Senate Banking Committee Announces Digital Asset Agenda
Under Chair Tim Scott (R-SC), the Senate Committee on Banking, Housing and Urban Affairs has announced several policy objectives favorable to the digital asset industry. We expect the Committee to take a more favorable view of the industry during the next Congress than in years past.
In announcing the Banking Committee’s priorities for the next Congress, Chair Scott noted that will be a key focus.
Under Chair Gensler, the SEC refused to provide clarity to the cryptocurrency industry, which has forced projects overseas. Moving forward, the committee will work to build a regulatory framework that establishes a tailored pathway for the trading and custody of digital assets that will promote consumer choice, education, and protection and ensure compliance with any appropriate Bank Secrecy Act requirements. The committee will also foster an open-minded environment for new innovative financial technologies and digital asset products, like stablecoins, that promote financial inclusivity.
To that end, the Committee announced the formation of the first ever Subcommittee on Digital Assets, to be chaired by Senator Cynthia Lummis (R-WY), an outspoken supporter of cryptocurrency innovation. The Subcommittee’s jurisdiction covers a wide range of issues, including:
Digital assets, including but not limited to cryptocurrencies and stablecoins; activities of digital asset issuers, trading and lending platforms, custody providers, and other intermediaries, when such activities are related to digital assets; regulatory activities of the Department of Treasury, the Federal Reserve System, OCC, FDIC, NCUA, SEC, to the extent they directly or indirectly exercise supervisory or regulatory authority over digital assets and digital asset intermediaries; and financial literacy in digital assets.
Chairman Scott also issued a press release trumpeting President Trump’s executive order on digital assets. Further, the Committee announced a hearing on February 5 to discuss possible “debanking” of certain industries, including digital assets.
Texas Railroad Commission’s New Environmental Rules: A Step Toward Sustainability or Business as Usual?
In 1984, while Ronald Reagan was securing a landslide reelection and Apple introduced the Macintosh, the Railroad Commission of Texas (RRC) last updated the state’s primary oil and gas waste regulations. Now, four decades later, the RRC is revisiting these rules to better align them with modern industry practices and rising demands for stronger environmental protections.
Oil and gas extraction methods have evolved dramatically since the 1980s. Hydraulic fracturing (fracking) and horizontal drilling have sparked a production boom, significantly increasing both the volume and complexity of waste generated. This waste includes drilling fluids, fracking chemicals, and produced water—all of which, if mishandled, pose serious risks to soil, water, and public health.
While most oil and gas wastes are exempt from federal hazardous waste laws under the Resource Conservation and Recovery Act, states maintain broad authority to regulate their disposal and management. In Texas, the RRC oversees this responsibility. However, increasing environmental concerns and evolving industry practices have driven calls for regulatory updates, resulting in the recent revisions in the RRC’s rules.
Key Changes in the New Rules
The new rules, published in the Texas Administrative Code (“TAC”) on January 3, 2025, reflect a multiyear effort by the RRC to modernize waste management, encourage and expand recycling, and strengthen groundwater protections. These changes aim to balance industry needs with environmental stewardship, though their impact will depend on implementation and enforcement when they take effect on July 1, 2025.
Oil and Gas Waste Pits and Produced Water Recycling Pits (16 TAC §§ 4.113-114). A major change consolidates provisions from Statewide Rule 8 (“Disposal of Oil and Gas Waste”) and Rule 57 (“Produced Water Recycling”) into a new subchapter. Key updates include:
Authorization for certain pits (e.g., reserve and mud circulation pits) to operate without a specific RRC permit, with new registration requirements.
Updated standards for pit liners, groundwater monitoring, and closure procedures.
Stricter location restrictions, construction standards, and closure requirements for produced water recycling pits.
Produced Water Recycling (16 TAC § 4.112). One of the most significant shifts is facilitating produced water recycling. Operators can recycle produced water for reuse in drilling, fracking, and completion operations without requiring an RRC permit. However, they must still meet specific design, groundwater monitoring, and siting requirements. This change reflects growing interest in recycling as a solution to mitigate environmental risks, especially in areas like the Permian Basin, where seismicity concerns are increasing.
Transportation of Oil and Gas Waste (16 Tex. Admin. §§ 4.190-195). The new rules introduce enhanced accountability for waste transportation. Notable provisions include:
Detailed manifests for waste characterization.
Special waste authorizations.
Enhanced recordkeeping for waste haulers, improving tracking and compliance.
Public Participation (16 Tex. Admin. § 4.125). To boost transparency and public involvement, the new rules require that affected individuals and entities be notified about permit applications for waste facility construction. The notice must include details about the application, the protest process, and the location of the proposed facility. Notices must be sent via registered or certified mail, and recipients have 30 days to protest. If a protest is filed, the applicant must respond within 30 days. If no protests are received, the permit may be issued. Protests may lead to a hearing, with notice given to all affected parties.
Recycling Drill Cuttings (16 Tex. Admin. §§ 4.301-302)The rules aim to promote recycling of drill cuttings for beneficial use. Operators must comply with specific treatment and recycling requirements. The Commission may approve permits for using treated drill cuttings in commercial products like lease pads or roads, provided the products meet engineering standards, ensure public safety, and avoid water pollution.
