Our June 6, 2011 Compliance Memorandum discussed an emergency amendment to the District of Columbia Municipal Regulations entitled “Foreclosure Mediation”, which was effective May 25, 2011. The Commissioner of the Department of Insurance, Securities, and Banking (the “Commissioner”) recently adopted the rules as final, effective December 30, 2011, with changes as discussed below. The Superintendent of Financial Services (the “Superintendent”) recently adopted amendments to the Banking Board Regulations (the “Regulations”) effective January 4, 2012, which eliminate the former exemptions from licensing as a mortgage banker or registration as a mortgage broker for consolidated subsidiaries of financial services organizations and for entities that deal solely in certain loan products.
District of Columbia Regulations
A link to each form that is included in this discussion is available on the Commissioner’s website at http://disb.dc.gov.
Notice of Default on Residential Mortgage
The following documents must be recorded within 2 business days of the date of mailing of the Notice of Default on Residential Mortgage (“Notice of Default”) with the District of Columbia Office of the Recorder of Deeds, unless good cause is shown to the Mediation Administrator:
- The Notice of Default, excluding all required attachments, except the Mediation Election Form, and any supplement to the Notice of Default; and
- The Mediation Election Form.
Completion of Notice of Default on Residential Mortgage Instructions
If there is more than one borrower, a Notice of Default must include all borrowers for the property subject to the residential mortgage. If the Notice of Default mailed by the lender provides the borrower with a mediation election period of more than 30 days, any applicable time period set forth in the Saving D.C. Homes from Foreclosure Temporary Amendment Act of 2011 (the “Act”) or in the rules will be suspended for the additional days granted by the lender.
Mailing of Notice of Default on Residential Mortgage
The original Notice of Default, including the attachments that must be included with the Notice of Default, which is mailed to the borrower, must be sent by the lender to the Mediation Administrator by regular first class mail within 2 business days of the date of mailing of the Notice of Default and by e-mail to DISB.mediation@dc.gov.
A Notice of Default submitted to the Mediation Administrator must be accompanied by the following:
- A recorded copy of the mortgage or deed of trust;
- A true copy of the note secured by the mortgage showing a proper chain of endorsements, or an Affidavit of Acknowledgment of Note Ownership or similar document signed by the foreclosing lender or its agent stating that the foreclosing lender is the holder of the note;
- A true copy of every recorded assignment of mortgage vesting of record the beneficial interest of the foreclosing lender;
- The name of the holder of the note;
- The location of the note; and
- A true copy of all pooling and servicing or other similar agreements regarding the residential mortgage.
A lender must provide a written explanation to the Mediation Administrator for the reason(s) that a document or information required to be submitted with a Notice of Default is not applicable to the residential mortgage. A lender must retain all evidence of mailing of a Notice of Default to each borrower for a period of 2 years. The date of the Affidavit of Mailing of Notice of Default included with the Notice of Default will be the same date as the mailing.
Receipt of Mediation Election Form and Loss Mitigation Application on Behalf of Lender
The Mediation Administrator must send upon request to the lender’s office that will review the Loss Mitigation Application and prepare the loss mitigation analysis, by e-mail at the e-mail address listed on the Lender Foreclosure Mediation Agent Contact Form, a copy of the Mediation Election Form, and Loss Mitigation Application received from a borrower.
Mediation Scheduling
A borrower who fails to bring all documents and information to mediation will not be entitled to participate in mediation (previously a borrower who failed to act in good faith was not entitled to participate in mediation).
A mediation must not exceed 2 sessions, each 2 hours in duration (previously 3 hours in duration), which may be scheduled concurrently. A mediation that is rescheduled, during the time of a scheduled mediation session will constitute one of the permitted two mediation sessions.
Information Required for Mediation
The lender or its representative must, at least 5 business days prior to the first mediation session, provide an electronic copy at DISB.mediation@dc.gov to the Mediation Administrator, and to each borrower, if applicable, of the following:
- An itemization of the amounts needed to cure and pay off the mortgage;
- Payment history records with respect to the mortgage;
- The results of the lender’s loss mitigation analysis;
- A copy of its documentation of its consideration of the various available options; and
- Any document to substantiate any claim by the lender that the borrower is not eligible for a loss mitigation option available from the lender or to be presented during mediation.
A lender or borrower must provide a written explanation to the Mediation Administrator of the reason(s) that a document or information required to be provided is not applicable to the residential mortgage and mediation.
Mediation Report
Unless a settlement agreement is executed, the Mediation Administrator will within 5 business days after receipt of the mediation report cancel a mediation and issue a Mediation Certificate if the borrower did not participate in the mediation in good faith.
Mediation Certificate
A Mediation Certificate will expire one year from the date of issuance unless extended for an additional six months. A foreclosure sale of property secured by a residential mortgage will be void if a lender files a Notice of Intention to Foreclosure on a Residential Mortgage without a Mediation Certificate.
A borrower will have the same rights to assert claims for defects in the recorded documents as the law provides for a defective Notice of Foreclosure Sale of Real Property or Condominium Unit and Notice of Intention to Foreclose on a Residential Mortgage. A Mediation Certificate will serve as conclusive evidence that all other provisions of the Act and the rules have been complied with and can be relied upon by a bona fide purchaser and a bona fide purchaser’s lender, their successors, or assigns. A borrower will not be barred from asserting a claim for fraud or monetary damages against the borrower’s lender.
A lender may request an extension of a Mediation Certificate that has not expired by filing a request for an extension of a Mediation Certificate with the Mediation Administrator, and sending a copy of the request for an extension of a Mediation Certificate to the borrower(s). A request for an extension of a Mediation Certificate must set forth each basis for which the lender seeks an extension and include all relevant facts and documentation, if applicable.
The Mediation Administrator may contact the lender or borrower(s) for information regarding a request for an extension of a filed Mediation Certificate.
New York Department of Financial Services Rule Part 39
The term “exempt organization” no longer includes any nonbanking subsidiary of a bank holding company.
The following terms were deleted from the Regulations: bank holding company, consolidated subsidiary, credit line mortgage, home improvement loan, and installment loan.
Entities that are no longer exempt from licensing or registration must file an application to become licensed or registered prior to April 3, 2012 and must become licensed or registered by July 2, 2012, or such later date as the Superintendent may approve for good cause.
An exempt organization will not be relieved of the advertising, solicitation, application, and commitment procedures and disclosure requirements set forth under the Licensed Mortgage Bankers’ law or the Regulations, and the penalties for violations of these requirements will apply.
The requirements for consolidated subsidiaries to commence business in New York have been deleted.
Loan servicers are no longer exempt from licensing or registration requirements.
The following provision has been deleted: Nothing in the Regulations or the Licensed Mortgage Bankers’ law will require the employees of an exempt organization to obtain a license or registration certificate when assisting the exempt organization in the performance of business activities.
A purchase money mortgage extended by a seller (previously or an organization controlled by a seller of residential real property) to buyers, where the seller is an individual, estate, or trust that sells not more than 3 properties in any 12-month period, provided that the seller has not constructed or acted as a contractor for the construction of a residence being sold is an exempt loan product. The following provision has been deleted: Included within this exemption are loans made by sponsors of cooperatives and condominium developments to unit purchasers, and loans made by organizations controlled by sponsors of cooperative and condominium developments to unit purchasers.