Effective May 20, 2009 a New Notice is Required to be Given to Consumers Under the Federal Truth in Lending Act Within 30 Days After the Sale, Transfer or Assignment of a Mortgage Loan
The Helping Families Save Their Homes Act of 2009
On May 20, 2009, the President signed The Helping Families Save Their Homes Act of 2009. The new law contains a number of provisions, including amendments to the HOPE for Homeowners Program, protections for servicers of mortgage loans who modify mortgage loans, and extensions of the credit facilities from the U.S. Treasury to the Federal Deposit Insurance Corporation. However, Section 404 of the Act amends the Truth in Lending Act (TILA) to require that a new notice be given to consumers within 30 days after the sale, transfer or assignment of the consumer’s mortgage loan.
Notice Requirement Effective on May 20, 2009
The new notice requirement became effective on May 20, 2009 and applies to any sale, assignment or transfer of a mortgage loan occurring on or after May 20, 2009.
Civil Liability and Attorneys’ Fees for Failure to Comply
The new requirement has real teeth because Section 404 also amends Section 130(a) of TILA to provide that the failure to give the notice can result in liability for actual and up to $2,000 statutory damages per violation, plus plaintiff’s reasonable attorneys’ fees. Class action lawsuits can also be brought for systematic violations, subject to a $500,000 cap.
Section 404 Requirements
Section 404 of the Act amends Section 131 of TILA to add a new subsection (g) which provides that, in addition to other disclosures required by the TILA, 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 the transfer. The notice must include the identity, address and telephone number of the new creditor; the date of the transfer; how to reach an agent or party having authority to act on behalf of the new creditor; the location of the place where transfer of ownership of the debt is recorded; and any other relevant information regarding the new creditor.
Definition of Mortgage Loan
For purpose of the new notice, the term “mortgage loan” is defined to include any consumer credit transaction that is secured by the principal dwelling of the consumer. Therefore, it applies to first mortgage loans, subordinate mortgage loans, home equity loans and any other credit transaction that is secured by the principal dwelling of the consumer.
Obligation on Purchaser, Assignee or Transferee
The obligation to give the notice is on the purchaser, assignee or transferee of the mortgage loan and not the seller of the mortgage loan. However, the giving of the notice could become complicated in securitizations and may fall by default on the servicer of the mortgage loans backing the securities issued in the securitization.