TILA amendment requires that you get a disclosure when there is a new owner of your loan per Section 131(g) of TILA
We have said all along that notes are getting passed around like a whiskey bottle at a frat party. Fine, the banks are allowed to sell your loans to another party. But you are legally entitled to get notice of this transfer to a new assignee of a consumer loan. Yes, it is a legal right you have, even if you are in default, and even if you are in foreclosure. This is a law passed that amends TILA (reg Z) 15 U.S.C. 1641 – specifically section 131(g), and which states that you are entitled to get this notice. We have seen many a case where there simply is no notice and one day some new financial institution (including securitized loan trusts) literally appear out of thin air and demand payment at the threat of foreclosure. It is your right to ask them who they are and ask when they bought the loan and where the transfer disclosure statement is or where it was sent.
If they fail to provide this statement, you could be entitled to $4,000 statutory damages and can seek your attorney fees. This law is part of the “Helping Families Save their Homes Act” and became effective on 5/19/09 when President Obama signed the law. The law applies to “principal dwellings of a consumer” (won’t apply to commercial loans) whether the loan be a first mortgage or junior mortgage. The law requires the loan assignee (the seller has no obligation) to notify the consumer borrower of the sale or transfer of the loan within 30 days.
Contents of the notice must include:
- Identity, address and phone number of the assignee
- Date of the transfer of the loan
- Contact information of the agent with authority to act on behalf of the assignee
- The location of the place where the transfer of the ownership of the debt is recorded
- Any other relevant information regarding the assignee
NOTE: Section 130(a)- 15 U.S.C. 1640(a) lays out the civil penalties for a violation of the act, which include $4,000 and attorney fees may be sought.
The federal reserve board (which implements TILA) has not yet appeared willing to clarify any of the section 131 ambiguities, so some of this may shake out in litigation.
Overview of the Helping Families Save Their Homes Act of 2009 and the requirement to notify borrowers within 30 days when their note is sold
MONEY DAMAGES ARE POSSIBLE UNDER TRUTH IN LENDING IF YOUR LOAN IS SOLD AND YOU ARE NOT NOTIFIED.
Does telling someone their note was sold help save homes under the “Helping Families Save their Homes Act of 2009?”
Okay, so it has taken us a little while to get around to discussing this law. We wanted to take a little time to let things develop and see if this law had any real significance to it. Here is what we now know.
This was signed into law by President Obama on May 20, 2009. The law originally contained a provision allowing bankruptcy judges to modify mortgage loans (of course, that is too drastic for the banks, and so the provision, although initially providing some good window dressing for some politicians was eventually dropped).
The act is supposed to help stem the tide of foreclosures. Some of the ways this is supposed to happen is By excluding home mortgage debt from the current Chapter 13 maximum debt limitations (if you have too much secured debt, you cannot file for Chapter 13, and must seek a more expensive Chapter 11); and the Hope for Homeowners program is supposed to be expanded. These are some of the provisions. The one I am going to focus on in this blog is the new requirement to notify homeowners when their mortgage is sold.
This new requirement comes under Section 404:
SEC. 404. NOTIFICATION OF SALE OR TRANSFER OF MORTGAGE LOANS. (a) IN GENERAL.—Section 131 of the Truth in Lending Act (15 U.S.C. 1641) is amended by adding at the end the following:
NOTICE OF NEW CREDITOR.— ‘‘(1) IN GENERAL.—In addition to other disclosures required by this title, not later than 30 days after the date on which a mortgage loan (includes closed end and open end loans) is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including—
(A) the identity, address, telephone number of the new creditor;
(B) the date of transfer;
(C) how to reach an agent or party having authority to act on behalf of the new creditor;
(D) the location of the place where transfer of ownership of the debt is recorded; and
(E) any other relevant information regarding the new creditor.
(2) DEFINITION.—As used in this subsection, the term ‘mortgage loan’ means any consumer credit transaction that is secured by the principal dwelling of a consumer.’’.
