first glance, like nothing earthshattering; it simply requires these lenders “to follow their existing BSA protocols.” In this crisis, though, nothing is as it always was. The urgency of getting these loans approved plus the importance of social distancing makes verifying the applicant’s information no easy task. Although the SBA’s regulation says that “PPP loans for existing customers will not require re-verification under applicable BSA requirements, unless otherwise indicated by the institution’s risk-based approach to BSA compliance,” the question arises whether a PPP loan application for an existing customer is considered a new account for FinCEN Customer Due Diligence (“CDD”) Rule purposes. Fortunately, the SBA and the Treasury Department issued revised FAQs addressing that question and explaining that, for PPP loans to existing customers, lenders do not have to re-verify information that had been previously provided and verified and do not even have to collect and verify missing information in the first instance “unless otherwise indicated by the lender’s risk-based approach to BSA compliance.” Paycheck Protection Program Loans Frequently Asked Questions (FAQs) (Apr. 8, 2010). We expect the final SBA regulation to be updated to reflect this important clarification.
Continue Reading Compliance for PPP Loans: Different Questions for Different Lenders

This article originally appeared in the November 2018 edition of National Mortgage Professional Magazine.

In the fallout from the 2008 financial crisis, courts across the United States were inundated with litigation challenging the legitimacy of mortgages, notes, and the records purporting the transfer or assign them. Such claims included asserting that endorsements of promissory notes were not enforceable, claiming assignments of mortgages were executed without authority, and allegations that the note, mortgage, or associated disclosure documents were neither presented to nor signed by the borrowers. In recent years, as the economy appears to have improved, much of this litigation has died down. However, it does not take much imagination to assume that if and when the next economic downturn hits, some borrowers may again find themselves in default on their mortgage obligations, and in turn may seek to challenge the enforceability of those agreements. 
Continue Reading What’s Past is Prologue: Applying Lessons from the Financial Crisis to the Future of eMortgage and eNote Litigation

It has been almost easy to forget that the PHH v. CFPB case started life as an appeal of an enforcement action taken by the Consumer Financial Protection Bureau (CFPB) for purported violations of the Real Estate Settlement Procedures Act (RESPA).  Technical RESPA issues quickly took a back seat in public discourse to the juicier issue in the case—whether the structure of the CFPB itself was unconstitutional. (Among the factors heightening the drama was the fact that, post-election, the new leadership at the Department of Justice reversed the Obama-era course in the litigation, directing its lawyers to argue against the CFPB and contend that the CFPB was unconstitutional.)

In the latest turn in the case, in a January 31 opinion, the US Court of Appeals for the DC Circuit brought the RESPA issues back to the fore — ironically, in an opinion that does not substantively discuss the RESPA issues. 
Continue Reading Latest PHH v. CFPB Ruling Brings RESPA and CFPB Enforcement Approaches Back in Focus

2018 has a tough act to follow, after a 2017 full of momentous developments—starting with a new Administration and wrapping up with a showdown over the right to serve as Acting Director of the Consumer Financial Protection Bureau (CFPB) (a fight that continues as of this writing, as discussed below).

But 2018 is unlikely to be a quiet year. In addition to developments in the CFPB leadership battle and other litigation, the year is expected to bring developments such as effective and compliance dates for major regulations on data protection, Bank Secrecy Act/anti-money-laundering (BSA/AML), mortgage servicing, and other topics, and could bring changes in supervisory focus at multiple federal agencies. 
Continue Reading Fasten Your Seatbelts: Are You Ready for Another Eventful Year?

The Consumer Financial Protection Bureau (CFPB) proposed Friday to temporarily relax the scope of upcoming changes to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA), by raising one threshold for HMDA reporting. Under Regulation C amendments previously finalized and scheduled to take effect in 2018, HMDA reporting requirements would apply to any financial institution originating 100 or more open-end home equity lines of credit (HELOCs) per year over the prior two years. Under the new proposal, the HMDA reporting requirements would apply through calendar year 2019 to institutions that originated 500 or more HELOCs per year over the prior two years. In the meantime, the CFPB would conduct further studies to help determine whether to permanently change this threshold.
Continue Reading CFPB Offers Smaller HELOC Lenders Temporary Relief from HMDA Coverage; HMDA Changes Still Loom In the Future

On May 10, 2017, the Consumer Financial Protection Bureau (CFPB) announced steps toward issuing regulations to impose data reporting requirements on the small business lending industry, a rulemaking required under the Dodd-Frank Act of 2010. To help it draft a proposed rule, the CFPB requested public feedback through a Request for Information (RFI) Regarding the Small Business Lending Market. At the same time, the CFPB released a white paper, Key Dimensions of the Small Business Lending Landscape, discussing the data currently available regarding small business lending.
Continue Reading CFPB Asks for Input on Small Business Lending Data Collection; Agency Sees Small Business As Fair Lending Priority

America’s infrastructure received an overall grade of “D+” in The American Society of Civil Engineers Report Card for America’s Infrastructure, most recently published in 2013 (an updated Report Card is expected to be released on March 9, 2017). Grades for individual infrastructure categories ranged from a high of a “B-“ for solid waste to a low of “D-“ for inland waterways and levees. Other infrastructure sectors all received grades between a “D” and a “C+”. The infrastructure investment needed from 2013 through 2020 was estimated by the American Society of Civil Engineers to be approximately $3.6 Trillion, with a projected deficit of approximately $1.6 Trillion. Therefore, it is not surprising that during the presidential election campaign both major parties put forth programs to expand and repair infrastructure in the U.S.
Continue Reading Infrastructure Investment Under the Trump Administration