Each week, labor and employment attorney Ari Karen writes about the latest hearings and litigation in the financial sector, and offers his viewpoint on diverse compliance and compensation matters. Whether you run a business, work for a financial institution, or are involved in an employment dispute, Mr. Karen provides an important point-of-view on our nation’s volatile regulatory environment. Missed November’s Compensation and Compliance Matters? Catch up with this article round-up:
A new rule adopted by the Consumer Financial Protection Bureau (CFPB) allows lenders to cure violations of the 3% cap on points and fees for qualified mortgage loans, up to a maximum of 210 days after a loan is finalized. Though this rule is a benefit, its usefulness is minor, and as Mr. Karen writes, “it does not go nearly far enough to addressing the fundamental liquidity issues created by the uncertainty of the ability to repay rules and regulations.” Learn more about cures for cap violations and find Mr. Karen’s full opinion in his November 4th article for National Mortgage News.
Disparate impact—a theory that forbids practices that are not outwardly discriminatory, but produce unequal effects for different populations—may be on its way out after a decision made by the United States District Court for the District of Columbia last month. By invalidating the Department of Housing and Urban Development’s previous rule, the Court has cast doubt on a prevalent theory of liability and diminished some pressure on lenders to price without discretion. The essential conclusion of this decision will not be reached until the Supreme Court makes its ruling on a currently pending case, but readers can find out more about disparate impact in the meantime, in Mr. Karen’s column from November 10th.
The CFPB is fining Franklin Loan Corp $730,000 for an alleged violation of loan officer compensation laws. According to the CFPB, Franklin Loan Corp improperly paid its loan officers quarterly bonuses through “expense accounts” in an effort to dodge the regulatory agency. Mr. Karen advises lenders pay heed to the these allegations, as they once again demonstrate that smaller companies are not exempt from CFPB compliance. Read his interpretation of the case here.
Far too many lenders are relying on inadequate and outdated qualified mortgage practices, reports Mr. Karen, who warns that such approaches are bound to lead to legal trouble. Two years of bank statements, or even a residual income analysis—when not used in conjunction with any other documentation—will offer little to no legal protection to lenders. So how should a lender safely originate a QM loan? Get Mr. Karen’s advice here. If you have any questions about these or other compliance and compensation matters please contact Ari Karen at: firstname.lastname@example.org | 240.507.1740
Ari Karen is an experienced litigator and speaker who has focused his practice in representing financial institutions in both government investigations and litigation before state and federal trial and appellate courts nationwide.
Mr. Karen’s practice is diverse, representing clients on matters concerning banking regulations, Dodd Frank financial reform laws, contractual disputes, employment and labor statutes, wage-hour class actions, employment discrimination and fair lending matters, whistleblower complaints and non-competition claims, among others.