Johnston & Associates Special COVID-19 April Newsletter

In this newsletter we cover the following:
  • Welcome to the Special COVID-19 Installment of JT’s Newsletter
  • Compliance Spotlight: Maintaining Compliance in the Face of the COVID-19 Pandemic Crisis
  • Johnston & Associates and LBA Ware to Co-Host Complimentary Webinar, Entitled: “Keep Calm. Keep Compliant: Regulatory Resilience During a Pandemic”
  • RESCHEDULED Johnston & Associates Webinar, Entitled: “Agency and RMBS Litigation Overview: How to Defend Against Agency and RMBS Claims by JPMorgan Chase, EMC and Lehman Bros.”
  • 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 Special COVID-19 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 subscribe hereto, we welcome and thank you for taking the time to read about those topics that are of great importance to the mortgage banking industry.

First and foremost, with the rapid increase in concerns about COVID-19 (e.g., health, business/economic, social, etc.), please know that Johnston & Associates has taken and will continue to take any and all steps reasonably necessary to ensure the continuity of the critical work that we do every day on behalf of our clients all across the Country.  Along those lines, should any of our clients have any questions and/or concerns with regard to any matters that we are assisting you and your companies with, concerning the manner in which newly released COVID-19 rules may affect the continuity of your businesses, regarding what the economic fallout of the COVID-19 pandemic may mean to the mortgage banking industry and with regard to those steps that your companies may take to mitigate the impact of the economic fallout, please reach out to myself or whichever attorney on our team whom you are working with and we will ensure you and your companies receive a prompt response.  Otherwise, on behalf of myself and our entire team, please know that our thoughts and well wishes are with all of you, your families and your businesses.

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  Agreements and Correspondent LPAs, and much, much more.

Compliance Spotlight: Maintaining Compliance in the Face of the COVID-19 Pandemic Crisis

Business Continuity Planning

By now lenders should have deployed their business continuity plans (“BCP” or “Plans”), so the issue is how effectively lenders manage this process and not whether this process should be required.  With regard to how COVID-19 will impact audits being conducted by the regulators, we fully expect that the auditors will be reviewing how well your Plans worked.  Typically, your Plans should have provisions on documenting compliance with the Plan.  Generally, the following areas should be addressed:

  • Maintaining data integrity, especially with remote work
  • Communication plans
  • Revising plans that did not deal with a nation-wide disaster such as a pandemic
  • Educating employees, customers and other stakeholders about fraud and scams relating to coronavirus.  Be aware of fraudsters pretending to be public health officials, phishing emails and cybercriminals working to deliver malware using coronavirus-themed emails or messages.

The Federal Financial Institutions Examinations Council (“FFIEC”), which is the federal interagency body developed to provide uniform standards and principles for examinations and reports by federal regulators of financial institutions, including: FRB, FDIC, NCUA, OCC, and CFPB has issued the following guidance.  Highlights of particular interest to lenders at this time, include the following:

  • There are distinct differences between pandemic planning and traditional business continuity planning.
  • To address the unique challenges posed by a pandemic, the financial institution’s BCP should provide for:
    • A preventive program to reduce the likelihood that an institution’s operations will be significantly affected by a pandemic event, including: monitoring of potential outbreaks, educating employees, communicating and coordinating with critical service providers and suppliers, in addition to providing appropriate hygiene training and tools to employees.
    • A documented strategy that provides for scaling the institution’s pandemic efforts so they are consistent with the effects of a particular stage of a pandemic outbreak, such as the 6 intervals described by the Center for Disease Control and Prevention (CDC) ( The strategy will also need to outline plans describing how to recover from a pandemic wave and proper preparations for any following wave(s). Furthermore, the strategy should include plans for re-entering personnel into the workplace.
    • A comprehensive framework of facilities, systems, or procedures that provide the organization the capability to continue its critical operations in the event that large numbers of the institution’s staff are unavailable for prolonged periods. Such procedures could include social distancing to minimize staff contact, telecommuting, redirecting customers from branch to electronic banking services, or conducting operations from alternative sites. Consideration should be given toward visitor procedures and whether restrictions should be implemented for visitors accessing the facilities. The framework should consider the impact of customer reactions and the potential demand for, and increased reliance on, online banking, telephone banking, ATMs, and call support services. In addition, consideration should be given to possible actions by public health and other government authorities that may affect critical business functions of a financial institution.
    • A testing program to ensure that the institution’s pandemic planning practices and capabilities are effective and will allow critical operations to continue.
    • An oversight program to ensure ongoing review and updates to the pandemic plan so that policies, standards, and procedures include up-to-date, relevant information provided by governmental sources or by the institution’s monitoring program.

