Patricia Paruch, Kemp Klein Law Firm
Beware New Loan Originator Rules
By Howard Lax, Bodman LLC
Consumer Financial Protection Bureau regulations encourage strict separation of attorney interests from residential finance clients. Effective January 1, 2014, 12 CFR §1026.36(d) expands the definition of "loan originators" and revises originator compensation rules. Attorneys who draft financing documents for consumer residential transactions should not become further involved in the transaction. Endorsing specific lenders or loan terms, arranging a loan, assisting a consumer with a mortgage application, evaluating a consumer's qualifications for a mortgage, negotiating or presenting loan terms or an approval to a consumer, or advertising or communicating that the attorney may do any of these for a fee may trigger this rule. Comment 12 CFR §1026.36(d)(1)-1(iv) explains:
". . . Advisory activity not constituting loan originator activity would include . . . a licensed attorney assisting clients with consummating a real property transaction or with divorce, trust, or estate planning matters. Such a person, however, who advises a consumer on credit terms offered by either the person or the person's employer, or who receives compensation or other monetary gain, directly or indirectly, from the loan originator or creditor on whose credit offer the person advises a consumer, generally would be a loan originator."
This rule prohibits compensation based on the terms of the transaction (other than the amount of credit granted), or any proxy for loan terms, such as revenue or profits from the transaction. Gifts, lunches, and other tangible or intangible benefits are considered compensation. Statutory damages are three times the amount of interest and finance charges, plus costs and attorney fees. 15 USC §1639b(d)(2). The "creditor" may lose the sum of interest and other finance charges, $4,000 in statutory damages, actual damages, costs, and attorney fees. See 15 USC §1640(a). Foreclosure or collection defendants may raise violations of this rule as a recoupment claim.
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January 23, 2014
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Consequences of Failing to Disclose Known Contamination
By Stacey L. DiDomenico, Couzens, Lansky, Fealk, Ellis, Roeder & Lazar, PC
In Bowman v. Greene, (Mich App No. 308282, November 5, 2013, unpublished), the Michigan Court of Appeals upheld the joint liability of an owner and listing agent who knew of and failed to disclose existing environmental contamination to purchasers of a residential condominium within a redeveloped factory site. The owner and agent verbally asserted there were no "environmental issues" and did not disclose the contamination on the Seller Disclosure Statement. Prior to closing, the MDEQ informed the listing agent and owner that the development's marketing brochure was misleading as the property remained "highly contaminated" and carcinogenic solvents remained in the soil despite installation of a vapor barrier over the affected area. After discovering the environmental conditions, plaintiffs sued, claiming fraudulent misrepresentation, silent fraud, negligent misrepresentation, and violation of the Seller's Disclosure Act (SDA), MCL 565.951 et seq.
The court found that the claim of fraudulent misrepresentation was foremost about plaintiffs' expectations in the property, and therefore the "catch-all" six-year statute of limitations in MCL 600.5813 applied to all of plaintiffs' claims.
The court also rejected defendants' assertion that the SDA only applied to the individual condominium unit and not to the entire development, stating that "the SDA requires the transferor of property to disclose environmental problems that relate to, effect, and influence not only the dwelling unit in and of itself, but also the land upon which the dwelling unit is situated."
Practitioners should also note that under the Michigan Natural Resources and Environmental Protection Act, an owner with knowledge that his or her real property is a "facility" must provide written notice to a purchaser disclosing the nature and extent of the release of the hazardous substance. MCL 324.20116.
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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice.