July 28: Weed & lending; lending law changes from the Heartland; the investigation of FHFA’s Mel Watt

Yes, seems like the summer doldrums out there, and relatively quiet as lenders and originators focus on helping their borrowers one loan at a time. It was pretty quiet until Politico broke the story of the FHFA Director Mel Watt being investigated by the US Postal Service for sexual harassment, apparently with taped conversations about kissing an employee’s ankle tattoo. If the inappropriate behavior is true, would this impact borrowers? Not really, because lenders should focus on helping home buyers and home owners at the loan level. If true, would it impact our industry that continues to try to improve our public relations? Yes, because if true, it is shameful and should not be condoned. Obviously we will see where the investigation goes.
 
Full disclosure
 
Earlier this week I posted a note asking, "Rob, are you hearing that residential lenders are nervous about releasing their 2nd quarter results to warehouse banks, correspondent investors, and other counter-parties since they aren’t as good as hoped? Or even delaying them?"
 
The question prompted Jerry Davis, Managing Director in the Warehouse Division of LegacyTexas, to send, “The last thing any mortgage company should do is hide or delay financials as required by their warehouse banks. We, and reputable warehouse banks, work on fostering relationships where ALL clients inform us as soon as they know of issues including poor financial performance. With this knowledge and relationship, we can help companies going forward. Whereas finding out information either indirectly or after the fact makes the relationship on rocky foundation. Anyone with grey hair knows the mortgage industry has ups and downs in ALL aspects. But delaying or hiding information is truly not an acceptable process to take on the industry challenges.”
 
Weed
 
There’s no substantive change to the policy that many lenders face. Namely, loans sold or guaranteed by a U.S. Government Agency can’t be backed by income from illegal activities – in this case the marijuana business. Fed Chair Powell clarified that until federal guidance comes out, the Fed will not allow federally chartered banks to take money from marijuana businesses. He said the issue is difficult because while “many state laws permit the use of marijuana”, the issue remains that “federal law still doesn’t”. The current marijuana situation “puts the supervisors in a very difficult position”, so he wants to see it clarified. And the House Appropriations Committee has voted down a measure that would have defended banks that opened accounts for cannabis businesses from any punishment by federal financial regulators.
 
As one would expect, federal authorities are not applying consumer protections to the marijuana industry. A new study from the University of Northern Colorado (imagine that senior project!) bought several samples of 30 different labeled strains of legal cannabis from dispensaries to check to see if that Ghost OG they thought they were buying was in fact the bona fide breed. Perhaps someone in the supply chain is hitting the employee discount a little too hard, because out of the 30 strains, only 4 strains proved to be genetically consistent. Same with Purple Kush.
 
Heartland state-level lending changes
 
The states are “united” but that doesn’t mean they don’t all have different economic conditions, rules, regulations, disasters, and the like. Arch MI’s release of its quarterly Housing and Mortgage Market Review (HaMMR) report and proprietary risk index had some key findings and data from the report, including the top five states most at risk for home price declines and details regarding increased shortage in entry-level homes.
 
Let’s look at changes in America’s “Heartland” – defined as states that don’t touch an ocean.
 
Mortgage Solutions Financial posted updated information regarding the Indiana Severe Storms and Flooding.

 
The Oklahoma Department of Consumer Credit has published its annual changes in dollar amounts for 2018. The revised dollar amounts were effective on July 1, 2018, unless otherwise noted in the chart. Various dollar amounts set forth in the Uniform Consumer Credit Code change effective July 1 of each “qualifying year.” The calculations for dollar amount changes use figures from the Consumer Price Index Indicators, Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), issued each December by the Bureau of Labor Statistics. The annual changes in dollar amounts for 2018 may be viewed on the chart.
 
Wisconsin has recently passed Assembly Bill 607, relating to non-probate transfers of real estate, the transfer by affidavit procedure for small estates, and payoff amounts in mortgage payoff statements. The new bill first creates more flexibility for the transferring of real property upon death. Second, the bill modifies Wisconsin’s transfer by affidavit procedure, so that it may be used when the gross value of the decedent’s estate is less than $50,000. The bill notes that purchasers and lenders who acquire improperly transferred property will be held harmless if acting in good faith. Lastly, the new bill creates more flexibility for creditors, by allowing them to qualify the payment amount, state that the payoff amount cannot be determined, or state that the payoff amount is subject to change under certain conditions.
 
And Wisconsin has passed Assembly Bill 691, effective October 1, 2018, in response to a longstanding problem with nuisance landlords that routinely purchase property at foreclosure auctions, but habitually fail to pay delinquent property taxes and court fines for building code violations. There are two requirements placed on successful bidders at foreclosure auctions. First, the successful bidder must submit an affidavit to the court affirming that the bidder does not own property in the state that is more than 120 days tax delinquent.  And second, the affidavit must also affirm that the successful bidder does not have an outstanding judgement regarding noncompliance with state or local building codes. These affirmations must also be true for an entity that the bidder owns, manages, or controls, or for any entity that owns manages, or controls the bidder.
 
The news of Tennessee legislation update allowing every notary in Tennessee to conduct online notarizations, valid for citizens of all 50 states. Digital notary start-up Notarize was instrumental in helping to pass bill HB 1794/SB 1758, now headed to Governor Bill Haslam to be signed into law. Notarize co-founders Pat Kinsel and Adam Pase have been working with the Tennessee Land Title Association, the Tennessee Bankers Association, Realtors, Credit Unions, and others to adopt the remote notarization operating model originally enacted by Virginia in 2011. Tennessee joins Indiana, Ohio, Nevada, Texas, and Virginia as states enabling notaries to conduct secure, verifiable and convenient online notarizations. Benefits of the law to consumers and businesses include: eliminating robo-signing, encourages local business, and streamlines payment process.
 