Please be sure to check your state regulators as well. For example, New York has required lenders to submit a response to DFS describing the institution’s plan of preparedness to manage the risk of disruption to its services and operations.  Responses are to be provided to New York’s Department of Financial Services as soon as possible and no later than April 10, 2020.


COVID-19-Related Regulatory Changes at the State Level

New York Governor Andrew Cuomo’s March 21, 2020, Executive Order prohibits banks’ denial of forbearance to persons and businesses suffering financial hardship from COVID-19 for 90 days, and directs the New York Department of Financial Services to adopt emergency regulations to require banks to make mortgage forbearance applications widely available and to restrict ATM, overdraft and credit card late fees.  This order can be found here:

In contrast, the state regulator of another hard-hit area, California, has merely issued guidance that encourages certain practices, such as an immediate moratorium on foreclosures and related evictions when such arise out of hardship related to COVID-19.  In particular, California’s Department of Business Oversight (“DBO”) has stated that “prudent efforts to modify the terms on existing loans for affected customers will not be subject to examiner criticism.”

In addition, causes of actions for judicial foreclosure and unlawful detainer are suspended as applied to tenancies or residential real property to which a local government has imposed an eviction limitation pursuant to the California Governor’s Executive Order N-28-20, found here:  The DBO has also stated that it will consider institution’s unusual COVID-19-related circumstances when reviewing its financial condition.

COVID-19-Related Regulatory Changes at the Federal Level

Advocates for the mortgage industry are in discussions with their representatives for federal legislation such as a foreclosure moratorium.

The FDIC, the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency, the National Credit Union Administration, the state banking regulators, and the Consumer Financial Protection Bureau issued the Interagency Statement on Loan Modifications and Reporting by Financial Institutions Working with Customers Affected by the Coronavirus to encourage financial institutions to work constructively with borrowers impacted by the Coronavirus Disease 2019 (referred to as COVID-19) and provide additional information regarding loan modifications.

Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter (FIL) applies to all FDIC-supervised institutions.  Highlights include the following:

As described in the interagency statement, the FDIC:

  • Encourages financial institutions to work constructively with borrowers affected by COVID-19
  • Will not criticize institutions for prudent loan modifications and will not direct supervised institutions to automatically categorize COVID-19-related loan modifications as troubled debt restructurings (TDRs)
  • Confirmed with staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs
  • Views that modification efforts described in the interagency statement for borrowers of one-to-four family residential mortgages where loans are prudently underwritten and not past due or carried in nonaccrual status do not result in loans being considered restructured or modified for the purpose of respective risk-based capital rules
  • Views prudent loan modification programs to financial institution customers affected by COVID-19 as positive actions that can effectively manage or mitigate adverse impacts on borrowers due to COVID-19, and lead to improved loan performance and reduced credit risk.

The interagency statement also provides supervisory views on regulatory reporting of past due and nonaccrual status for loan modification programs whereby past due status should be based on the due date stipulated in the legal loan documents as modified within such modification program. Additionally, the interagency statement reminds institutions that loans that have been restructured as described under the statement will continue to be eligible as collateral at the FRB’s discount window based on the usual criteria.

This Statement is found here:

Mortgage Industry – Overall Response to COVID-19 Pandemic

As of March 23, 2020, the main concern of the industry overall is to restore liquidity to the system, especially because servicers advance payments to investors.  Given the anticipated wave of COVID-19-related defaults, servicers will not be able to do so indefinitely without federal liquidity facilities.  We expect a federal facility to be set up to cover these advances.

