Mortgage Banking & Consumer Financial Products Group. Highlight of 2010 Activities

Transcription

1 Mortgage Banking & Consumer Financial Products Group Highlight of 2010 Activities

2 K&L Gates maintains one of the most prominent financial services practices in the United States with more than 150 U.S.-based lawyers representing diversified financial services institutions and their affiliated service providers. Our practice is at once regional, national, and international in scope, cutting edge, complex, and dynamic. Amidst the constant stream of negotiating transactions, providing regulatory counseling, defending clients in litigation or government enforcement actions or advocating on the policy side, our lawyers try to find time to educate and train clients on the major industry issues of the day. We do it through webinars, seminars, client alerts, and we remain available to do on-site training. Below is a sample of the types of educational endeavors the lawyers have undertaken in A go-to firm for the most high-profile, complex and important cases in the consumer area. - Chambers 2010 The New Fannie Mae, Freddie Mac, and FHLB Whistleblower Rule, by Kristie D. Kully. Alert, February 1, The new Federal Housing Finance Agency, which regulates Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, issued its final rule to require those entities to report to the Agency loan fraud or possible fraud in connection with all their products and programs. The rule implements a provision in the Housing and Economic Recovery Act of 2008, which provides that those government sponsored entities (and their officers, directors, attorneys, and accountants) are protected from liability when they report such mortgage fraud in good faith. This client alert describes the rule, which becomes effective February 26, Webinars: Top Takeaways From the New GFE and HUD-1, presented by Phillip L. Schulman and Holly Spencer Bunting. January 26, Wholesale Price Monitoring in the Age of Tough Enforcement, presented by Melanie H. Brody. April 8, Complying With the New Gift Card Rules, presented by David L. Beam and Steven M. Kaplan. April 13, New FHA Regs Cause Acid Indigestion, presented by Phillip L. Schulman and Krista Cooley. May 13, HUD Interpretive Rule - Are Marketing Agreements Under Siege?, presented by Phillip L. Schulman and Holly Spencer Bunting. September 14, New Appraisal Requirements Affect Lenders and Their AMCs, presented by Phillip L. Schulman, Nanci L. Weissgold, Holly Spencer Bunting, and Kerri M. Smith. November 30, Alerts: Opening the Fair Lending Enforcement Floodgates?, Obama Administration Announces New Fair Lending Unit at DOJ; Vows Vigorous Investigation of Mortgage Lending and Servicing Practices, by Paul F. Hancock, Melanie H. Brody, and David G. McDonough, Jr. Mortgage Banking & Consumer Financial Products Alert, January 27, After three months in office, Assistant Attorney General for Civil Rights Tom Perez recently announced an aggressive push by the Department of Justice into combating discriminatory and fraudulent lending and servicing practices. With the symbol of the newly created Fair Lending Unit standing forefront, mortgage lenders and servicers can expect to be on the receiving end of more numerous and forceful reviews by the Department, including investigations that appear to merge fair lending and consumer protection principles. Indeed, overlaying the DOJ s initiative appears to be the belief that they will now be able to shed the constraints that hindered fair lending investigations during the George W. Bush Administration, as well as partner more closely with state and local enforcement officials for joint reviews of lenders and servicers. HUD s Adventures in Wonderland, by Costas A. Avrakotos and Kerri M. Smith. Mortgage Banking & Consumer Financial Products Alert, February 8, You re late, you re late, for a very important date; But wait, but wait, there s time for you to state Your thoughts, your views on HUD s rule in the SAFE Act debate. The comment period for HUD s Proposed Rule on SAFE Act compliance ends February 16, The Proposed Rule sets out HUD s criteria for determining the states compliance with the SAFE Act. If, in the rush of year-end festivities, you missed HUD s proposal when it was published in the Federal Register in December, or should you be planning to submit comments to HUD s latest adventures in rulemaking by the due date, we offer some highlights and thoughts for your consideration. Mortgage Tax under Fire in New York, by Eli R. Mattioli and Sarah P. Kenney. Mortgage Banking & Consumer Products Alert, February 19, For many years, the New York State Department of Taxation and Finance has levied recording taxes on mortgages granted to secure loans made by federal credit unions ( FCUs ) to their members. New York has done so despite wide recognition that FCUs, as federal instrumentalities, are immune from state taxation under both the Supremacy Clause of the United States Constitution and the Federal Credit Union Act of 1934, as amended (the FCU Act ). However, until recently, this New York tax has gone unchallenged in the courts. This alert discusses the tax, FCUs exemption from taxation, and pending litigation which challenges Group Highlight of 2010 Activities 2

