Mortgage Report

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The Pendulum Swings Back

In our Summer 2006 issue, we reported on a closely watched appeal in the First Circuit involving a class certification order in a TILA rescission case. On January 29, the First Circuit reversed the much-criticized class certification order in McKenna v. First Horizon Home

Loan Corp., No. 06-8018, 2007 U.S. App. LEXIS 1901 (1st Cir. Jan. 29, 2007).

Captive Re Wars

We have been tracking in these pages the ongoing investigations by state Attorneys General and insurance regulators into the relationships between mortgage lenders and their captive reinsurers. Recently, several new class actions have been filed against large mortgage lenders who have captive reinsurance programs.

FDIC Chimes In on Predatory Lending

On January 22, 2006, the FDIC issued its supervisory policy letter on predatory lending. The letter identified the characteristics of predatory lending as making unaffordable loans based on the assets of the borrower rather than on the borrower’s ability to repay an obligation, inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced,

and engaging in fraud and deception to conceal the true nature of the loan obligation or ancillary product from an unsuspecting or unsophisticated borrower.

Countrywide Settles HMDA-Based Inquiry

New York’s inquiry into Countrywide Financial Corp.’s fair lending practices has been settled with Countrywide’s agreement to set up a $3 million consumer education fund and other reforms.

Countrywide Cleared

More on the Countrywide front. In our last few issues, we have reported on some of the increased RESPA scrutiny various lending practices involving affiliates or subsidiaries have received from courts and regulators.

“CHARM” Those Borrowers

The Fed recently issued a revised CHARM booklet—that is, the Consumer Handbook on Adjustable-Rate Mortgages—for distribution to new borrowers.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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