Fowler vs. U.S. Bank, N.A., 2014 Westlaw 850527 (District Court S.D. Tex. 2014)
Facts: Two homeowners facing foreclosure filed an action against their mortgage lender under the Truth in Lending Act (“TILA”), alleging a variety of violations. One of the plaintiffs’ theories was that the mortgage had been assigned and that the assignee had failed to inform the borrowers of the assignment. The lender moved to dismiss the complaint, arguing that the borrowers themselves had disputed whether the assignment had actually taken place.
Reasoning: Although the court dismissed some of the plaintiffs’ claims, the court upheld the claim under 15 U.S.C.A. §1641(g), enacted in 2009, which provides that “not later than 30 days after the date on which a mortgage loan 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 . . . .” The court reasoned that the borrowers could plead (in the alternative) either that the assignment had not taken place or that the assignee had failed to provide the proper notification of the assignment. The court further noted that the borrowers had alleged that they had conducted a title search, which failed to reveal any recorded assignment of the mortgage.
Comment: Although the potential damage award for violation of this new statute is relatively small, the effect of this rule could be significant. It provides a convenient “hook” upon which many distressed homeowners can hang a TILA claim, thus temporarily forestalling foreclosure. As everyone now knows, the documentation surrounding the assignment of mortgages has been slipshod, and violations of §1641(g) are quite common.
This analysis is from the California State Bar Insolvency Committee e-newsletter of 3/14