3 the constitutionality and legality of the tax as applied to FCUs. Federal Reserve Board Finalizes Gift Card Rules, by Steven M. Kaplan and David L. Beam. Alert, March 25, If your company issues or sells gift cards or gift certificates, then you might be subject to newlyissued Federal Reserve Board rules that go into effect on August 22, These rules impose a number of restrictions on gift cards and gift certificates, and also require issuers and sellers to provide certain disclosures. Violations can lead to private civil liability (including in class actions) and enforcement actions by the Federal Trade Commission or federal banking regulators. And since everyone will be rushing to replace their card inventories by the effective date, you might want to get the order in to your vendor soon. Wholesale Lender Held Responsible for Broker Pricing in New DOJ Settlement, by Melanie H. Brody and Rebecca Lobenherz. Alert, March 31, Wholesale residential mortgage lenders should be held responsible for broker fee disparities, according to the first mortgage loan price discrimination case against a wholesale mortgage lender brought by the United States Department of Justice ( DOJ ) in over a decade. The settlement, between the DOJ and subsidiaries of American International Group, Inc., is noteworthy because it confirms that the Obama administration will seek to hold wholesale mortgage lenders responsible for broker fee differences across borrower groups. Still Confused About The New RESPA Rules? HUD Issues a New Round of Frequently Asked Questions, by Phillip L. Schulman and Holly Spencer Bunting. Mortgage Banking & Consumer Financial Products Alert, April 14, Even though nearly 100 days have passed since use of the new Good Faith Estimate ( GFE ) and HUD-1 Settlement Statement ( HUD-1 ) forms became required under the Real Estate Settlement Procedures Act ( RESPA ), the mortgage and title industries continue to grapple with implementation of the forms and HUD s RESPA regulations. In response, the U.S. Department of Housing and Urban Development ( HUD or Department ) continues to provide guidance to the settlement service industries on the new RESPA regulations and disclosure forms through a series of Frequently Asked Questions ( FAQs ). In fact, on Monday, April 5, 2010, HUD posted an updated version of its FAQs to its RESPA website, which now number into the hundreds of questions/answers and comprise 62 pages. To HUD s credit, these updated FAQs suggest that the Department is considering many of the practical problems that have resulted from the forms and takes to heart the issues raised by settlement service providers. However, that means that HUD has changed its interpretation of certain requirements and issued new FAQs, which are sure to raise additional questions. It, therefore, is imperative for the mortgage and title industries to pay close attention to this April 2010 version of HUD s RESPA FAQs. This client alert summarizes the highlights of this round of updates to the RESPA FAQs. New FHA Approval Regulations: HUD Weighs In On Risk Management, by Phillip L. Schulman, Krista Cooley. Mortgage Banking & Consumer Financial Products Alert, April 27, The U.S. Department of Housing and Urban Development ( HUD or Department ) has finalized rules that significantly restrict small and medium-sized lenders from participating in Federal Housing Administration s ( FHA ) mortgage insurance programs. While few can argue with the goal of strengthening the financial soundness of the FHA programs, the method of achieving this goal most certainly will limit the geographic access of FHA lending and wreak havoc on the ability of small businesses to provide FHA loans. Multi-State Mortgage Examinations are Coming. You Need to be Ready, by Costas A. Avrakotos, Phillip L. Schulman, and Nanci L. Weissgold. Mortgage Banking & Consumer Financial Products Alert, April 30, On March 24, 2010 the Conference of State Bank Supervisors ( CSBS ) and the American Association of Residential Mortgage Regulators ( AARMR ) announced a 35 state settlement with one mortgage company following an examination led by the Massachusetts Division of Banks of compliance with federal and state consumer protection laws. The violations that served as the basis for the settlement involved federal requirements (failing to report loans as required by the Home Mortgage Disclosure Act ( HMDA )) and the penalties imposed ($1.25 million) were a wake-up call. This settlement is significant as it represents one of the first joint actions of state banking departments against a state regulated mortgage lender. Wrong Call on Call Reports, by Costas A. Avrakotos. Mortgage Banking & Consumer Financial Products Alert, May 14, Based on an obscure and ambiguous provision of the Federal Secure and Fair Enforcement for Mortgage Licensing Act, the state mortgage finance regulators will call for a new set of far-reaching reporting obligations for large and small licenses. The proposed NMLS Mortgage Call Report will significantly increase the regulatory burden on licensees and jeopardize license renewals. With the NMLS still accepting comments until May 19th, licensees should let the state regulators know that they