Reactions to the New Rules
The revisions have sparked mixed reactions. For the oil and gas industry, the rules provide much-needed clarity, particularly on produced water recycling and waste transportation. However, many changes merely codify existing practices—like new registration requirements for certain pits—so their day-to-day impact may be minimal. That said, the ability to recycle produced water presents an opportunity for operators to reduce disposal costs and environmental impacts, especially in areas with limited disposal well capacity.
Environmental groups and landowners, however, view the revisions as insufficient. While the new rules offer clearer guidance on waste management and promote recycling, critics argue they fall short in addressing critical environmental issues. Concerns include a lack of more stringent regulations on pit liners, groundwater monitoring, and disposal in sensitive areas. Environmental advocates are also frustrated by the RRC’s decision not to require operators to notify landowners about waste disposal activities on their property. Despite these concerns, the RRC maintains it lacks the statutory authority to require such notifications or consent.
Practical Considerations for Landowners
Landowners whose properties are affected by oil and gas operations may need to take proactive steps to protect their interests. Since mandatory landowner notification is not required, surface owners should negotiate specific lease provisions, such as:
Restrictions on the types of waste disposed of on their land.
Designated disposal locations and management methods.
Operator notification before disposal activities—or even consent for certain types of waste disposal.
Landowners may also seek additional safeguards, such as stricter pit liner requirements, enhanced groundwater monitoring, or more comprehensive closure plans for waste pits.
Looking Ahead
The RRC’s overhaul of its oil and gas waste management regulations marks a significant step toward modernizing Texas’s regulatory framework in response to changing industry practices and environmental concerns. However, the real impact of these revisions will depend on how they are implemented and enforced when they take effect on July 1, 2025. Stakeholders—from industry operators to environmental advocates—should carefully consider the potential implications. For landowners, consulting legal counsel may be wise to ensure their interests are protected under the new rules. These final regulations could shape Texas’s oil and gas industry and environmental stewardship for years to come.
Pricing Considerations in the Aftermath of the California Wildfires
The devastating January 2025 wildfires in southern California prompted Governor Newsom to declare a state of emergency on January 7, 2025 for Los Angeles and Ventura counties. This triggered California laws around price gouging and pricing restrictions in the wake of the emergency. While other, overlapping states of emergency will impact how price restrictions are ultimately calculated and considered – including local emergencies, and a statewide emergency relating to the ongoing bird flu outbreak – that the unprecedented scale of the wildfires will undoubtedly lead to increased scrutiny of pricing practices during the immediate aftermath, recovery and rebuilding.
The California Penal Code prohibits selling, or offering for sale, covered products at a price more than 10% greater than the price offered for that good in the 30 days prior to the declaration of an emergency. While application and enforcement of the pricing restrictions can be complex, the key considerations to keep in mind are these.
When did price restrictions go into effect? January 7, 2025. The price restrictions immediately go into effect when the President of the United States, the Governor of California, or a city/county executive officer declare a state of emergency.
When do they expire? This will be a moving target in some places. The price limitations typically stay in effect for 30 days after the emergency declaration date, subject to extensions. For repair or reconstruction services or any services used in emergency cleanup, these typically stay in effect for an initial period of 180 days. Specifically for Los Angeles County, Governor Newson has already extended certain categories of pricing restrictions by executive order to remain in effect until January 7, 2026.
What is the price increase ceiling? 10% more than the price offered in the 30 days prior to the emergency declaration.
What if a seller starts selling a covered item only after a state of emergency is declared? That seller is prohibited from marking up the price of that item more than 50% of its costs.
Does this only apply to California-based businesses? No. The statute applies to all sellers, including manufacturers, wholesalers, individuals, distributors, and retailers, and to all kinds of sales.
What goods are covered? The statute covers a wide range of products such as: rental housing, building materials, gasoline, goods or services used for emergency cleanup, consumer food items, and medical supplies.
What are the potential consequences? Violations are criminally punishable by up to one year in jail and a fine up to $10,000 or civil penalties up to $2,500 per violation, injunctive relief, or mandatory restitution.
Where do they apply? Even when trigged by an emergency that is specifical to a particular geographic area, California Department of Justice interprets the statute to provide that the pricing restrictions are not restricted to the city or county where the emergency is declared, and that the statute is intended to prevent price gouging elsewhere in the state where this is increased consumer demand as a result of the emergency.
While the horizon for enforcement is long – the California statute provides a 4-year statute of limitations for bringing price gouging complaints – we have already seen the state eyeing enforcement opportunities. On January 22, 2025, the California Department of Justice (CDOJ) filed charges against a real estate agent. A couple who had lost their home in the wildfires applied to rent a property and were allegedly told the price would be raised 38% more than the prior advertised rate. The CDOJ has also announced that it has sent upwards of five hundred “warning letters” to hotels and landlords.
Considering the scope of pricing restrictions in place, and expected enforcement, businesses may want to consider additional diligence and documentation supporting compliance with pricing restrictions triggered by the California wildfires.
