Johnston & Associates April 2019 Newsletter

In this newsletter we cover the following:
  • Fannie Mae Backs Dreamers
  • Johnston & Associates to Host “Annual Regulatory Round-up: Invaluable Tips for Maintaining Compliance in 2019 and Beyond”
  • Regulatory Compliance and Litigation Webinars: Complimentary Recordings and PPTs for JT’s Marketing Service Agreement, Loan Officer Compensation, and other Complimentary Webinars
  • The Legal Services we offer at Johnston & Associates
  • Conference Attendance by Johnston & Associates
Welcome to the April Installment of Johnston & Associates Newsletter

To all our preexisting clients, industry friends and strategic partners whom are in receipt of the Johnston & Associates Newsletter, as well as any and all the new readers whom have decided to subscribe hereto, we welcome and thank you for taking the time to read about those topics that we believe to be of great importance to the mortgage banking industry.

Along with all the other news updates that we have for our readers, we are very pleased to announce that given our Firm’s success and resulting growth (e.g., including our defending one of the largest groups of lenders being pursued by Lehman Bros. and JPMorgan Chase/EMC, prosecuting a large case against a national servicer, assisting lenders from all across the Country with regard to national regulatory compliance issues and more), we have made the decision to open up our first Mortgage Banking Branch Office in Orange County, California.  Of course, given our sustained growth, our goal is to continue this expansion and eventually open up regional offices in both the East Coast and the Midwest.

As part of our ongoing effort to provide our readers with content rich Newsletters, including timely discussions on those topics that are of great concern and interest to many within our industry, we always welcome any and all follow-up questions and/or feedback that you and/or your companies may have.  In fact, if any of you have such questions and/or feedback, please know that we will be in attendance and/or speaking at several regional and national industry conferences in the months of April and May.  To that end, we are always grateful for the chance to meet with you in person.

Finally, as many of you already know, the professionals who comprise Johnston & Associates Mortgage Banking Practice Group represent our clients in matters that include, but are not limited to, repurchase and make-whole lawsuits, Servicer litigation, third-party mortgage fraud litigation, appeals to HUD’s Mortgagee Review Board, preparation of policies and procedures, creation of Loan Officer Compensation plans, formation of Marketing Service Agreements, assisting with the negotiation and review of Broker and Correspondent LPAs, and much, much more.

Fannie Mae Backs Dreamers

In the past year there seems to have been an unannounced shift in the various agency requirements for DACA Visa Status borrowers. DACA [Deferred Action for Childhood Arrivals] status is a Visa status that was offered to children who were brought to the US illegally by their parents but have been here the majority of their lives. Many of the “children” (also called Dreamers) who qualified for this status are now well into their adulthood. DACA was created as a way for working-age adults to obtain a Visa status that would allow them to work in the US, until Congress could agree on what to do with this segment of the population.  In February of this year DACA status was thrust into the limelight of national media outlets, causing uncertainty about home buying options.

Overwhelmingly, the main argument received as to why DACA borrowers were not eligible for mortgage financing is because FHA and Fannie Mae guidelines state that a U.S. citizen borrower must be legally present in the United States. Investors argue that because DACA does not confer a Lawful Permanent Residence Status according to the USCIS definitions, this means that DACA borrowers are not eligible for mortgage financing. Namely, these individuals are considered temporary residents which fall under non-U.S. citizens without lawful residency in the U.S. and are not eligible for FHA insuring at this time.

Fortunately for Dreamers, this interpretation is wrong and Fannie Mae is stating that loud and clear. On Tuesday (March 26, 2019) Fannie Mae issued a clarification stating, “We have a longstanding policy on eligibility for non-U.S. citizen borrowers. Fannie Mae purchases and securitizes mortgages to non-citizens who are lawful permanent or non-permanent residents of the United States under the same terms available to U.S. citizens,” the government-sponsored enterprise said in a lender bulletin. Fannie Mae said that it is not changing its existing policies. Rather, the purpose of issuing the bulletin was to provide “additional guidance to help lenders determine eligibility for non-U.S. citizen borrowers” in response to customer feedback on the issue.

