SP0243, LD 731, item 1, An Act To Require Mortgage Servicers To Act in Good Faith in Dealings with Homeowners

An Act To Require Mortgage Servicers To Act in Good Faith in Dealings with Homeowners

Be it enacted by the People of the State of Maine as follows:

Sec. 1. 14 MRSA §6113 is enacted to read:

§ 6113. Mortgage servicer duty of good faith

1. Definitions. As used in this section, unless the context otherwise indicates, the following terms have the following meanings.

A. "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.

B. "Mortgage servicer" means a servicer who is responsible for:

(1) Receiving any scheduled periodic payments from a borrower pursuant to the terms of any mortgage described in section 6111, subsection 1, including amounts for escrow accounts;

(2) Making or advancing payments to the owner of a mortgage loan or other 3rd parties with respect to the amounts received from the borrower pursuant to a loan servicing contract; and

(3) Evaluating borrowers for loss mitigation or loan modification options.

C. "Obligation" means a debt or other duty or liability of an obligor secured by a mortgage of the type described in section 6111, subsection 1.

D. "Obligor" means a person that:

(1) Owes payment or performance of an obligation;

(2) Has provided property other than the mortgaged property to secure payment of an obligation;

(3) Has granted a mortgage interest with respect to the mortgaged property; or

(4) Is otherwise accountable in whole or in part for payment of an obligation.

E. "Servicer" means a person responsible for servicing an obligation, including a person that holds or owns an obligation or originates a mortgage loan if the person also services the obligation.

F. "Servicing" means any combination of the following:

(1) Receiving a scheduled periodic payment from an obligor under the terms of an obligation, including an amount received for an escrow account;

(2) Making or advancing a payment to the owner of an obligation on account of an amount due from the obligor under a mortgage servicing loan document or a servicing contract;

(3) Making a payment to an obligor under a home equity conversion mortgage or reverse mortgage;

(4) Evaluating an obligor for loss mitigation options or communicating with an obligor with respect to loss mitigation options;

(5) Collecting funds from a homeowner for deposit into an escrow account and making payments out of an escrow account; and

(6) Taking any other action with respect to an obligation that affects the obligor's payment or performance of the obligation or that relates to enforcement of the obligation.

2. Duty of good faith. A mortgage servicer shall act in good faith toward a borrower in the servicing of an obligation secured by a mortgage and in any foreclosure action relating to that obligation.

3. Effect of violation during foreclosure. If, during a foreclosure action, a mortgage servicer controlling or managing the action on its own behalf or on behalf of the owner of the obligation subject to foreclosure is shown to have committed a material violation of its duty of good faith under this section, the court may dismiss the foreclosure action, stay the action on appropriate terms and conditions or impose other appropriate sanctions until the violation is cured.

4. Remedies for violation. The following remedies may apply to a violation of this section.

A. A homeowner or obligor injured by a violation of this section may bring an action against the mortgage servicer for actual damages sustained by the homeowner or obligor.

B. In addition to actual damages, the court may award a homeowner or obligor statutory damages not to exceed $15,000 for a pattern or practice of violating the duty of good faith. In determining whether to award statutory damages and the amount of those damages, the court shall consider all relevant factors, including:

(1) The frequency and persistence of violations by the mortgage servicer;

(2) The nature of the violations;

(3) The extent to which the violations were intentional;

(4) The extent to which the actions that constitute violations are prohibited by federal regulations or state rules; and

(5) The extent to which such actions constitute violations by the mortgage servicer of any consent judgments to which it is a party.

C. If a court determines during a foreclosure or an attendant action for damages that there has been a material violation of the duty of good faith, the mortgage servicer may not charge the owner of the mortgage loan for or add to the amount of the obligation any attorney's fees or costs incurred as a result of the violation or any attorney's fees or costs incurred before the owner of the mortgage loan cures the violation.