What You Need to Know about the California Fair Access to Insurance Requirements Plan (FAIR Plan)
This alert begins our series discussing legal issues related to the Southern California wildfires. We invite you to contact us if you would like a free consultation related to this topic. We will continue to provide updates as more information becomes available.
Due to the high risk of wildfires in California, many private homeowner insurers have made a business decision to leave the state. These decisions have left thousands of homeowners seeking insurance from an ever-dwindling pool of providers. Those who are unable to obtain insurance have instead turned to the “insurer of last resort,” better known as the California Fair Access to Insurance Requirements Plan (FAIR Plan).
What is the FAIR Plan?
The FAIR Plan is an insurance “pool” comprised of all California-licensed insurers that allows high-risk California homeowners to have access to basic fire insurance protection while limiting any one insurer’s liability. The plan is run by the California FAIR Plan Association, which, notably, is not a state or public agency. This means it is not taxpayer-funded, and profits from participating insurers come primarily from the sales of policies. However, though the FAIR Plan reported that the number of FAIR Plan dwelling and commercial policyholders grew by a reported 225% over the past two fiscal years, FAIR Plan’s exposure has also significantly increased.
If you were affected by the recent Eaton and Palisades fires in Southern California, there is a relatively good chance you are preparing to, or are in the process of, submitting an insurance claim through your FAIR Plan. You are not alone. Recent reports suggest more than 3,600 policyholders in Altadena, Pacific Palisades, and other parts of greater Los Angeles have already submitted claims to the FAIR Plan. Unfortunately, the claims submission and adjudication process for these policyholders is unlikely to be smooth due to the sheer number of claims and the FAIR Plan’s high exposure in the Southern California area. As such, there are a few points to remember when submitting a claim and communicating with FAIR Plan representatives.
How to Submit a Claim
Policyholders should understand the process for submitting claims. The FAIR Plan website provides a claims submission link. This link can be found here, along with a brief “FAQ” page here. We encourage all policyholders to submit their claims as soon as possible due to the expected delays in the claims adjudication process. Moreover, policyholders should take special care to document all communications with the FAIR Plan in case disputes arise later in the process. All emails with FAIR Plan representatives should be preserved, and, if possible, all phone conversations with representatives should be confirmed in writing through email. In addition, all documentation relevant to a policyholder’s claim, including pictures of the premises and receipts for lost or affected property, should be kept in a secure location. We also encourage policyholders to document the condition of their homes to the extent possible. Pictures should be taken of every room and all surrounding property prior to any remediation work.
We encourage policyholders to review the language of their FAIR Plan carefully and to submit all possible claims. When in doubt, make the claim. This applies even if your home is not destroyed, as the FAIR Plan should cover fire damage even if the home is left standing.
Understanding Smoke Damage Coverage
Policyholders should be aware of FAIR Plan administrators’ views on coverage for smoke damage. Properties of many policyholders have experienced profound smoke damage that prevents them from returning to their homes. While FAIR Plan policies are required to cover smoke damage, the FAIR Plan has recently narrowed its policies so that smoke damage may only be covered if there are clearly visible signs of damage or if smoke is detectable through smell. Class-action lawsuits have been filed in Alameda and Los Angeles Counties addressing the FAIR Plan’s narrowing of their policies. A primary argument by the plaintiffs in those cases is that the FAIR Plan is required to provide coverage for all smoke damage in accordance with California Insurance Code Section 2071. This would expand policies issued by the FAIR Plan to cover damages beyond permanent physical damage or damage detectable through smell. However, litigation on these issues is ongoing and may drag on for several years. In the meantime, policyholders should assume that all fire damage to their homes, including all smoke damage, will be covered by the FAIR Plan and submit claims accordingly. This should ensure that your claims are included in the class of claims covered by these class-action lawsuits, and that you benefit from any favorable rulings.
Mass. Chapter 93A and Non-Owner-Occupied Properties
In a previous post we highlighted that landlords of non-owner-occupied properties must navigate both specific Massachusetts landlord-tenant laws and Chapter 93A. A recent case, Pennetti v. Beauregard, reaffirmed this when the Appeals Court of Massachusetts upheld a Housing Court judgment in favor of tenants on their Chapter 93A counterclaim.
The case began when the landlord sought to evict tenants from a three-family unit. In response, the tenants stopped paying rent and counterclaimed, alleging that the landlord (1) retaliated against them for complaining about cross-metering electricity, (2) breached the warranty of habitability, and (3) violated Chapter 93A. The latter two claims were based on defects in the common areas and the landlord’s failure to replace a door damaged from an attempted break-in, which was temporarily covered with “a plywood board secured with only a ‘slide chain’ inside the apartment” for over 30 days. The Housing Court ruled in favor of the tenants, offsetting their unpaid rent against the damages awarded and allowing them to retain possession of the apartment.
The Appeals Court agreed, noting that the landlord’s failure to make timely repairs breached the implied warranty of habitability. Moreover, not addressing sanitary code violations within a reasonable time after notice was deemed an unfair and deceptive business practice under Chapter 93A, § 2. The longstanding defects in the common area and inadequate repair of the entry door violated the sanitary code, establishing the landlord’s willful and knowing misconduct. Consequently, this justified imposing double damages on the tenants’ chapter 93A counterclaim.