If those criteria are met, the borrower’s loan is eligible to be purchased by Fannie Mae. To be more specific on the matter, Fannie Mae provided four examples of borrower scenarios under which a borrower would or would not qualify for a Fannie Mae mortgage. One of those scenarios specifically deals with DACA borrowers. If the Fannie Mae listed criteria are met, Fannie Mae considers that Dreamer’s mortgage eligible to be purchased.

The first thing a lender should do is gather information from their investor outlets regarding this issue.  This due diligence will not only assist you in your policy-making process, but it may also provide you with documented evidence that you followed proper protocol in attempting to get an answer.  Once you have gathered your information, then it is time for the Executive team to consider the consequences of offering or not offering mortgage loans to DACA status borrowers.  Next, seek your legal counsel’s opinion as they will need to defend your thought process if required to do so. Legal risks that each lender will now have to consider includes dealing with the False Claims Act and Fair Lending practices.   For those of you that have had to deal with the “False Claims Act” litigation loans, will this rear its ugly head again if you offer DACA status loans and then misinterpreted their guidelines becomes a question?  This is an area where good legal advice is needed.

Will not offering mortgages with DACA Visa Status affect your Fair Lending risk?  The first step of due diligence is to research what other competing lenders  are offering or not offering.  If everyone else offers DACA status loans and you do not, then the question will always be “why”?  Again, this is where your due diligence and documentation comes in.  When dealing with Disparate Treatment concerns, it is always best practices to ensure that your guidelines and policy reference only criteria that would not be considered discriminatory on a prohibited basis.  For instance, in a company Visa acceptance policy you may state what criteria you require of the Visa Type, such as, lawful resident, authorization to work, documentation to prove that, length of stay, type of income, assets, etc., but does specifying those criteria cause disparate treatment by your company?

For more information on how to protect your rights and take advantage of our legal team’s expertise and cost savings, please contact Johnston & Associates Mortgage Banking Chairman James Brody.

Johnston & Associates to Host “Annual Regulatory Round-up: Invaluable Tips for Maintaining Compliance in 2019 and Beyond”

Date:              Thursday, April 18, 2019
Time:             10:30 a.m. PST / 1:30 p.m. EST
Duration:       Approx. One Hour

With the first quarter of 2019 wrapping up, now is the perfect time to make sure you’re up to date on the top trending Compliance topics of the year.  Johnston & Associates invites you to attend our upcoming complimentary webinar where James Brody, Chairman of the firm’s Mortgage Banking Practice Group, will not only review these emerging trends, but will also provide practical tips on how to ensure you remain compliant with the requirements.

Some of the main hot topic trends facing our clients that Mr. Brody will review during the webinar include, but are not limited to, the following:

§ The Digital Mortgage Platform:  A refresher review on electronic disclosure/ESIGN Act requirements; digital record retention requirements; and how to ensure you remain compliant while leveraging digital marketing campaigns.

§  Non-QM Products:  A discussion on the compliance and risk considerations when determining whether or not to offer Non-QM and Non-Agency products, including: disclosure requirements; Ability to Repay rule implications; and the heightened scrutiny these products carry during regulatory examinations.

§  Loan Officer Compensation:  A comprehensive update on the current status of Loan Officer Compensation requirements, including Branch Manager Compensation.

§  Fair Lending:  A deep dive into fair lending best practices, including what constitutes a proper fair lending monitoring program, as well as a review of the recent $25 million fine levied against Citibank by the OCC.

§  State Enforcement:   A review of recent enforcement actions issued by some of the country’s more active state regulatory agencies.

Moderator and Speaker:

James Brody, Esq., Chairman of Mortgage Banking Practice Group
Johnston & Associates Attorneys at Law, P.C.

Additional Speakers: To be announced

In order to register for this complimentary webinar, which will be limited to the first 1,000 registrants, please click on the following link:

Otherwise, should you have any follow-up questions or have any difficulty registering for the upcoming webinar, please contact Mr. James Brody. After registering, you will receive a confirmation email containing information about joining the webinar.