have dialed a wrong number on call reports. Lind v. New Hope Property, LLC: No Hope for Implausible Claims under Iqbal, by R. Bruce Allensworth, Andrew C. Glass, Ryan M. Tosi, and Nicole D. Newman. Mortgage Banking & Consumer Financial Products Alert, May 18, Following the United States Supreme Court s decision in Ashcroft v. Iqbal, legal commentators queried how much protection against frivolous lawsuits the decision would actually afford to institutional defendants, including the financial services industry. The Iqbal Court articulated a more rigorous pleading standard that requires plaintiffs to state both well-pleaded facts and a plausible claim for relief. The results are now in: the Iqbal standard has afforded meaningful relief early on in litigation for defendants that are only tangentially related to the core allegations in a complaint. A recent decision in an action from the United States District Court for the District of New Jersey, Lind v. New Hope Property, LLC, arising out of a mortgage foreclosure rescue program, is an example of such a case. The Court held that notwithstanding the plaintiffs lengthy and detailed complaint, the conclusory and generalized Group Highlight of 2010 Activities 3

4 allegations against the mortgage banking defendants failed to satisfy the Iqbal standard and must be dismissed with respect to those defendants. The Senate Moves to Reform Mortgage Loan Origination and Underwriting Practices, by Laurence E. Platt, Kristie D. Kully, and Kerri M. Smith. Mortgage Banking & Consumer Financial Products Alert, May 19, The effort of Congress to revise the way in which residential mortgage loan originators are compensated and loans are underwritten is close to fruition as a result of a recently enacted amendment to the Senates large, proposed financial reform bill, the Restoring American Financial Stability Act of While it appears that tighter restrictions on loan originator compensation and underwriting standards may be on their way, it is unclear whether those restrictions will solve the nations financial crisis and foreclosure problems or instead will impose steep obstacles to consumers obtaining mortgage loans and will discourage vigorous, private participation in the residential finance industry. Mistaken Legal Judgment No Longer a Defense to FDCPA Claims, by Steven M. Kaplan, Brian M. Forbes, Gregory N. Blase, and David G. McDonough, Jr.. Mortgage Banking & Consumer Financial Products, May 21, In a decision that has largely flown under the radar screens, the United States Supreme Court recently ruled that the bona fide error defense in the Fair Debt Collection Practices Act may not be relied upon to excuse an error in legal judgment. The decision in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, reversed a decision of the Sixth Circuit Court of Appeals and overruled similar holdings in two other circuits. In reaching its decision, the Court resolved a circuit split and offered its first opinion on the interpretation of the FDCPA in several years. Class Arbitration Waivers: Silence Reigns In Stolt-Nielsen, But The Courts Have More To Say, by R. Bruce Allensworth, Andrew C. Glass, Robert W. Sparkes, III and Roger L. Smerage. Alert, June 15, The United States Supreme Court s recent opinion in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. ---, No (issued April 27, 2010), decided whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq. Slip op. at 1. In a five to three decision, the Court held that a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. Id. at 20 (emphasis in original). Although the Court found that an agreement which is silent on the issue of class arbitration is not sufficient evidence that the parties intended to submit to class arbitration, the Court is not through examining class arbitration waiver issues. This article discusses Stolt-Nielsen and future developments that are likely to follow. HUD s RESPA Interpretive Rule: It s Time to Reevaluate Your Marketing Arrangements, by Phillip L. Schulman and Holly Spencer Bunting. Alert, July 1, The payment of transactionally-based marketing fees by home warranty companies to real estate brokers and agents has been attacked by the U.S. Department of Housing and Urban Development ( HUD or Department ) pursuant to an interpretive rule published on June 25, 2010 under the Real Estate Settlement Procedures Act. By its terms, the interpretive rule appears to be limited to service arrangements where home warranty companies pay real estate brokers and agents on a per-transaction basis for the performance U.S. News Best Law Firms Rankings Recognize K&L Gates with Most First-Tier Rankings of Any Firm (2010) of administrative and marketing services related to the sale of home warranty products. But, in crafting its interpretation, HUD fails to identify the particular facts upon which it relies, which raises questions about the scope of the rule and whether HUD is trying to send a message about its view of marketing agreements across settlement service industries. Accordingly, this client alert summarizes HUD s interpretive rule and identifies some of the issues that could have significant implications for real estate brokers and agents, home warranty companies, and, if