This case underscores the importance of understanding the laws governing landlord-tenant rights and an individual’s rights and obligations under those laws.
5 Trends to Watch in 2025: United Arab Emirates
Abu Dhabi Continues to Host International Sporting Events – For the third year in a row, the NBA came to Abu Dhabi in 2024. The 2024 showcase included the Boston Celtics and Denver Nuggets facing off in two pre-season games in October at the Etihad Arena on Yas Island, bringing NBA excitement to the United Arab Emirates capital. In May 2025, Abu Dhabi will host the EuroLeague basketball’s “Final Four” tournament—the first time the event has been staged outside of Europe. As with the NBA, EuroLeague is planting its footprints in the region, and they will likely take advantage of top-class infrastructure, professional support services, and a growing fan base, with festivities including dynamic fan engagement opportunities and multi-day matches.
M&A Trends in the UAE’s Corporate Transactional Landscape and AI Advancements –In 2025, the UAE’s corporate transactional landscape is expected to be driven by notable external and internal factors. A key trend will be the rise in outbound M&A activity, as UAE-based sovereign wealth funds and private investors look to deploy capital into international markets, particularly the United States. This trend is likely to be influenced by recent changes in the U.S. administration, which could present more favorable conditions for investment, particularly in technology, infrastructure, and health care sectors. As a result, UAE investors are expected to pursue strategic acquisitions to diversify their portfolios and gain access to high-growth sectors in developed markets. Simultaneously, the UAE is poised to emerge as a global leader in artificial intelligence innovation. The country’s ongoing investments in AI infrastructure, research, and development, coupled with its commitment to fostering a business-friendly ecosystem, will likely accelerate its attraction of top-tier AI companies, startups, and talent from around the world. As a result, the UAE is positioned to become a key hub for AI technology development, contributing to both regional and global advancements in industries such as finance, health care, and manufacturing, while providing fertile ground for corporate ventures and strategic partnerships in this rapidly evolving field.
Capital Markets Trends in the UAE –Two major trends are expected to shape the UAE capital markets in 2025. Lower interest rates have resulted in a substantial increase in debt capital market offerings across the entire bond spectrum, including Sharia-compliant sukuk offerings. The trend is gaining momentum, and we expect the debt capital market to grow substantially in 2025. We expect the equity capital market to be shaped by the following trends: an increased number of IPOs by non-government-related entities, including a number of tech companies; secondary offerings by listed companies in the form of accelerated non-documented block trades as well as fully documented equity offerings; and an increased focused on dual listing structures between the UAE and other countries, driven in particular by regulatory efforts of the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX).
The Growth of Private Credit and the Possible Impact of AAOIFI Standard 62 on the UAE Finance Market –As creditors continue to look across the global market for strategic opportunities, the UAE further developed as a hub for private credit providers in 2024 and we have seen an increased appetite for both international and regional credit funds to operate in the UAE and the wider Middle East, resulting in a number of high-profile private credit transactions closing during the year. Historically, the market has been dominated by local financial institutions offering relationship-based lending to local corporate entities, however the market terms that have evolved within the UAE as a result of regional bank market dominance have created a regime that has become of particular interest to a number of private credit providers. Given this, as banks and financial institutions continue to gain more share of the leveraged market in 2025 and private credit providers continue to search for opportunities, we expect the importance of private credit to continue to grow within the UAE (and the wider Middle East) in 2025 and beyond.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which sets the standards in the Islamic finance industry, is considering new guidelines on sukuk (fixed income instruments that comply with Sharia principles). Standard 62, if enacted, would transform how sukuk are structured and treated in accounting and financial reporting processes, and would bring with it significant implications for issuers and investors. As it stands, sukuk are asset-based, but not asset-backed, meaning that investors are notionally exposed to the assets’ performance risk, but do not bear any direct financial or legal risk tied to those assets. Standard 62 would change this by transferring full ownership and risk of the underlying assets to the investors. Rather than resembling bonds (as they do currently), sukuk would be treated more like securitized assets, altering the risk dynamics for issuers and investors such that investors would bear the full risk of the underlying assets’ performance and no longer be protected from the specific performance of those assets. This reclassification could deter issuers, potentially limiting the volume of capital raised in the sukuk market, although much will depend on how the new rules (if enacted) are interpreted and implemented in practice. Issuers and investors will need to closely monitor developments in the coming months.
