31 Aug Federal Regulatory, State Legislative and Regulatory Update
This memo will address recent Regulation Z servicing amendments, those states that have adopted the Uniform Fiduciary Access to Digital Assets Act and recent amendments to Colorado title insurance rules.
81 Federal Register 49869 CFPB Revision to Periodic Statement Requirement in Reg. Z (effective July 29, 2016)
Regulation Z requires servicers to provide borrowers with periodic statements regarding their residential mortgage loan. They are exempt from this requirement, however, when the consumer is a debtor in bankruptcy. The Bureau of Consumer Financial Protection (“CFPB”) has amended Regulation Z to address this exemption in further detail.
As indicated, the requirement to provide consumers with periodic statements does not apply once a petition for bankruptcy is filed under Title 11 of the United States Code, commencing a case in which the consumer is a debtor.
With respect to any portion of the mortgage debt that is not discharged, a servicer must resume sending periodic statements as required within a reasonably prompt time after the next payment due date that follows the earliest of any of three potential outcomes in the consumer’s bankruptcy case: the case is dismissed, the case is closed, or the consumer receives a discharge. However, this requirement to resume sending periodic statements does not require a servicer to communicate with a consumer in a manner that would be inconsistent with applicable bankruptcy law or a court order in a bankruptcy case. To the extent permitted by such law or court order, a servicer may adapt the requirements in any manner believed necessary.
The periodic statement is not required for any portion of the mortgage debt that is discharged under applicable provisions of the U.S. Bankruptcy Code. If the consumer’s bankruptcy case is revived—for example, if the court reinstates a previously dismissed case, reopens the case, or revokes a discharge—the servicer is again exempt from the requirement indicated above.
When two or more consumers are joint obligors with primary liability on a closed-end consumer credit transaction secured by a dwelling subject to Regulation Z, the exemption applies if any of the consumers is in bankruptcy. For example, if a husband and wife jointly own a home, and the husband files for bankruptcy, the servicer is exempt from providing periodic statements to both the husband and the wife.
Uniform Fiduciary Access to Digital Assets Act
The Uniform Fiduciary Access to Digital Assets Act (the “Act”) has been enacted in various states, the following of which have previously been reported (with effective dates noted):
- Arizona (August 6, 2016)
- Colorado (August 10, 2016)
- Hawaii (July 1, 2016)
- North Carolina (June 30, 2016)
- South Carolina (June 3, 2016)
- Wisconsin (March 31, 2016)
The acts in each state have minor differences, but the primary focus of the Act is to define digital assets and the parties involved, which generally includes the following:
- Custodian (person or entity that carries, maintains, processes, receives or stores a digital asset of a user)
- User (person who has an account with a custodian)
- Designated recipient (person chosen by a user to administer digital assets of the user – can be chosen by online tool or in a document, such as a trust or will)
- Fiduciary (personal representative, executor, administrator, trustee, guardian, conservator, agent, or other person performing in a fiduciary role with regard to a user).
The state enactments set forth the requirements and obligations for a custodian to provide a designated recipient or fiduciary with access to the digital assets of a user, with slight variations from state to state. In some states, the act also amends the statutory power of attorney, if any, to include a power related to digital assets.
Instead of providing a separate detailed update for additional states, following is a list of states that have enacted the Act with the effective date of each noted:
- Washington Senate Bill 5029 (June 9, 2016)
- Michigan House Bill 5034 (June 27, 2016)
- Tennessee House Bill 774/Senate Bill 326 (July 1, 2016)
- Indiana Senate Bill 253 (July 1, 2016) – a distributee under a decedent’s estate has the same rights as a personal representative to access a digital asset of the decedent.
- Idaho Senate Bill 1903 (July 1, 2016)
- Florida Senate Bill 494 (July 1, 2016)
- Wyoming Senate Bill 34 (July 1, 2016)
- Illinois House Bill 4648 (August 12, 2016) – also amends the Illinois criminal law related to computer tampering to specify that a person who accesses a computer network in compliance with the Act is not committing a crime.
- Connecticut House Bill 5606 (October 1, 2016)
- Maryland House Bill 507 (October 1, 2016) – also amends the Maryland Statutory Form Personal Power of Attorney and Statutory Limited Power of Attorney to include a power related to digital assets.
- Nebraska Legislative Bill 829 (January 1, 2017)
- Oregon Senate Bill 1554 (January 1, 2017)
Colorado 3 CCR 702-8 (effective August 15, 2016)
The Colorado Division of Insurance (“Division”) of the Department of Regulatory Agencies recently issued amendments to its title insurance rules.
Of interest to residential mortgage lenders is Regulation 8-1-3, Title Insurance Standards of Conduct. Section 5.D is a partial, but not all-inclusive, list of acts and practices which the Division considers per se unlawful inducements under Colorado law. Item 21 in this list is a marketing arrangement commonly referred to as Marketing Services Agreement (MSA) between a title entity and settlement producer.
“Settlement producer” is defined as a person who is in a position to refer business that is incident to or a part of a settlement service and includes, among others, a person who lends money with an interest in real property as security.