11 Nov Connecticut Legislative Update
Our May 27, 2014 Compliance Memorandum discussed the provisions of House Bill 5353, effective May 14, 2014, which addressed the confidentiality provisions of the Nationwide Mortgage Licensing System and Registry (“NMLSR”) as well as the foreclosure mediation provisions, and our September 5, 2014 Compliance Memorandum discussed the provisions of House Bill 5353, effective October 1, 2014, which addressed the mortgage servicer licensing provisions. The provisions of House Bill 5353 addressed in this Memorandum are effective January 1, 2015 and further amend the mortgage servicing laws (the “laws”).
Upon assignment of servicing rights on a residential mortgage loan, the mortgage servicer must disclose to the borrower:
- Any notice required by the Real Estate Settlement Procedures Act (“RESPA”) and its regulations; and
- A schedule of the ranges and categories of its costs and fees for its servicing-related activities, which must comply with state and federal law and, if the disclosure is made by a mortgage servicer, must not exceed those reported to the Banking Commissioner (Commissioner”).
A mortgage servicer must comply with all applicable federal laws and regulations relating to mortgage loan servicing, including, but not limited to, RESPA, the Truth-in-Lending Act, and their regulations. In addition to any other remedies provided by law, a violation of any such federal law or regulation will be deemed a violation and a basis upon which the Commissioner may take enforcement action.
A mortgage servicer must maintain and keep current a schedule of fees that it charges borrowers for its servicing-related activities. The schedule must identify each fee, provide a plain English explanation of the fee, and state the amount of the fee or range of amounts or, if there is no standard fee, how the fee is calculated or determined. A mortgage servicer must make its schedule available to the borrower or the borrower’s authorized representative upon request.
A mortgage servicer must not impose any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period. Late charges must not be:
- Based on an amount greater than the past due amount;
- Collected from the escrow account or from escrow surplus without the approval of the borrower; or
- Deducted from any regular payment.
A mortgage servicer must not:
- Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person.
- Engage in any unfair or deceptive practice toward any person or misrepresent or omit any material information in connection with the servicing of the residential mortgage loan, including, but not limited to, misrepresenting the amount, nature, or terms of any fee or payment due or claimed to be due on a residential mortgage loan, the terms and conditions of the servicing agreement, or the borrower’s obligations under the residential mortgage loan.
- Obtain property by fraud or misrepresentation.
- Knowingly misapply or recklessly apply residential mortgage loan payments to the outstanding balance of a residential mortgage loan.
- Knowingly misapply or recklessly apply payments to escrow accounts.
- Place hazard, homeowner’s, or flood insurance on the mortgaged property when the mortgage servicer knows or has reason to know that the borrower has an effective policy for the insurance.
- Fail to comply with the requirements for providing payoff statements.
- Knowingly or recklessly provide inaccurate information to a credit bureau, thereby harming a borrower’s creditworthiness.
- Fail to report both the favorable and unfavorable payment history of the borrower to a nationally recognized consumer credit bureau at least annually if the mortgage servicer regularly reports information to a credit bureau.
- Collect private mortgage insurance beyond the date for which private mortgage insurance is required.
- Fail to issue a release of mortgage in accordance with Connecticut law.
- Fail to provide written notice to the borrower upon taking action to place hazard, homeowner’s, or flood insurance on the mortgaged property, including a clear and conspicuous statement of the procedures by which the borrower may demonstrate that he or she has the required insurance coverage and by which the mortgage servicer must terminate the insurance coverage placed by it and refund or cancel any insurance premiums and related fees paid by or charged to the borrower.
- Place hazard, homeowner’s, or flood insurance on a mortgaged property, or require a borrower to obtain or maintain such insurance, in excess of the replacement cost of the improvements on the mortgaged property as established by the property insurer.
- Fail to provide to the borrower a refund of unearned premiums paid by a borrower or charged to the borrower for hazard, homeowner’s, or flood insurance placed by a lender or the mortgage servicer if the borrower provides reasonable proof that the borrower has obtained coverage such that the forced placement insurance is no longer necessary and the property is insured. If the borrower provides reasonable proof that no lapse in coverage occurred such that the forced placement was not necessary, the mortgage servicer must promptly refund the entire premium.
- Require any amount of funds to be remitted by means more costly to the borrower than a bank or certified check or attorney’s check from an attorney’s account to be paid by the borrower.
- Refuse to communicate with an authorized representative of the borrower who provides a written authorization signed by the borrower, provided the mortgage servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the borrower.
- Conduct any business covered by the laws without holding a valid license or assist or aid and abet any person in the conduct of business without a valid license.
- Negligently make any false statement or knowingly and willfully make any omission of a material fact in connection with any information or reports filed with a governmental agency on the NMLSR or in connection with any investigation conducted by the Commissioner or another governmental agency.
- Collect, charge, attempt to collect or charge or use or propose any agreement purporting to collect or charge any prohibited fee.