The UAE Remains one of the Most Vibrant Markets for the Real Estate and Construction Industry – The future of the real estate and construction industry in the region is filled with opportunity, with the primary goal of establishing the region as the preeminent location for investment and growth. The UAE continues to invest heavily in tourism and hospitality, with significant developments in luxury hotels, resorts, and entertainment complexes. One of the largest growing areas in the development space is branded residences (of which there are over 700 projects globally), which command higher yields for both owners and operators and diversify the real estate market. This trend is expected to continue into 2025, with ongoing and upcoming projects totaling over U.S. $100 billion in value, including state-sponsored infrastructure projects and landmark real estate developments. As of 2024, the top three causes of disputes in the region remain design-related, with scope change at 52.9%, late design at 32.1% and incomplete design at 26.3% (versus 31.8%, 17.9% and 11.3%, respectively, in the rest of the world) according to the CRUX 2024 report. The technological advancements used in the UAE construction market (for instance, AI, robotics, wearable IoT trackers, and augmented reality outlays) are likely to have an impact on the labour market. A key trend seen in state-sponsored projects is the increasing demand by international contractors and investors for early advice on the structuring of their local construction arms to benefit from investment treaty protections. Careful (legal and technical) early assessments of the time, cost, and quality risks are increasingly adopted by key market players in the UAE.
5 Trends to Watch in 2025: AI and the Israeli Market
Israel’s AI sector emerging as a pillar of the country’s tech ecosystem. Currently, approximately 25% of Israel’s tech startups are dedicated to artificial intelligence, according to The Jerusalem Post, with these companies attracting 47% of the total investments in the tech sector (Startup Nation Finder). This strong presence highlights Israel’s focus on AI-driven innovation and entrepreneurs’ belief in the growth opportunities related to AI. The Israeli AI market is expected to grow at a compound annual growth rate of 28.33% from 2024 through 2030, reaching a value of $4.6 billion by 2030 (Statista). This growth is driven by increasing demand for AI applications across diverse industries such as health care, cybersecurity, and fintech. Government-backed initiatives, including the National AI Program, play a critical role in supporting startups by providing accessible and non-dilutive funding for research and development (R&D) purposes. Despite facing significant challenges since the start of the war in Gaza, Israel has continued to produce cutting-edge technologies that are getting the attention of global markets. Additionally, Israel’s highly skilled workforce and partnerships with academic institutions provide a steady supply of talent to meet the sector’s demands. With innovation, resilience, and collaboration at its core, the Israeli AI landscape is poised to remain a global force in 2025 and beyond.
Mergers and acquisitions to remain a cornerstone of deals. According to IVC Research Center, 47 Israeli AI companies successfully completed exits in 2024, showcasing the global demand for AI-driven innovation. Investors are continually identifying the differences between companies whose foundations were built on AI, versus those leveraging AI to enhance other core elements of their value proposition—sometimes only marginally. Savvy buyers look beyond the “AI label” and seek out companies with genuine, scalable AI solutions rather than superficial integrations, understanding that value lies in robust and transformative applications. AI is also sector agnostic and may disrupt virtually every vertical. From health care and finance to retail and manufacturing and others, numerous industries are increasingly leveraging AI to enhance or even change their core competency to gain competitive advantages. Deals in this space are coming from strategics such as automobile manufacturers, banks, digital marketing companies and life science firms, among others. As AI continues to permeate multiple sectors, Israeli companies are poised to receive increased attention from strategic M&A buyers looking to unlock new technologies and business opportunities in the market.
Intersection of PropTech and AI to further revolutionize the global real estate industry. Israeli innovation is expected to be at the forefront of this trend. According to IVC Research Center, over 70 PropTech companies headquartered in Israel are leveraging AI to develop cutting-edge technologies that are reshaping the industry on a global scale. We anticipate these companies will continue advancing AI-driven tools and third-party solutions to streamline acquisition strategies, enhance underwriting processes, and drive operational efficiencies. By harnessing AI to identify leasing opportunities, forecast rental trends, and optimize costs, Israeli PropTech firms are set to solidify their position as global leaders in real estate innovation in the year ahead.
AI to become increasingly important across global industries. Israeli companies have demonstrated genuine thought/R&D leadership in AI innovation. Some of the AI-centric legal trends that may stand out in 2025 include (1) a greater focus on data rights management as Agentic AI continues to carve new learning standards; (2) regulatory advancements in science, highlighted by two AI-related Nobel Prizes in science, that will likely materialize in the U.S. Food and Drug Administration adopting new rules for AI-driven drug approvals, as well as new AI patenting standards and requirements; (3) greater emphasis on responsible AI usage, particularly around ethics, privacy, and transparency; (4) the adoption of quantum AI across many industries, including in the area of securities trading, which will likely challenge securities regulators to address its implications; and(5) turning to AI-powered LegalTech strategies (both in Israel and in other countries). Israeli entrepreneurs are likely to continue working within each of these industries and help drive the AI transformation wave.
AI-based technology to continue changing how companies handle recruitment and hiring. While targeted advertising enables employers to find strong talent, and AI-assisted resume review facilitates an efficient focus on suitable candidates, the use of AI to identify “ideal” employees and filter out “irrelevant” applicants may actually discriminate (even if unintentionally) against certain groups protected under U.S. law (for example, women, older employees, and/or employees with certain racial profiles). In addition, AI-assisted interview analysis may inadvertently use racial or ethnic bias to eliminate certain candidates. Israeli companies doing business in the United States should not assume their AI-assisted recruitment and hiring tools used in Israel will be permitted to be utilized in the United States. Also, Israeli companies should be mindful of newly enacted legislation in certain U.S. states requiring companies to notify candidates of AI use in hiring, as well as conduct mandatory self-audits of AI-based employee recruitment and hiring systems. AI regulation on the state level in the United States is likely to increase, and Israeli companies that recruit and hire in the United States will be required to balance their use of available technology with applicable U.S. legal constraints.