Complimentary Webinar Recordings and Presentation Materials Available from Johnston & Associates Mortgage Banking
We are pleased to offer complimentary recordings and other presentation materials from our recent webinars:
  • January 17, 2019 – “Lehman Bros. GSE and RMBS Litigation: A Comprehensive Review and Analysis” lender only webinar (only available by individual request)
  • July 26, 2018 – “Loan Officer Compensation Tips and Trends: How to Gain a Competitive Edge While Remaining Compliant” webinar
  • June 28, 2018 – “Repurchase and Indemnification Claims in 2018 and Beyond: A Comprehensive Update” webinar
  • May 10, 2018 – “Mergers and Acquisitions in the Mortgage Banking Industry: Expert Insights and Forecasts for 2018 and Beyond” webinar

These materials may be downloaded from our Johnston & Associates website or, for more information concerning any of the foregoing webinars and/or the subject matter of these webinars, please contact its Chairman James Brody.

Legal Services Offered by Johnston & Associates in the Mortgage Banking Industry

Johnston & Associates is a full suite boutique law firm, which amongst other practices such as real estate and commercial litigation, has a nationally recognized Mortgage Banking Practice Group.  With an experienced team of mortgage banking lawyers (including senior litigation attorneys, former in-house General Counsel and in-house Compliance Counsel from a well-known bank and mortgage company, etc.), certified fraud examiner and forensic underwriters, and an extremely competent support staff, all of whom are dedicated to aggressively and competently serving the needs of our valued clientele, Johnston & Associates Mortgage Banking Practice Group is known all across the country for the experience and results that it brings to the areas of regulatory compliance, mortgage banking litigation, and a broad range of mitigation services.

Amongst the many legal services Johnston & Associates offers the mortgage banking industry (e.g., brokers, lenders, servicers, vendors and more), such include, but are in no way limited to, as follows:

  • Mortgage Repurchase and Make-Whole Indemnification Litigation and Mitigation (e.g., Secondary Market Investors, Agencies, etc.)
  • Mortgage Industry Litigation (e.g., Servicer and Sub-Servicer Disputes, 3rd Party Fraud Recovery, CPL and Title Policy Actions, Appraiser E&O Claims, Loan Officer Actions, etc.
  • Mortgage Repurchase and Make-Whole Alternative Dispute Resolution (e.g., Arbitration, Mediation, etc.)
  • Regulatory Compliance, Administrative and Business Services (e.g., Mock Audits, LO Compensation, MSAs, Licensing, CA Dep’t of Business Oversight, HUD Review Board, etc.)
  • Transactional Matters (e.g., Drafting and Negotiating Broker and Correspondent Loan Purchase Agreements, Mergers & Acquisitions, etc.)

Should you have any questions regarding how Johnston & Associates Mortgage Banking Practice Group can be of assistance to you and/or your company, please contact its Chairman James Brody and/or its Co-Chair Ingrid Peterson.

Conference Attendance by Johnston & Associates

Johnston & Associates will have a number of its attorneys in attendance and/or speaking at the following upcoming conferences:

  • April 7-9, 2019: Mr. Brody will be in attendance at the California MBA’s 2019 Chairman’s Conference in La Jolla, CA.
  • May 5-8, 2019: Mr. Brody will be in attendance with colleagues, as well as speaking on a litigation panel (e.g., Lehman Bros, JP Morgan Chase/EMC, etc.), at the National MBA’s Legal Issues and Regulatory Compliance Conference in New Orleans, LA
  • May 19-22, 2019: Mr. Brody will be in attendance with colleagues at the National MBA’s National Secondary Market Conference & Expo 2019, New York, NY.

If you or someone from your company will also be in attendance at the foregoing conferences and would like to set up a complimentary appointment to meet with Johnston & Associates Mortgage Banking Practice Group, please contact its Chairman, James Brody, to schedule a date and time. We hope to see you there!

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