Mortgage Lending Mishap You Can Easily Avoid

May 19, 2017 at 10:14 am 1 comment

Yours truly is in a particularly good mood today.

Not only is it Friday, it is a sunny and warm Friday, and as someone who would gladly go the rest of his life without seeing another snowflake, it doesn’t get better than this. Thirdly, and most important for our purposes, a settlement announced yesterday between JPMorgan Chase and homeowners provides a great example of why—whether you are a federal or state charted credit union—it can get awfully expensive to disregard state mortgage law.

Under NYS law (N.Y. Real Prop. Acts. § 1921(1); N.Y.Real Prop. § 275(1)) a lender/mortgagee must present a satisfaction of mortgage for recording within thirty (30) days of a mortgage being paid off. If the mortgagee does not, it is liable for statutory damages between $500-$1500 per violation. I was around when the Legislature imposed these fines. At the time, legislators were fed up with getting calls from frustrated constituents, desperate to locate their mortgage satisfactions, which they assumed were recorded years ago.

In Bellino v. JPMorgan Chase Bank (U.S. District Court, Southern District of New York, No. 14-cv-3139), a homeowner paid off her mortgage loan on May 14, 2012. Chase sent the satisfaction of mortgage to the Westchester County clerk by Fed Ex on June 13, 2012, but the payoff was not received by the county clerk until June 15. The homeowner brought a class action law suit against the bank, seeking damages on behalf of herself and all others who took out a mortgage with Chase between 2011-2016, for whom a certificate of discharge or satisfaction was not presented to the appropriate county officer within 30 days. Yesterday Chase agreed to settle this case for more than $8 million.

A few quick takeaways as there is more going on here than meets the eye: First, Chase never denied that it was tardy with its filing, but argued that the case should be dismissed because the homeowners suffered no real harm. The court flatly rejected this argument, underscoring that those pesky little penalties that legislators like to add at the end of consumer protection laws have created a cottage industry of lawyers making a pretty good living out of nickel-and-diming financial institutions.

Second, it all comes down to process. Chase easily could have avoided this lawsuit had it just had tighter processes.

Third, just to be clear, you are not obligated to make sure that the satisfaction is recorded in thirty days, just that it is received in thirty days.

I have always thought that the credit union industry is a bit obsessed with the distinction between federal and state intuitions, at least when it comes to mortgage lending. At the end of the day you will be impacted by the laws of the state in which you are located. There are of course numerous exceptions to this statement, but a healthy understanding of your states laws and how they impact your operations is a critical part of any compliance program.

On that note, yours truly is done blogging for the week! Enjoy your weekend. Peace Out.

 

Entry filed under: General, Legal Watch, Mortgage Lending, New York State.

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1 Comment Add your own

  • 1. Anonymous  |  May 19, 2017 at 11:36 am

    I think the “satisfaction” must be presented for recording (not recorded) within 30 days.

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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