Maryland Expands Licensing Requirements for Mortgage Loan Assignees
On January 10, 2025, the Maryland Office of Financial Regulation (OFR) issued guidance significantly expanding licensing requirements for assignees of residential mortgage loans in Maryland. The guidance stems from an April 2024 court ruling and raises important considerations for entities involved in the secondary mortgage market.
Maryland’s licensing laws did not explicitly require a license to purchase closed and funded residential mortgage loans. However, in April 2024, the Appellate Court of Maryland ruled that an assignee of a home equity line of credit was required to obtain a license to have the legal authority to bring a foreclosure action.
The OFR’s new guidance expands upon this ruling, asserting that any assignee of residential mortgage loans, including “passive trusts,” must obtain a license under Maryland mortgage lending laws in order to acquire or obtain assignments of any mortgage loans. This applies regardless of lien position and whether the loans are open- or closed-end extensions of credit. The court highlighted that exempting assignees from these requirements would undermine consumer protection statutes designed to ensure that entities involved in mortgage lending possess the requisite oversight.
Some key takeaways from the OFR’s guidance are:
Passive trusts are subject to licensing requirements. The guidance defines a “passive trust” as a trust that acquires mortgage loans serviced by others, does not originate loans, and does not act as a mortgage broker or servicer. These trusts are now required to obtain a license to acquire or assign mortgage loans in Maryland.
Emergency regulations facilitate licensing for mortgage trusts. The OFR has issued emergency regulations to streamline the licensing process for mortgage trusts, recognizing the potential impact of the new requirements on the secondary mortgage market.
Enforcement is temporarily suspended, but action is recommended. While the OFR intends to suspend enforcement of these licensing obligations until April 10, 2025, the guidance recommends that affected parties should audit their portfolios and submit license applications promptly to ensure compliance.
Putting It Into Practice: This expansion of the applicability of licensing requirements could significantly impact the operations of state banks in Maryland. These banks may need to re-evaluate their procedures for acquiring and selling mortgage loans, raising the potential need for such banks to obtain additional licenses or adjust their loan trading practices. The guidance could also mean increased compliance costs and operational burdens for affected banks.
Listen to this Post.
CFPB Takes Action Against Illinois Mortgage Lender for Redlining Violations
On January 17, 2025, the CFPB filed a complaint against an Illinois-based non-depository mortgage lender for allegedly engaging in discriminatory practices. The CFPB alleges the lender engaged in improper redlining by deliberately excluding certain neighborhoods from its services based on the racial and ethnic composition of those areas, in violation of the Equal Credit Opportunity Act (ECOA).
The CFPB claims the lender violated ECOA by engaging in a pattern of discriminatory conduct against applicants on the basis of race or nationality. Specifically, the CFPB alleges the lender:
Concentrated office locations and marketing efforts in majority-white neighborhoods. The CFPB alleges the lender intentionally avoided locating offices and marketing its services in majority-Black and Hispanic neighborhoods in the Chicago and Boston metropolitan areas.
Discouraged prospective minority applicants. The lender allegedly engaged in practices that discouraged borrowers from applying for mortgage loans to purchase properties in majority-Black and Hispanic neighborhoods.
Failed to maintain sufficient training and compliance monitoring. The lender’s employees allegedly received little to no training on fair lender laws and regulations. The lender also allegedly failed to adequately monitor employee conduct for compliance with fair lender laws and did not perform any internal analyses to monitor for redlining.
The CFPB asserts that these actions resulted in a disproportionately low number or mortgage applications and loan originations from majority-Black and Hispanic neighborhoods.
To address these alleged violations, the CFPB is seeking a court order that would:
Ban the lender from engaging in mortgage lending for five years. This would prohibit the lender from engaging in any residential mortgage lending activities or receiving compensation for any such mortgage lending activities.
Impose a $1.5 million civil penalty. The penalty would be deposited into the CFPB’s victims relief fund to provide financial relief to harmed consumers.
Putting It Into Practice: This action is the latest of a flurry of redlining settlements by federal regulators in advance of the administration change (previously discussed here and here). It remains to be seen how the Trump Administration will approach ECOA enforcement. Lenders should nonetheless ensure their fair lender compliance protocols align with federal regulators’ standards and expectations.
Listen to this post
AB 238 Mortgage Deferment Act for California Wildfire: Mortgage Forbearance Relief
AB 238, also referred to as the Mortgage Deferment Act, to add Title 19.1§ 3273.20 et seq. (the “Mortgage Deferment Act” or the “Act”), was introduced in the California legislature on January 13, 2025 to provide essential financial relief to the victims of the Los Angeles County wildfires (including the Palisades and Eaton fires) that continue to burn in multiple locations throughout Southern California. The Mortgage Deferment Act may be heard in committee on February 13, 2025. If implemented, the Act is intended to provide financial relief to those who have lost their homes or livelihood to wildfires by allowing borrowers to request mortgage payment forbearance for up to 360 days, in two increments of 180 days each.
