Compliance Bulletin

Court Opinion Adds Uncertainty Regarding Mortgage Late Fees
June 24, 2013

A court of appeal decision that was recently published (Akopyan v. Wells Fargo Bank) applies a residential mortgage fee limitation statute in the Business & Professions Code to banks. B&P Section 10242.5 includes a number of restrictions that are familiar to mortgage lenders (only one late fee per installment, 10 day grace period, limit on amount of late fee, etc.). These restrictions are similar to provisions in Civil Code Section 2954.4, but there are significant differences.Complying with both simultaneously would be onerous and confusing.Until this decision, it was believed that the B&P Code applies only to loans that are originated or made by mortgage loan brokers. Civil Code Section 2954.4 by its terms applies to banks and explicitly exempts mortgage loan brokers. Defendants Wells Fargo and Aurora Loan Services Inc. (a subsidiary of a federal savings bank) prevailed on federal preemption.  However, the court’s troubling interpretation of the B&P Code still stands. See CBA’s Regulatory Compliance Bulletin for more information.