Effective Communication with Consumers with Disabilities

The Americans with Disabilities Act (ADA) applies to certain entities providing goods and services to the public. In the context of interactions with the public, mortgage lenders have obligations to ensure that information communicated to consumers is accessible to individuals with disabilities. Businesses covered by the ADA must provide reasonable accommodations to consumers with communication disabilities when necessary. This may include providing a sign language interpreter during certain face-to-face meetings or providing loan documents in Braille or an electronic format that is accessible to a blind consumer who uses a screen reader.

The U.S. Department of Justice (DOJ) is increasingly enforcing its regulations regarding communications with consumers who have vision, speech, and hearing disabilities. The DOJ recently entered into settlement agreements with two banks regarding the use of relay calls by individuals with hearing disabilities. The DOJ required these entities to have in place an effective communication policy under the ADA that is available and accessible to individuals with disabilities, including through business websites, and to provide training to relevant employees on the policy. Businesses also have been required to ensure equal access to telephone services offered to the public by accepting telephone relay calls from individuals who may have hearing disabilities and to ensure that individuals who use a text telephone can be accommodated in a manner equivalent to individuals who use other telephone services. The DOJ also requires businesses to make written communications available in an alternate format where necessary to accommodate individuals with disabilities.

- Olabisi Ladeji Okubadejo and Juliana D. Gerrick

Assignee Not Liable Under TILA for Mortgage Servicer's Failure to Provide Payoff Statement, 11th Circuit Holds

The assignee of a residential mortgage loan is not liable under the Truth In Lending Act (TILA) for a loan servicer's failure to timely provide a payoff demand, the 11th Circuit recently held.

TILA requires that a mortgage lender or servicer send ''an accurate payoff balance within a reasonable time, but in no case more than seven business days'' after receiving the borrower's request. 15 U.S.C. § 1639g.  A creditor who fails to comply is liable for the remedies listed in § 1640(a), including actual and statutory damages, and attorney's fees and costs.

In Evanto v. Fed. Nat’l Mortg. Ass’n, the plaintiff alleged that he requested a payoff statement from his loan servicer, but the servicer failed to provide it. He sued the assignee owner of his loan, and the assignee successfully moved to dismiss the complaint. The 11th Circuit affirmed the dismissal, holding that the assignee owner had no liability for the servicer’s failure to provide the statement.

In a case of first impression, the Court noted that 15 U.S.C. § 1641(e) of TILA creates a cause of action against a voluntary assignee only for a violation of the act that is ''apparent on the face of the disclosure statement.'' Because the disclosure statement is provided prior to the loan being made, and because a payoff statement cannot be requested until after the loan is made, the Court reasoned that a failure to provide a payoff statement could not possibly be apparent on the face of the disclosure statement.  Therefore, the assignee could not be held liable.

The case is an important victory for lenders because a contrary result could have opened the door to potential plaintiffs serving strategic payoff demands following the assignment of a loan to generate potential claims under TILA.

Robert A. Scott, David J. Reed, and Justin Angelo

Survey Says: TRID Extends Processing Times and Limits Products Offered

The American Bankers Association (ABA) has released findings from its recent 2016 ABA TRID Survey focusing on the TILA/RESPA Integrated Disclosure (TRID) rule’s effect on the residential mortgage lending market. The findings tell the story of increased processing times, fewer products, and substantial closing delays.

The survey of 548 banker participants was conducted between February 1, 2016, and February 17, 2016, and included banks with an array of asset sizes from across a large geographic area. Despite this diverse pool of respondents, the responses relating to the effect of TRID were almost uniform:

  • Between 457 and 470 respondents reported additional staff training and compliance hours were required to ensure compliance

  • 50 percent of respondents have hired or plan to hire additional staff

  • 67 percent reported increased legal and regulatory costs

  • 77 percent reported increased delays in closing

  • 73 percent reported that their Loan Origination System (LOS) still has not been fully updated for the TRID rule.

  • 83 percent reported that they were manually bypassing LOS systems due to system limitations

  • A resounding 94 percent reported that they would like the current informal grace period for “good faith efforts” to be extended.
Survey participants reported between $300 and $1,000 in additional cost per transaction and 8 to 20 additional days required to close a loan. Based on results so far, whether the TRID rule, as currently structured, will produce the consumer benefits intended by the CFPB is questionable. The CFPB is continuing its efforts to provide clarity on the TRID rule, which we have written about here and here. However, without clear written guidance, as well as amendments to the rule to address issues noted by the industry, it is difficult to imagine the easing of compliance burdens.

- Matthew Smith and Richard J. Andreano, Jr.

CFPB Staff Presents TRID Rule Webinar

The Consumer Financial Protection Bureau (CFPB) staff presented an informational webinar on  March 1, 2016, to address several issues with the TILA/RESPA Integrated Disclosure (TRID) rule in connection with construction-to-permanent loans. These are loans that have a single closing and include a construction phase and a permanent phase. The presentation on construction lending follows a rather lackluster “fact sheet” covering the same topic on which we have previously written.