(b) PRIVATE RIGHT OF ACTION.—Section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is amended by inserting ‘‘subsection (f) or (g) of section 131,’’ after ‘‘section 125.
A private right of action exists for failure to comply with the requirements of this new subsection 131(g) of TILA may result in civil liability for actual damages, legal fees and 4k statutory damages under Section 130(a) of TILA.
So what does this mean? This new subsection requires that after May 20, 2009, purchasers or assignees of mortgage loans secured by a mortgagor’s principal dwelling must provide written notice of each sale, transfer, or assignment no later than 30 days after such sale, transfer or assignment occurs. In other words, you are entitled to know if your note is sold, and who it was sold to. If not, you could be entitled to money damages.
MERS has maintained that it tracks loan ownership and servicing rights. They have indicated they can help compliance with this statute by generating notices whenever a “transfer of beneficial rights” occurs on its system, and they will generate a notice. That should make everyone feel comfortable.
If you feel your rights may have been violated under this section, contact a truth in lending lawyer.
Attorney foreclosure defense training asks whether you are using a Qualified Written Request in your foreclosure defense practice?
HAVE YOU TOLD YOUR SERVICER LATELY, THAT YOU LOVE THEM? WHY NOT SEND THEM A QUALIFIED WRITTEN REQUEST SO THEY KNOW YOU ARE ALIVE!
A Qualified Written Request (“QWR”) can be a valuable tool to find out what is going on with your loan servicer. Most people now realize the entity you are trying to get a loan modification from is not really your “lender” as many people used to think. In reality, they are merely a “servicer” of your loan, collecting loan payments and transmitting them to the party entitled to collect your loan payment (or should we say the party that claims to be the owner of your loan). Just a few years back, many of the servicers pretended to be your lender, and would not disclose who they were servicing loans on behalf of (whether that is an “investor”, “creditor” or “beneficiary.”). Nowadays, they seem to admit more clearly than they had before, who they claim “owns your loan” or who “your investor” is.
But there is one thing most foreclosure defense lawyers know, and that is you have to KEEP AN EYE ON YOUR LOAN SERVICER. They make errors, tag on bogus fees, and also they are the party you typically have to work a loan modification and other loss mitigation tactics (such as short sale or deed in lieu of foreclosure) so there may be reasons you want to know what they are doing, and where accounting and billing errors are suspected, you need to hold their feet to the fire and make them justify their actions. Sending in the QWR is the one legal RIGHT you have to make them explain what is going on in the loan servicing back-room.
For our attorney colleagues in California and Arizona, we are offering for the first time a copy of our QWR. It begins like this (and is ready for you to paste onto your letterhead for easy use to assist your clients):
____________________________________________________________________________
Re: Qualified Written Request under RESPA Section 6 in regard to subject Loan# XXXXXX for borrower(s) XXXXXXX and XXXXXX, for Real Property located at XXXXXXXX, CA 92706 (APN#_________).
THIS IS A LEGAL DEMAND AND A COPY OF THIS LETTER MUST BE FORWARDED TO YOUR LEGAL DEPARTMENT, OFFICE OF THE PRESIDENT, INVESTOR, EXECUTIVE RESOLUTION DEPARTMENT OR OTHER PROPER OFFICE FOR IMMEDIATE REVIEW, COMPLIANCE AND RESOLUTION.
To Whom It May Concern:
Please be advised that my office has been retained by XXXXXXXX to represent her in regard to her real property and loan as set forth above. Specifically, my client has the following concerns over your accounting and billing practices and hereby disputes each of the following:
(1) Monthly payment amount is not warranted by the terms of the note and deed of trust. The amount of the payment should be lower;
(2) The most recent monthly mortgage payment coupon reflects there is “late fees” of $_____ this is not correct, and not warranted.
(3) The most recent monthly mortgage payment coupon reflects there is “escrow shortage” of $_____ this is not correct, and not warranted.