Sec. 2. 14 MRSA §6321-A, sub-§11, as amended by PL 2009, c. 476, Pt. B, §6 and affected by §9, is further amended to read:

11. Parties to mediation. A mediator shall include in the mediation process under this section any person the mediator determines is necessary for effective mediation. Mediation and appearance in person is mandatory for:

A. The mortgagee, who has the authority to agree to a proposed settlement, loan modification or dismissal of the action, except that the mortgagee may participate by telephone or electronic means as long as that mortgagee is represented with authority to agree to a proposed settlement;

B. The defendant;

C. Counsel for the plaintiff; and

D. Counsel for the defendant, if represented.

A mortgage servicer as defined in section 6113, subsection 1, paragraph B participating in the mediation process submits to the jurisdiction of the court with respect to the power of the court to sanction parties who fail to participate in the mediation process in good faith as required by section 6113, subsection 2.

Sec. 3. 14 MRSA §6321-A, sub-§12, as enacted by PL 2009, c. 402, §18, is amended to read:

12. Good faith effort. Each party and each party's attorney, if any, must be present at mediation as required by this section and shall make a good faith effort to mediate all issues. If any party or attorney fails to attend or to make a good faith effort to mediate, the court may impose appropriate sanctions. A mortgage servicer as defined in section 6113, subsection 1, paragraph B participating in the mediation process is obligated to participate in good faith as required by section 6113, subsection 2. In determining the nature and extent of appropriate sanctions, the court shall consider the need for deterrence of similar future conduct by the party being sanctioned and by others and is permitted to take into account prior orders imposing sanctions upon the sanctioned party, whether in the same case or in other previous cases. The imposition of any sanction does not bar any independent action by a defendant to seek recovery with respect to the actions giving rise to the order of sanctions.

Sec. 4. 14 MRSA §6321-A, sub-§13, as amended by PL 2013, c. 521, Pt. F, §2, is further amended to read:

13. Report. A mediator must complete a report for each mediation conducted under this section. The mediator's report must indicate in a manner as determined by the court that the parties completed in full the Net Present Value Worksheet in the Federal Deposit Insurance Corporation Loan Modification Program Guide or other reasonable determination of net present value. If the mediation did not result in the settlement or dismissal of the action, the report must include the outcomes of the Net Present Value Worksheet or other determination of net present value. As part of the report, the mediator may notify the court if, in the mediator's opinion, either party failed to negotiate in good faith. The mediator's report must also include a statement of all agreements reached at mediation, with sufficient specificity to put all parties on notice of their obligations under agreements reached at mediation, including but not limited to a description of all documents that must be completed and provided pursuant to the agreements reached at mediation and the time frame during which all actions are required to be taken by the parties, including decisions and determinations of eligibility for all loss mitigation options. The mediator's report must state the identity of any mortgage servicer as defined in section 6113, subsection 1, paragraph B who participates in the mediation process, and any order of sanctions made by the court must also state the identity of the mortgage servicer.

Sec. 5. 14 MRSA §6321-A, sub-§14, as enacted by PL 2009, c. 402, §18, is amended to read:

14. Records. The court shall maintain records or other information relating to the program as necessary to meet the reporting requirements in subsection 7, paragraph B. The court shall collect and maintain a record of all sanction orders imposed on all mortgage servicers as defined in section 6113, subsection 1, paragraph B as a result of a failure to comply with the requirements for mediation or as a result of the filings of motions for sanctions. The record must include summaries of the nature of the acts resulting in the imposition of sanctions, the nature of the sanctions imposed and the identity of the mortgage servicers whose conduct resulted in sanctions. The record of sanction orders must be appropriately published so that the record is available to judges and parties in the mediation process.

SUMMARY

This bill requires servicers of residential mortgage loans to act in good faith when dealing with homeowners who are borrowers under those loans. The bill also makes changes in the foreclosure mediation process providing that, if courts have previously sanctioned the conduct of a mortgage servicer in a foreclosure process, the courts are authorized to directly sanction the mortgage servicer if the mortgage servicer's conduct evidences a failure to mediate in good faith. The bill requires the collection of data on sanctions imposed to provide that, when a mortgage servicer is found to have failed to act in good faith, the court may take into account previous conduct in determining a sanction sufficient to deter such conduct in the same case or future cases.

SP0243 LD 731	Session - 128th Maine Legislature		LR 2015 Item 1
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