The Mortgage Deferment Act is modeled after the CARES Act, which provided similar forbearance relief to those experiencing financial hardship during the COVID-19 pandemic. To effectuate a request under the Act as currently drafted, the borrower[1] must submit a request for forbearance to the borrower’s mortgage loan servicer and affirm that the borrower is experiencing a financial hardship due to the wildfire disaster. Id. at § 3273.22(a). No additional documentation is required for a request for forbearance, other than the borrower’s attestation to a financial hardship caused by the wildfire disaster. Id. at § 3273.23(a).
Upon receipt of such a request, the mortgage servicer must provide the borrower a forbearance for up to 180 days, which may be extended for an additional period of up to 180 days at the request of the borrower. Id. at § 3273.22(b). Additionally, the mortgage servicer must communicate with the borrower to whom a forbearance has been granted to ensure that the borrower understands that the missed mortgage payments must be repaid, although they may be paid back over time. Id. at § 3273.23(a)-(b).
The proposed legislation prohibits the assessment of additional fees, penalties, or interest beyond scheduled amounts. It also requires an immediate stay of foreclosure efforts, and extends to all aspects of the foreclosure process, including foreclosure-related eviction. Moreover, during the forbearance period, the Mortgage Deferment Act prohibits a mortgage servicer from initiating any judicial or nonjudicial foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure-related eviction or foreclosure sale. Id. at § 3273.24.
If the Mortgage Deferment Act is implemented, it will be of the utmost importance for mortgage servicers to work closely with borrowers who may have been impacted by the wildfire disaster in California. Servicers should also ensure that borrowers requesting forbearance are properly informed that any missed mortgage payments pursuant to the borrower’s forbearance request ultimately will be required to be repaid to the mortgage servicer. Further, upon implementation, any failure to properly adhere to the Mortgage Deferment Act by mortgage servicers could have significant negative consequences, which could include litigation and/or compliance issues. Servicers should monitor the status of the Act, to ensure that they are prepared to fully comply with its terms, should the Act become law.
[1] The Mortgage Deferment Act, as currently drafted, includes various proposed definitions. “Borrower” is defined as a natural person who is a mortgagor or trustor or a confirmed successor in interest, or a person who holds a power of attorney for a mortgagor or trustor or a confirmed successor in interest. Mortgage Deferment Act § 3273.21(a). “Mortgage loan” is defined as a loan that is secured by a mortgage and is made for financing, including refinancing of existing mortgage obligations, to create or preserve the long-term affordability of a residential structure in the state, or a buy-down mortgage loan secured by a mortgage, of an owner-occupied unit in this state. Id. at § 3273.21(b). “Mortgage servicer” means a person or entity who directly services a loan or who is responsible for interacting with the borrower, managing the loan account on a daily basis, including collecting and crediting periodic loan payments, managing any escrow account, or enforcing the note and security instrument, either as the current owner of the promissory note or as the current owner’s authorized agent. Id. at § 3273.21(c). “Wildfire disaster” means the conditions described in the proclamation of a state of emergency issued by California Governor Gavin Newsom on January 7, 2025. Id. at § 3273.21(d).
Safeguarding CRE Companies: Navigating Risks in Revenue Management Software Agreements
In the wake of the DOJ’s pending antitrust lawsuits, CRE companies should include several protections in their vendor agreements that involve the use of revenue management software. This article provides tips to mitigate risks and avoid potential legal violations.
In today’s rapidly evolving commercial real estate market, it is crucial that CRE companies include protective provisions in their agreements with vendors that utilize revenue management software (RMS). Legal actions, including a U.S. Department of Justice’s (DOJ) antitrust lawsuit against a prominent RMS provider, highlight the potential risks associated with the use of these RMS systems.
The DOJ lawsuit alleges that the provider’s RMS product enabled multifamily landlords “to share their competitively sensitive data … in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data”. The landlords allegedly funneled their sensitive, confidential data into the RMS algorithm, which also uses other CRE companies’ proprietary, non-public data (including occupancy and rental rates), and received rental pricing recommendations for their apartment communities. The DOJ asserts that this practice resulted in increased rents and decreased market competition in rental pricing across the numerous apartment communities owned by CRE companies that use the RMS platform.
The DOJ’s antitrust lawsuit follows a 2022 investigation by ProPublica into the provider’s use of its RMS algorithm in setting rents. That investigation launched a series of lawsuits filed against the provider on behalf of apartment residents in several cities seeking class-action status. In 2023, the-then District of Columbia Attorney General filed a lawsuit against the provider and fourteen of the largest apartment landlords operating in DC. That suit accused the defendants of “colluding to illegally raise rents for tens of thousands of DC residents by collectively delegating price-setting authority to [the RMS provider], which used a centralized pricing algorithm to inflate prices, costing renters millions of dollars”.