Arizona Governor Doug Ducey signed HB 2154 into law, amending and strengthening the state’s data breach notification law. Notably, the amended law significantly expands the definition of “personal information” to include several new data elements, including online account credentials, certain health information, and biometric data used to authenticate an individual when the individual accesses an online account. 
 
The amended law also requires that notice be provided within 45 days after a determination that a “security system breach” has occurred and adds an obligation to notify the Arizona Attorney General and nationwide consumer reporting agencies if the security system breach involves more than 1,000 individuals.
 
Iowa has made amendments to its Power of Attorney Act regarding an agent’s termination or suspension of authority effective as of July 1, 2018. The current section of the Act provides that an agent’s authority as power of attorney can be terminated under various circumstances, including when the principal revokes authority and when the agent dies, becomes incapacitated, or resigns. Under the amendment to this section, an agent’s powers can now be terminated if the agent is named as the abuser in an abuse report regarding the principal’s financial resources, or if the agent is convicted of dependent adult abuse related to the principal’s financial resources.
 
The Act has also been amended to allow any person who becomes aware of pending criminal charges of dependent adult abuse against a principal to petition the court to construe a power of attorney or to review an agent’s conduct. Finally, the amended Act provides that the court, upon receiving such a petition, may suspend the agent’s power of attorney and may appoint a guardian ad litem to represent the principal. Under this bill, the guardian ad litem must be a practicing attorney.
 
Effective as of August 28, 2018, Missouri has enacted provisions regarding its Fiduciary Access to Digital Assets Act. The Act allows fiduciaries to access electronic records of an account holder. The account holder may allow or prohibit the disclosure or his or her digital assets to a fiduciary in a will, trust, or other record.
 
The bill also specifies that a health savings account may be created if the trustee of a trust consisting of trust property less than $250,000 concludes that the trust property is insufficient to justify the cost of administration. The trustee must also provide notice to qualified beneficiaries upon this determination. Under the previous provision, the amount of the trust property must have been less than $100,000.
 
The term “directed trust” has been defined in the new provision and the term “trust protector” is further defined within this section. The bill also adds a no-contest clause in a trust instrument in certain circumstances.
 
The Tennessee Department of Commerce and Insurance, Division of Regulatory Boards, Collection Service Board has adopted provisions regarding the standards of practice for debt collectors. The new provisions address, among other things, the acquisition of location information from 3rd parties, communications in connection with debt collection, harassment or abuse, and unfair practices.
 
The standards define a debt collector, requirement of identification and state that he or she is attempting to confirm or correct location information and may only identify his/her employer if expressly requested. The debt collector cannot state that the consumer owes a debt, may not communicate with the 3rd party more than once unless requested to do so. If the consumer is represented by an attorney, may only communicate with that attorney unless the attorney consents to direct communication with the consumer. Further, a debt collector may not communicate with the consumer at his or her place of employment if the debt collector has reason to know that the employer prohibits the consumer from receiving such communication.
The standard also specifies what is considered harassment, abuse and unfair practices.
 
Through House Bill 1320, Indiana modified its provisions relating to recording requirements as they relate to the disposition of tax sale surplus.
 
For purposes of the tax sale statutes, has been amended to specify that: the term “means title to or interest in a tract that is within the tract’s chain of record title and: possessed by a person; and either recorded in the office of a the county recorder for the county in which the tract is located; or available for public inspection and properly indexed in the office of a the circuit court clerk in the county in which the tract is located; no not later than the hour and date a sale is scheduled to commence under IC 6-1.1-24.”
 
Furthermore, Section 2. Indiana Code 6-1.1-23.9-3(b) is amended to specify “for purposes of IC 6-1.1-24 and IC 6-1.1-25 only, chain of record title includes instruments executed by the owner and recorded within the five (5) day period before the date the owner acquires title to the tract.”
 
Oklahoma has recently passed House Bill 1151, regarding convenience fees on consumer loan payments effective on November 1, 2018. In addition to the typical loan finance charges permitted by statute, a lender may also charge a “convenience fee” if a borrower makes his or her loan payment by debit card, electronic funds transfer, electronic check, or other electronic means. The purpose of the fee is to offset the lender’s costs for processing electronic payments with limits set not exceed the lesser of either the actual cost to the lender of electronic processing or 4% of the transaction amount.
 
If a lender charges a convenience fee, the lender must notify the customer of the fee amount prior to completing the electronic payment transaction. The lender must allow the customer to then cancel the transaction if he or she wishes without incurring a fee.  If a lender charges a convenience fee for electronic transactions, the lender must also allow the borrower to make loan payments by check, cash, or money order, without a convenience fee. The bill adds that if a borrower elects to make payments by debit card, electronic funds transfer, electronic check, or other electronic means, and a convenience fee is properly imposed, then the fee will be nonrefundable.
 
 
Plenty of folks use movies to escape reality, and everyone in residential lending knows we have enough of that. And people like lists for some reason. So let’s finish the week with the 50 best special effects of all time, per the people who wrote the article. (The cool thing about this site is that one can click on the links and see the effect. And yes, that godawful Alien movie stuff is in there.)
 
 
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “With Regulations, Be Careful What You Wish For.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
 
Rob
 
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