Lenders are facing an increased volume of inbound consumer calls but restricted capacity due to staff absences or slow-downs as staff adapt to working from home.  The other main issue is uncertainty and rate volatility.  As such, the Fed’s recent announcement of its purchases of treasuries and MBS is very helpful.

If you and your companies are interested in learning more about how to remain compliant in the face of the challenges that the COVID-19 pandemic crisis has brought about, please contact Johnston & Associates Mortgage Banking Chairman James Brody and/or its Co-Chairwoman Ingrid Peterson.

Johnston & Associates and LBA Ware to Co-Host Complimentary Webinar, Entitled: “Keep Calm. Keep Compliant: Regulatory Resilience During a Pandemic”

Date:             Thursday, April 9, 2020
Time:             10:30 a.m. PST / 1:30 p.m. EST
Duration:       Approx. 60-90 Minutes

With the first quarter of 2020 wrapping up, as well as many in our industry who may be looking for a distraction to life in quarantine, now is the perfect time to make sure that you and your companies are up to date on a number of the most pressing regulatory compliance issues, including commentary concerning some of the many COVID-19 related Compliance topics that are dominating the headlines throughout the mortgage banking industry.  Along those lines, in order to help you and your companies in these uncertain times, we have teamed up with LBA Ware’s Lori Brewer and Johnston & Associates’ own James Brody have teamed up for a complimentary webinar on navigating regulatory requirements and remaining resilient during the pandemic.

Key topics to be discussed during this free 60-90 minute webinar include, but are not limited to, the following:

  • Business Continuity Planning
  • Payroll Protection Legislation
  • Long-term Sick Leave
  • EPDs, EPOs and Forbearances – GSEs vs. Private Label
  • Loan originator compensation & the LO Comp Rule
  • EPD & EPO adjustments
  • Consumer privacy and data security
  • Vendor risk management best practices

Spots are limited to the first 300 registrants. Click here to register and save your spot.

Moderator and Speakers

James Brody, Esq., Chairman of Mortgage Banking Practice Group at Johnston & Associates, Attorneys at Law, P.C.
Lori Brewer, Founder & CEO at LBA Ware.

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.

RESCHEDULED: Johnston & Associates to Host Complimentary Webinar, Entitled: “Agency and RMBS Litigation Overview: How to Defend Against Claims by JPMorgan Chase, EMC and Lehman Bros.”

New Date:           Thursday, May 21, 2020 (Originally Scheduled for Thursday April 9, 2020)
New Time:           10:30 a.m. PST / 1:30 p.m. EST
Duration:             Approx. 60 Minutes

Although the mortgage banking industry had experienced a much needed slowdown in the number of repurchase and indemnification claims being made in connection with GSE loan production over the last couple of years, there had been and continues to be a large spike in the number of repurchase and indemnification claims being made in connection with private label/RMBS loan production.

Specifically, Lehman Bros. Holding, Inc. (“LBHI”) had filed and continues to prosecute private label/RMBS related claims against a massive number of lenders in a New York Bankruptcy Court.  Further, while EMC/JPMorgan Chase (Chase) have focused most of their efforts on trying to informally resolve their own group of private label/RMBS related claims against the lending community, they have been threatening to begin filing lawsuits and have in fact done so with regard to a significant case that had been filed against Pulte Mortgage.

In addition, with the onset of the COVID-19 crisis, which is the reason this webinar is being rescheduled from April 9 to May 21, forecasts are that there will be a substantial wave of repurchase and indemnification demands that will follow a significant spike in First Payment Defaults, Early Payment Defaults, and reps and warrants allegations that are made after investigations into defaults increase across the nation.

With Johnston & Associates defending one of the largest groups of lenders, brokers and credit unions against claims made by LBHI, EMC and/or Chase (both in and out of court), as well as the depth of our experience defending against the wave of claims that were made the last time our economy melted down in 2007/8, we will use this webinar to pass along invaluable information and tips to help you and your companies defend against similar claims that you may be defending against now or in the future.

Moderator and Speakers

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

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:
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:
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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