While the provider has denied that its RMS “facilitates collusion” and has stated that it “is willing to make changes to its system to ease antitrust concerns”, CRE companies that continue to use these types of RMS risk facing similar claims by residents, the DOJ and other public agencies. According to a recent Washington Post article, in the past week, the DOJ “expanded its suit to sue six large landlords, which it says operate in 43 states and D.C.”
Here are some protective provisions that CRE owners and managers should consider including in their contracts with vendors that use RMS products similar to those that are the subject of the DOJ lawsuit:
Compliance with Laws: Have the vendor agree that in using the RMS and providing pricing recommendations, it will do so in compliance with all current and future laws. This should include court orders issued in any pending or future litigation involving any RMS.
Confidentiality: Require the vendor to keep strictly confidential all non-public information and data about the CRE company and its operations. This includes information about the CRE company’s rental rates and methods for pricing rents. The point is to have the vendor agree to not share or use any of the CRE company’s data with any competitor, including through the implementation of its RMS algorithm.
Non-Use of Confidential Information: Forbid the vendor from using any confidential or nonpublic information or data from any other CRE company in using the RMS (or implementing its algorithm) other than the information and data the vendor obtains from the CRE company that is a party to the agreement.
No Collusion: Prohibit the vendor from colluding or collaborating with the CRE company or any other CRE business in its use, application or operation of the RMS in any manner (including in setting or raising rents) that might give rise to a claim of price-fixing or other violation of any antitrust or other laws.
Documentation: Require the vendor to maintain a record documenting each action and decision concerning rental and other pricing determinations for the properties covered by the agreement, including how the RMS and its algorithm is utilized and the source of information used for each action and decision.
Antitrust Policy: Have the vendor represent in the agreement that it maintains and updates an antitrust policy and compliance program to ensure its adherence with all laws, including in the use of the RMS. The vendor should also have a continuing obligation to modify the RMS and how it is used at the CRE company’s properties to avoid any violation of antitrust or other laws.
Indemnification: The vendor should broadly indemnify the CRE company against all losses and claims resulting from the use of the RMS or otherwise from the agreement, including the vendor’s breach of the agreement or the failure of its RMS to comply with antitrust or other laws.
Vendors may push back on requests for many of these provisions. However, given the current litigious environment involving RMS systems, CRE companies may have increasing leverage in their contract negotiations to insist that vendors accept them. The RMS provider that is the subject of the DOJ lawsuit publicly acknowledged that its customers “are starting to worry about the legal threats”, which is a signal that RMS vendors may be more accommodating in negotiating their agreements in order to retain their existing customers and attract new ones.
These practical tips are intended to protect CRE companies from being inadvertently caught up in the current antitrust scrutiny involving RMS systems. Antitrust claims based on information sharing are easier to allege than prove. Proof requires specific economic analysis of the specific practice and its impact on the market, which is often difficult to determine when initially entering into seemingly benign agreements. Once entangled in an antitrust case, however, a CRE company faces significant costs and disruption of its business, regardless of the ultimate outcome of the case.
The lawsuits against the RMS provider (and now the landlords that are using the RMS) underscore the importance of safeguarding the interests of CRE companies. By ensuring that contracts with vendors using RMS include provisions that protect against potential antitrust and other legal violations, CRE companies can mitigate risks and avoid becoming embroiled in this type of lengthy and expensive litigation.
California FPPC Updates Campaign Contribution Limits
On Jan. 16, 2025, the Fair Political Practices Commission in California approved the bi-annual cost-of-living adjustment to the contribution limits to candidates and committees in California, as well as the voluntary expenditure limits.
The new limits are as follows:
Contribution Limit
2023-2024 Limit
2025-2026 Limit
Assembly/Senate/CalPERS/CalSTRS
$5,500
$5,900
Statewide (Other than Governor)
$9,100
$9,800
Governor
$36,400
$39,200
Small Contributor Committee Contribution Limit
2023-2024 Limit
2025-2026 Limit
Assembly/Senate/CalPERS/CalSTRS
$10,900
$11,800
Statewide (Other than Governor)
$18,200
$19,600
Governor
$36,400
$39,200
PAC for State Candidates
$9,100
$9,800
Voluntary Expenditure Limit
2023-2024 Limit
2025-2026 Limit
Assembly (primary/general)
$727,000/$1,273,000
$784,000/$1,373,000
Senate (primary/general)
$1,091,000/$1,636,000
$1,177,000/$1,765,000
Board of Equalization (primary/general)
$1,818,000/$2,272,000
$1,961,000/$2,942,000
Other Statewide (primary/general)
$7,272,000/$10,908,000
$7,844,000/$11,767,000
Governor (primary/general)
$10,908,000/$18,181,000
$11,767,000/$19,611,000
Officeholder Account Contribution Limits
2023-2024 Limit
2025-2026 Limit
Assembly/Senate
$4,500
$4,900
Statewide
$7,500
$8,100
Governor
$30,200
$3,600
.
Aggregate Officeholder Contribution Limits
2023-2024 Limit
2025-2026 Limit
Assembly/Senate
$75,500
$81,400
Statewide
$151,000
$162,900
Governor
$301,900
$325,700