Compliance Bulletin

Court Case Raises the Bar on Mortgage Servicing
May 26, 2015

A recent federal court decision held that a mortgage servicer violated the Truth in Lending Act by failing to credit an online mortgage payment on time and then charging a late fee. The servicer, NYCB Mortgage Co. LLC, normally bundles borrowers’ electronic authorizations into an ACH file and then initiates a debit against the borrowers’ accounts the next or following business day depending on whether the authorization made the servicer’s cutoff time. Since the borrower initiated the payment on the last day payment was due, the payment was deemed late. The trial court held for the servicer but the appeals court reversed. It interpreted a provision of Regulation Z, which implements TILA, to hold that the date of submission of an electronic authorization for a payment entered on the servicer’s website is the date of receipt of payment, comparing the receipt of an electronic authorization online with the receipt of a payment by check. (A comment in Regulation Z states that a payment is credited when the check is received, not when funds are collected).

See CBA’s Regulatory Compliance Bulletin for more information, authored by Ted Kitada, senior counsel with Wells Fargo Bank and chairman of CBA’s Legal Affairs Committee.