(4) The most recent monthly mortgage payment coupon reflects there is “arrearages” of $_____ this is not correct, and not warranted.
(5) The Notice of Default, recorded with the _______ County Recorder’s Office on or around ______ date reflects arrearages owing of $________ this is not correct and is overstated by $______.
(6) There is evidence that you are not servicing this loan on behalf of the party legally required to enforce the note, and as such, you may be collecting loan payments that you are not legally entitled to, and which may require you to surrender.
[PUT ALL YOUR “BEAN-COUNTING” OR OTHER LOAN SERVICER DISPUTES HERE. MAKE THEM SHOW WHAT THE HECK THEY ARE DOING BEHIND CLOSED DOORS].
GIVEN THESE LEGITIMATE AND BONA FIDE ACCOUNTING AND BILLING CONCERNS OVER THE SERVICING OF MY CLIENT’S LOAN, MY CLIENT HAS INSTRUCTED ME TO SEND YOU THIS QUALIFIED WRITTEN REQUEST WHICH YOU MUST RESPOND TO IMMEDIATELY. YOUR FAILURE TO DO SO MAY RESULT IN LEGAL LIABILITY TO BOTH YOU AND THE ALLEGED OWNER OF MY CLIENTS LOAN.
I. QUALIFIED WRITTEN REQUEST UNDER RESPA SECTION 6 (12 U.S.C. § 2605(e)):
IF YOU ARE NOT USING A QUALIFIED WRITTEN REQUEST TO ASSIST YOUR FORECLOSURE AND BANKRUPTCY CLIENTS, YOU MAY BE MISSING OUT ON HUGE OPPORTUNITIES TO BENEFIT YOUR CLIENT.
You will get access to the rest of the QWR along with many other valuable foreclosure defense documents, video case briefs, and checklists.
Does Truth in Lending Act (TILA) apply to commercial loans? No. But what is a commercial loan?
Here is some general information on the TILA law. Commercial loans are not covered by TILA. But that is always not a easy question to figure out (is the loan commercial or is it a loan on the primary residence of the borrower). Here are a few ideas:
TIL is a remedial statute to be broadly construed to further the Congressional purpose of meaningful disclosure of credit terms. Rachbach v. Cogswell, 547 F.2d 502, 505 (10th Cir. 1976). Whether a transaction is primarily consumer or commercial in nature so as to be subject to this subchapter is a factual issue to be resolved by trier of fact by looking to transaction as a whole and purpose for which credit was extended. Gallegos v. Stokes, C.A.10 (N.M.) 1979, 593 F.2d 37. In a loan transaction in which the borrower uses his principal dwelling to secure the loan from the creditor, the Truth in Lending Act (TILA) provides the borrower with a right to rescind the transaction. Truth inLending Act, § 125(a), as amended, 15 U.S.C.A. § 1635(a). In re Webster, 300 B.R. 787 (Bankr. W.D. Okla. 2003).
15 U.S.C. § 1635(a) (emphasis added). The plain statutory text of § 1635 provides that a debtor’s right to rescind arises only when the loan transaction is secured by the debtor’s “principal dwelling.” Although TILA itself does not define a “principal dwelling,” Title 12 of the Code of Federal Regulations implementing TILA, known as Regulation Z, provides some guidance. *471 First, Regulation Z defines a “dwelling” as “a residential structure that contains 1 to 4 units, whether or not that structure is attached to real property.” 12 C.F.R. § 226.2(a)(19) (2007). Second, it provides that “[a] consumer can only have one principal dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling.” 12 C.F.R. § 226 Supp. I, Section 226.2(a)(24)(3) (2007) (emphasis in original); see also Scott v. Wells Fargo Home Mortgage, Inc., 326 F.Supp.2d 709, 715 (quoting Scott v. Long Island Sav. Bank, 937 F.2d 738, 741 (2d Cir.1991)).
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