HUD seeks to extend the interpretive rule s principles beyond transactionallybased marketing arrangements, other settlement service providers. Assignee Liability Is Extended by Massachusetts: Will Others Follow Suit?, by Philip M. Cedar, Jonathan D. Jaffe, and Laurence E. Platt. Mortgage Banking & Consumer Financial Products Alert, July 27, From the people that brought us assignee and servicer responsibility for presumptively unfair residential mortgage loans, the Massachusetts Attorney General (the Attorney General ) has relied on the common law of aiding and abetting to settle a dispute with Morgan Stanley & Company, Incorporated ( Morgan Stanley ) arising out of the origination of presumptively unfair subprime mortgage loans by New Century Financial Corporation ( New Century ). The settlement with the Attorney General, which it announced on June 24, 2010, calls for the payment of $102 million to Massachusetts borrowers, the State Treasury and two of the state s investment funds. It also requires Morgan Stanley to adopt certain practices in its financing, purchasing and securitizing of subprime loans in the future. The allegations and remedial relief in the settlement are likely to give heartburn to warehouse lenders, loan purchasers, conduit sponsors and securitizers. Nevertheless, the settlement is reflective of the current regulatory climate and consistent with the sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank or the Act ) which extend liability to non-primary actors who knowingly or recklessly participate in a violation of many consumer finance and securities laws. Group Highlight of 2010 Activities 4

5 Federal Banking Agencies Issue Final SAFE Act Rule, by Kristie D. Kully, Costas A. Avrakotos, and Kerri M. Smith. Mortgage Banking & Consumer Financial Products Alert July 30, Within a week of officially learning that their authority to issue regulations to implement the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 ( SAFE Act ) will be transferred to the new Bureau of Consumer Financial Protection ( Bureau ), the federal banking agencies released their final rule implementing the registration requirement for mortgage loan originators employed by financial institutions and the owned-and-controlled subsidiaries those agencies regulate. No April Fools : April 1 Effective Date for Federal Reserve Board s Rules on Loan Originator Compensation, by Kristie D. Kully and Jonathan D. Jaffe. Mortgage Banking & Consumer Financial Products Alert, September 8, In spite of the new statutory restrictions on mortgage loan originator compensation in the Dodd-Frank Wall Street Reform and Consumer Protection Act, or perhaps because of them, the Federal Reserve Board issued a final rule on the topic, with an April Fools effective date. In August 2010, the Board released several rules in its race with Congress to turn the Truth in Lending Act and Regulation Z into a powerhouse of residential mortgage regulation. Among those releases was the Board s final rule prohibiting certain mortgage loan originator compensation practices. The final rule (and the compensation restrictions in the Dodd-Frank Act) will result in a sea change in the way that loan officers and mortgage brokers will be compensated, and likely a similar sea change in the mortgage brokering and banking businesses. The prospects of implementing the new provisions by April 1, 2011 are daunting. Unfortunately, as much as we might like to think otherwise, the loan originator compensation final rule is no April Fools joke. The New Rules of the Road: New York Banking Department Finalizes Regulations on Mortgage Loan Servicer Business Conduct, by Nanci L. Weissgold and Morey E. Barnes Yost. Alert, October 4, The rules of the road have changed for mortgage loan servicers doing business in New York state. Several months after their initial introduction, the New York State Banking Department (the Department ) has issued significant and substantial business conduct rules for servicers. Part 419 of the Superintendent s Regulations ( Part 419 or the Rules ), addressing topics from fees to disclosures to loss mitigation, become effective on an emergency basis on October 1, The FTC Pursues Its Own Seat at the Table of Fair Lending Enforcement, by Paul F. Hancock, Melanie H. Brody, and Melissa S. Malpass. Alert, October 5, The Federal Trade Commission s ( FTC or Commission ) recent mortgage loan pricing settlements reveal a new, aggressive approach to fair lending enforcement, thus creating an even greater lack of analytical continuity across government agencies and making it more difficult for even the most well-intentioned lenders to properly analyze loan pricing for fair lending compliance. On September 17, 2010, the Commission announced a settlement with California-based regional mortgage lender Golden Empire Mortgage, Inc. (the company ) and its owner in his individual status. The settlement involved a $1.5 million payment for consumer redress to resolve claims that the company and its owner violated the Equal Credit Opportunity Act ( ECOA ) by discriminating against Hispanic borrowers in the pricing of home mortgage loans. Loan Holders are from Venus and Plaintiffs are from MERS, by R. Bruce Allensworth, Brian