The webinar, "Know Before You Owe Mortgage Disclosure Rule – Construction Lending," focused on issues related to disclosing construction-to-permanent loans in the loan estimate, whether the construction and permanent phases are disclosed in a single loan estimate or separate loan estimates. Specific topics of discussion included, among others:

The purpose and product disclosure requirements

Completing the projected payments pable, particularly with regard to the interest-only payments made during the construction phase, whether a balloon payment must be disclosed at the end of such phase, and situations in which the construction phase is not a whole number of years

The treatment of construction holdbacks

The staff noted that they received many questions during the presentation that would be logged and that the questions asked would impact future presentations.

The fact that the entire presentation appeared to be scripted word-for-word was interesting considering the fact that the CFPB has refused industry requests to issue informal guidance in writing. If the presentation was in fact so scripted, why the CFPB will not issue a written transcript is puzzling and also frustrating to an industry that has asked for, and deserves, more definitive guidance.

- Matthew Smith and Richard J. Andreano, Jr.

Did you know?

NMLS Reinstatement Period Ended

by Wendy Tran

Indiana Amends the Term "Nationwide Multistate Licensing System and Registry" and Adds Prelicensing Education Requirements

The Indiana Department of Financial Institutions (Department) has amended the term Nationwide Mortgage Licensing System and Registry to Nationwide Multistate Licensing System and Registry or NMLSR. NMLSR is a multistate licensing system developed and maintained by CSBS and AARMR and owned and operated by the State Regulatory Registry, LLC, or any successor or affiliated entity, for the licensing and registration of creditors and mortgage loan originators and other persons in the mortgage and financial services industries. The term includes any other name or acronym that may be assigned to the system by the State Regulatory Registry, LLC, or by any successor or affiliated entity.

The Department also adds a 20-hour prelicensing education requirement in order to obtain a mortgage loan origination license for a person who fails to obtain a mortgage loan origination license issued by the department or a federal mortgage loan registration within three years from the date of initial completion of any approved prelicensing education course; or obtained a mortgage loan origination license issued by the department or a federal mortgage loan registration but did not renew the license or federal registration for at least three years.

These provisions became effective on March 1, 2016.

Kentucky Mortgage Loan Companies and Mortgage Loan Brokers Updates

The Kentucky Department of Financial Institutions (Department) has enacted an administrative regulation to establish that mortgage loan companies and mortgage loan brokers required to complete and submit a report of condition must use Form ML-11, NMLS Mortgage Call Report. The Form ML-11, NMLS Mortgage Call Report shall be submitted electronically to the Nationwide Mortgage Licensing System and Registry according to the schedule established and set forth at the NMLS Resource Center

The Department updated existing regulation to specify the application form needed for each type of exemption as follows:

  • If relying on an exemption as a nonprofit organization that has affordable housing as a primary purpose of its operations, the person shall file Form ML-9, Application for a Mortgage Loan Company or Mortgage Loan Broker Exemption (Non-Profit Exemption).
  • If relying on an exemption as a mortgage loan company or mortgage loan broker approved and regulated by the U.S. Department of Housing and Urban Development, the person shall file Form ML-10, Application for a Mortgage Loan Company or Mortgage Loan Broker Exemption (HUD Exemption). The application fee of $150 has been removed. 

In addition, the Department enacted an amendment which provides a process for armed forces service members who hold a license or registration in good standing to place a license or registration on inactive status during times of military service. As a result, there would be no cost for existing continuing education requirements. To request inactive status for a license or registration, a person shall complete Form ML-8, Request for Inactive Status Due to Military Service, and submit it along with proof of mobilization or deployment to the commissioner for approval.

These changes became effective on September 22, 2015.

Virginia Mortgage Lending and Mortgage Brokering Updates

Virginia amended its provisions regarding mortgage lending and/or mortgage brokering in the following ways:

  •  The State Corporation Commission (SCC) can issue or renew an ''inactive'' mortgage loan originator license for individuals that have met all requirements for licensure, except those pertaining to their surety bond. The license will be inactive until the SCC has updated the licensee’s status in the Nationwide Mortgage Licensing System and Registry (NMLS) to indicate that the licensee may engage in the business of a MLO. Until then, during the ''approved-inactive'' status, the licensee will be able to complete testing and education requirements in advance.
  • The requirement that a residential mortgage lender's or broker's disclosure statement state that all the loan terms not legally locked in are subject to change until settlement and qualifies the requirement to describe when the interest, points, and fees will be locked in to those loans for which such terms will be locked in has been removed. Instead, the disclosure requirements will conform to the TILA-RESPA Integrated Disclosure rule, effective October 3, 2015, requiring that closing disclosures that reflect the actual loan terms be provided to the consumer no later than three business days before consummation of the loan.
  • Mortgage company and branch licenses issued by the SCC expire at the end of each calendar year, unless renewed.
  • Instead of annual reporting, mortgage company and branch licensees must now file periodic reports with the Commissioner of Financial Institutions or the Nationwide Mortgage Licensing System and Registry.
  • A licensed mortgage lender or mortgage broker is no longer required to prominently post his or her license in each office of the licensee. Instead, a licensee must display proof of licensing upon request and prominently display it at any location where the licensee conducts business in person with a borrower or prospective borrower.
These provisions become effective on July 1, 2016.

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.