Judge determines that DFI had no authority to regulate residential home loan modifications prior to July 2010

The Department of Financial Institutions (DFI) has long claimed that it could regulate residential home loan modification services prior to the amendment of the Mortgage Broker Practices Act that became effective in July of 2010. The DFI has charged many individuals under the theory that its interpretive statement of 2009 and a convenient misreading of the preamble to the 2010 Act gave it such authority.Judge Shuh of the Office of Administrative Hearings just ruled that this was not so. He writes, in re Financial Solutions Law Group, thatIn essence, the Respondents argued that the “plain meaning” doctrine dictates that the law in 2009 did not regulate mortgage loan modification activities. Further, the Interpretive Statement promulgated by the Department in April 2009 does not and cannot repair the failure of law in 2009 to address mortgage loan modifications. Moreover, the Legislature’s failure prior to 2010 to include any reference to mortgage loan modifications means that it had no intent prior to then to address mortgage loan modifications. On the other hand, the Legislature’s precise treatment of mortgage loan modifications in its amendments in 2010 demonstrated an intent then to do so. Finally, the law in 2009 was not ambiguous in its silence as to mortgage loan modifications.Hurray for Judge Shuh, who clearly got it right.