M. Forbes, and Gregory N. Blase. Mortgage Banking & Consumer Financial Products Alert, October 15, Among the many tools now being used by the antihome foreclosure advocates is an attack on the role of Mortgage Electronic Registration Systems, Inc. ( MERS ) in the residential mortgage market in the United States. They question the ability of MERS to act as a nominee of the lender and any assignee on a mortgage or deed of trust, yet a substantial body of law upholding MERS s role as nominee has already developed. Allegations that the formation and/or operation of the MERS system is somehow unlawful and/or fraudulent have been rejected by virtually every court to have considered the issue, including in a multidistrict litigation proceeding established to adjudicate claims challenging the formation and operation of the MERS system. And for the loan holders and loan servicers that have utilized MERS over the years as an innovation in the real estate finance industry to reduce unnecessary paperwork, these allegations sound like they are coming from a different planet. DC AG Seeks to Stop Home Loan Foreclosures Based on Incomplete Legal Analysis, by Laurence E. Platt and Kerri M. Smith. Alert, November 1, The latest attack on the role of Mortgage Electronic Registration Systems, Inc. (MERS) in the residential mortgage market has been levied by the District of Columbias Attorney General (AG), Peter Nickles, in a Statement of Enforcement Intent (the Statement) dated October 27, Claiming that commencing a home loan foreclosure is a deceptive trade practice if the security interest of the current noteholder is not recorded in the land records, the AG threatened to enjoin foreclosure proceedings, to secure restitution for injured homeowners and to seek appropriate civil penalties against noteholders. The use of the MERS private registry to track transfers of mortgage interests is insufficient, he claims. As we detail below, we believe the Statement provides an incomplete recitation of the District of Columbia (DC) laws pertaining to foreclosure and a more fulsome review of such laws should result in a different conclusion. Don t Touch That Technology, by Susan P. Altman, Todd A. Fisher.Outsourcing and Commercial Transactions Alert, November 2, If your client or customer asks you to input data into its database, do you readily agree, or do you first ask if you have the right to do the inputting? Most service providers are more than happy to show their responsiveness and helpfulness and sometimes forget to check whether they have the right to use the technology licensed by their client. The Fifth Circuit in Compliance Source Inc. v. GreenPoint MortgageFunding Inc. reminded us recently that use of someone else s technology, even if it is only on behalf of and for the benefit of a licensee, may require explicit permission of the owner (not just the licensee) and failure to obtain that explicit permission may result in a lawsuit. Group Highlight of 2010 Activities 5

6 The District of Foreclosure Limbo: New D.C. Foreclosure Law Creates Confusion, by Nanci L. Weissgold, and Morey E. Barnes Yost. Alert, November 23, The loud sound heard in the District of Columbia last week was not the result of Beltway traffic or increased political bickering after this month s midterm elections. What was it? The sound of foreclosures coming to a halt in the wake of a new D.C. measure creating a quasi-judicial foreclosure process and some justifiable confusion for lenders and servicers. On November 17, District of Columbia Mayor Adrian Fenty signed Bill , the Saving D.C. Homes from Foreclosure Emergency Amendment Act of 2010 (the Emergency Act ), which gives a borrower with a residential mortgage the right to engage in mediation prior to foreclosure, and effectively extends the timeline for foreclosure in D.C. by at least 60 days. Although the Emergency Act took effect immediately (and is scheduled to remain in effect until February 15, 2011, unless extended), it obligates lenders to use certain forms which are unavailable, as the Mayor is to prescribe them by rule, and to participate in mediation processes that have not yet been announced. The D.C. Department of Insurance, Securities, and Banking (the DISB ) is expected to issue guidance this week concerning the measure s implementation. In the meantime, it is unclear how lenders can comply with the Emergency Act s requirements or whether the DISB will enforce available penalties against lenders who fail to do so. As the Emergency Act provides that any sale that does not comply with its requirements is void, this issue is of utmost importance. FHA Annual Certification Just Got More Complicated, by Phillip L. Schulman and Rebecca Lobenherz. Mortgage Banking & Consumer Financial Products Alert, December 1, As if lenders do not have enough to worry about these days with the myriad of federal and state mortgage reforms, on November 17, 2010, the U.S. Department of Housing and Urban Development (HUD) released Mortgagee Letter (ML or the Mortgagee Letter), which clarifies mortgagee eligibility requirements to participate in Federal Housing Administration (FHA) programs and provides information regarding the FHA Annual Certification process. Just in time