Lawyer Article

The North Carolina General Assembly opened for business, for the 2007 "long" session, about a month ago. As usual, the early stages of this session have been taken up with committee appointments and other internal business. Few, if any, bills affecting the consumer financial services sector have been introduced at this time. We expect, based on early intelligence, this session to be another active one for the regulation of financial services, particularly in the area of residential mortgage lending. Highlights of what we are expecting:

Introduction of the Consumer Real Estate Settlement Protection Act.
This is a bill that is on the North Carolina Bar Association's legislative agenda. This bill would prohibit non-attorneys from closing residential mortgage loans in North Carolina, while imposing other restrictions on the process. North Carolina-based banks would be exempted. The bill, in the form approved by the North Carolina Bar Association, may be found at the following link.

The Commissioner of Banks is circulating draft legislative language for a mortgage fraud bill.
The language is similar to the Georgia mortgage fraud bill of a couple of years ago, but instead of providing for RICO remedies, this bill would be entirely a criminal law. If you have questions about this or would like a copy of the text being circulated, please let me know.

We fully expect "foreclosure reform" of some kind to arise in this legislative session.
Some legislators are calling for the introduction of a bill that was discussed last year, which would require the identity of the mortgage broker and the appraiser involved in a residential real estate loan transaction to be shown on the face of the recorded deed of trust (mortgage) from the transaction. It seems likely that further proposed amendments to the foreclosure statute itself, which in North Carolina provides for a relatively efficient non-judicial process, will emerge before long.

Other developments or matters of current interest to consumer financial services providers in North Carolina:

(1) Attorney General Roy Cooper just announced the first settlements that his office has entered into under the North Carolina identity theft law. It is clear from this that the Attorney General is interpreting the statute broadly and will investigate and prosecute both financial services and non-financial services providers doing business here;

(2) the comment period on the Banking Commissioner's proposal to adopt the Interagency Guidance on Nontraditional Mortgage Product Risks (as put forth by CSBS/AARMR) has expired. It is likely that the Commissioner is waiting on the federal banking regulators to issue additional guidance on hybrid ARM's, and if the federal regulators do so, the Commissioner would think seriously about including any additional federal banking agency guidance in North Carolina's version of the guidance; and

(3) the North Carolina Supreme Court denied rehearing in two of the most significant consumer lending cases in years, both decided late last year. In the Skinner case (handled by Womble Carlyle, the Court declined to exercise jurisdiction under the long-arm statute over an out-of-state securitization trust, and in the Shepherd case, the Court confirmed that the statute of limitations begins at the time of the making of a loan and does not re-set every time a payment is made on an allegedly usurious loan. It is possible, if not probable, that consumer advocates, with the help of the Attorney General, will press for a legislative reversal of Skinner in the current session.