for the end of many mortgagees fiscal years and the start of the recertification process, ML makes it much harder for many, if not most, lenders to cleanly certify their annual FHA renewals. Trust But Verify: Claim That New York Trust Law Voids Mortgage Transfers Does Not Survive Legal Scrutiny, by Laurence E. Platt, Phoebe Gallagher Winder, Andrew C. Glass. Alert, December 22, Millions of mortgage notes may not have been transferred to mortgage securitization trusts in compliance with New York trust law, according to Associate Professor Adam J. Levitin of the Georgetown University Law Center in written testimony to the House Financial Services Committee s Subcommittee on Housing and Community Opportunity and in other recent commentary. He contends that there may be additional requirements imposed by New York trust law which might act to void transfers to mortgage securitization trusts.[i] Before you rush to sell your mortgage-backed securities, however, please note Professor Levitin s use of conditional language that there may be additional requirements under New York trust law. It is a provocative theory, but one that must be verified to be taken seriously; we were not able to do so. Much has been made in recent weeks of the alleged deficiencies in the transfer of mortgage loans from originator to ultimate holder. Were the sales consummated in accordance with the documentation requirements of the applicable sales agreements, such as a pooling and servicing agreement ( PSA )? Did the paper trail of note endorsements and mortgage assignments satisfy the requirement of the applicable state s version of the Uniform Commercial Code ( UCC )? And if the answers to either question are equivocal in any way, does the holder have the unequivocal right to enforce the loan documents against a borrower in default? Financial Services Reform Alerts: On Wednesday, July 21, 2010, U.S. President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act ), the most dramatic revision of the U.S. financial regulatory framework since the Great Depression. To assist our clients in better understanding the impact of the Dodd-Frank Act, K&L Gates lawyers from our Financial Services, Corporate and Policy and Regulatory Practice areas prepared a series of alerts which provided information on substantive provisions in the Act that were of interest to our clients. Below is a sample of some of the alerts in the series discussing mortgage banking and consumer financial products. K&L Gates published these alerts prior to July 21, 2010, the date on which President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. However, these alerts discuss the final version of the bill that would eventually be signed into law. Approaching the Home Stretch: Senate Passes Restoring American Financial Stability Act of 2010, Financial Services Reform Alert, June On May 20, 2010, the Senate passed the Restoring American Financial Stability Act of 2010 as amended ( Senate Bill ). Congressional leadership has indicated that conference committee proceedings will take place in June, making it likely that the legislation will be passed by the House and Senate before the July 4th Recess and signed into law by the President shortly thereafter. Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity, by Daniel F. C. Crowley, Bruce J. Heiman, Karishma Shah Page, Collins R. Clark, Margo A. Dey, Akilah Green, Justin D. Holman. Financial Services Reform Alert, July 7, On June 30, 2010, the House adopted the conference report on H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Bill or Bill ). The Senate is expected to follow suit when it returns from recess later in July. This alert provides a high-level summary and analysis of the significant aspects of the Bill. In Group Highlight of 2010 Activities 6

7 the days ahead, K&L Gates will be issuing alerts addressing in detail the various provisions of the Bill. Consumer Financial Services Industry, Meet Your New Regulator, by Melanie H. Brody and Stephanie C. Robinson. Financial Services Reform Alert, July 7, While the 2,319-page, sixteen-title Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act ) imposes new regulatory requirements on virtually every sector of the financial industry, the centerpiece of the Dodd- Frank Act from a consumer protection standpoint is the creation of a consumer financial protection watchdog. The new agency will be called the Bureau of Consumer Financial Protection ( Bureau ) and will be created pursuant to Title X of the Dodd-Frank Act, entitled the Consumer Financial Protection Act of 2010 ( CFPA or Act ). Its main goal will be to protect consumers. Based on an idea advocated by Harvard Law School professor Elizabeth Warren, the Bureau will have exceptionally wide-reaching powers over providers of consumer financial products and services and vast implications for the financial industry. As we have reported in prior alerts, the creation of this new agency will fundamentally change how financial products and services are regulated in the United States. Preemption for National Banks and Federal Thrifts After Dodd-Frank: Answers to the Ten Most Asked Questions, by David L. Beam. Financial Services Reform Alert, July 9, The last ten years have been a period of consistent expansion of federal preemption for national banks and federal thrifts. That period of expansion will come to a grinding halt if the Senate passes and President Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd- Frank Act or the Act ), which most observers expect to happen shortly after the Senators return from recess on July 12. Hope You Like Plain Vanilla!, Mortgage Reform and Anti-Predatory Lending Act (Title XIV), by Laurence E. Platt and Kristie D. Kully. Financial Services Reform Alert, July 8, The Mortgage Reform Act and Anti-Predatory Lending Act, part of the comprehensive Dodd- Frank Wall Street Reform package under final Hill consideration, will likely melt any hopes for other than plain vanilla residential mortgage loans. Makers of strawberry or rocky road loans will likely face enhanced scrutiny, and may face increased damages, extended exposure to borrower claims, and risk retention requirements. In this client alert, we summarize the hefty provisions in the Mortgage Reform Act that would require creditors to consider a borrower s ability to repay; the safe harbor for plain vanilla loans; the restructuring of mortgage originator compensation; and other amendments to TILA, HOEPA, FCRA, HMDA, and the S.A.F.E. Act. In the end, as consumers, the industry, and the federal regulatory agencies work to implement these changes, Supreme Court Justice Breyer may be the final authority on plain vanilla mortgages and the Mortgage Reform Act s other ambiguous provisions. Loan Servicing Déjà Vu, by Steven M. Kaplan, Jonathan D. Jaffe and Kerri M. Smith. Financial Services Reform Alert, July 14, Loan servicers that are reeling from ever changing state laws and HAMP requirements can breathe a sigh of relief that the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act ) left most of its ammunition for other segments of the financial services industry. Title XIV of the Dodd-Frank Act, entitled Mortgage Reform and Anti- Predatory Lending Act (the Mortgage Reform Act or the Act ), would impose new restrictions and requirements on the residential mortgage industry, but in many cases these changes piggyback the regulations issued by the Federal Reserve Board ( FRB or the Board ) in Nevertheless, there are changes that could have a material impact on loan servicers and open them up to a federal cause of action with a private right of enforcement. HVCC s Sunset and Other Appraisal Reforms on the Horizon, by Nanci L. Weissgold and Kerri M. Smith. Financial Services Reform Alert, July 19, Congress is poised to eliminate the contentious Home Valuation Code of Conduct, (the HVCC ), and with the HVCC set to sunset, more expansive (and expensive) appraisal reforms are on the horizon. Tucked within the massive Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act ) are provisions that will strengthen appraiser independence and enforcement, regulate the use of broker price opinions ( BPOs ), set standards for pricing of appraisals and appraiser valuation model products ( AVMs ), and subject appraisal management companies ( AMCs ) to potential federal and state oversight. Originate-to-Distribute Lives on in Securitizations of Plain Vanilla Residential Mortgages: The Securitization Reform Provisions of the Dodd-Frank Act, by Steven M. Kaplan, Sean P. Mahoney, and Anthony R.G. Nolan. Financial Services Reform Alert, July 21, The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or the Act ) constitutes the most sweeping financial reform package since the 1930s. Title IX of the Dodd- Frank Act ( Title IX ), entitled the Investor Protection and Securities Reform Act of 2010 enacts a grab bag of substantial changes to capital markets regulation and practices in the hope of putting back in their bottles the twin genies of moral hazard and lax regulation that are widely viewed as the tinder that sparked the great credit conflagration of Subtitle D of Title IX, entitled Improvements to the Asset-Backed Securitization Process ( Subtitle D ), has been of particular interest to capital markets participants both because practices in securitization markets are widely credited with contributing uniquely to the credit crisis and because of the sense of many that the resuscitation of robust securitization markets is one of the key predicates to an economic recovery. A New Era: Depository Institutions and Their Holding Companies Face a Deluge of Regulatory Changes, by Rebecca H. Laird, Sean P. Mahoney and Collins R. Clark. Financial Services Reform Alert, July 22, 2010 On July 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act or Act ), which restructures the regulatory framework for most banking organizations. Although the full impact of the Dodd-Frank Act cannot be assessed until implementing regulations are released, depository institutions and their affiliates face new regulators, increased activities restrictions and capital requirements, and numerous other fundamental changes in how they are regulated. Group Highlight of 2010 Activities 7

8 Articles: Transfer and Assignment of Residential Mortgage Loans in the Secondary Mortgage Market American Securitization Forum White Paper, written on behalf of ASF by Laurence E. Platt and Phoebe Gallagher Winder, November 16, Press: Accouting Today AFX Asia Focus AFX Asia International Focus AFX Asia International ProFeed AFX Asia ProFeed AFX UK Focus AFX UK ProFeed American Banker American Banker BankThink Blog Bank Investment Consultant Bank Investment Consultant.com Bank Lawyer s Blog Bank Loan Report Bank Technology News Bear Market Investment.com Bloomberg News BNA Banking Report Boston Herald BreakingLegalNews.com Broward Daily Business Review BusinessWeek.com Chicago Daily Herald and DailyHerald.com Class Action Law360 CNBC.com Collections & Credit Risk Collections & Credit Risk Blog CQ Capital Transcripts C-SPAN.org Daily Finance DelawareOnline.com Democratic Underground.com DowJones MarketWatch FHA-Loan.org Financial Services Law360 Finanical Markets Regulation Wire Gloucester County Times High Yield Report HomeForeclosurePrevention.com HousingWire.com IndustryNews.org Inman News Insurance Network News Investment Dealers Digest Law Fuel.com Law.com LawAdvice.com Los Angeles Times Market Ticker.com Miami Daily Business Review Mortgage Banking Mortgage Servicing News Naked Capitalism Blog National Mortgage News National Mortgage News Online New York Times, NYTimes.com On Wall Street.com Origination News Palm Beach Daily Business Review Phil s Stock World Press of Atlantic City Real Estate Law360 RealDistressedDeals.com RESPA News Monthly Reuters Reverse Mortgage Daily Richmond Times-Dispatch Roll Call Political Transcripts Sarasota Herald-Tribune Seattle Times Securities Law360 SNL Bank M&A Weekly SNL Securities & Investments Structured Finance News The Am Law Daily The Atlantic.com The BLT: The Blog of the Legal Times The Bond Buyer The Legal Intelligencer Blog The News Journal The Post-Chronicle Total Securitization and Credit Investment Washington Post, WashingtonPost.com Group Highlight of 2010 Activities 8

9 Lawyers Boston R. Bruce Allensworth Irene C. Freidel Stephen E. Moore Stanley V. Ragalevsky Nadya N. Fitisenko Brian M. Forbes Andrew Glass Phoebe Winder Charlotte John H. Culver III Amy Pritchard Williams Chicago Michael J. Hayes Sr Dallas David Coale Los Angeles Thomas J. Poletti Miami Paul F. Hancock New York Philip M. Cedar Elwood F. Collins Steve H. Epstein Drew A. Malakoff San Francisco Jonathan Jaffe Elena Grigera Babinecz Seattle Holly K. Towle Washington, D.C. Costas A. Avrakotos David L. Beam Melanie Hibbs Brody Daniel F. C. Crowley Eric J. Edwardson Steven M. Kaplan Phillip John Kardis II Rebecca H. Laird Michael J Missal michael.missal@klgates.com Laurence E. Platt larry.platt@klgates.com Phillip L. Schulman phil.schulman@klgates.com Nanci L. Weissgold nanci.weissgold@klgates.com Kris D. Kully kris.kully@klgates.com Morey E. Barnes morey.barnes@klgates.com Emily J. Booth emily.booth@klgates.com Holly Spencer Bunting holly.bunting@klgates.com Krista Cooley krista.cooley@klgates.com Jessica M. Flathmann Sandler jessica.sandler@klgates.com Rebecca Lobenherz becky.lobenherz@klgates.com Group Highlight of 2010 Activities 9

10 Washington, D.C. (continued) Melissa S. Malpass David G. McDonough, Jr Stephanie C. Robinson Kerri M. Smith David Tallman Professionals Government Affairs Advisor / Director of Licensing Washington, D.C. Stacey L. Riggin stacey.riggin@klgates.com Regulatory Compliance Analysts Washington, D.C. Dameian L. Buncum dameian.buncum@klgates.com Teresa Diaz teresa.diaz@klgates.com Robin L. Gieseke robin.gieseke@klgates.com Brenda R. Kittrell brenda.kittrell@klgates.com Dana L. Lopez dana.lopez@klgates.com Patricia E. Mesa patty.mesa@klgates.com Daniel B. Pearson daniel.pearson@klgates.com Jeffrey Prost jeffrey.prost@klgates.com Anchorage Austin Beijing Berlin Boston Charlotte Chicago Dallas Dubai Fort Worth Frankfurt Harrisburg Hong Kong London Los Angeles Miami Moscow Newark New York Orange County Palo Alto Paris Pittsburgh Portland Raleigh Research Triangle Park San Diego San Francisco Seattle Shanghai Singapore Spokane/Coeur d Alene Taipei Tokyo Warsaw Washington, D.C. K&L Gates includes lawyers practicing out of 36 offices located in North America, Europe, Asia and the Middle East, and represents numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market participants and public sector entities. For more information, visit K&L Gates comprises multiple affiliated entities: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and maintaining offices throughout the United States, in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in Dubai, U.A.E., in Shanghai (K&L Gates LLP Shanghai Representative Office), in Tokyo, and in Singapore; a limited liability partnership (also named K&L Gates LLP) incorporated in England and maintaining offices in London and Paris; a Taiwan general partnership (K&L Gates) maintaining an office in Taipei; a Hong Kong general partnership (K&L Gates, Solicitors) maintaining an office in Hong Kong; a Polish limited partnership (K&L Gates Jamka sp.k.) maintaining an office in Warsaw; and a Delaware limited liability company (K&L Gates Holdings, LLC) maintaining an office in Moscow. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners or members in each entity is available for inspection at any K&L Gates office. This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer K&L Gates LLP. All Rights Reserved _4919