2009 Amendments To TILA Did Not Create Liability For Mortgage Servicers

Marais v. Chase Home Finance LLC, 12-4248 (6th Cir. Nov. 26, 2013) addresses the recent amendments to TILA and specifically whether they can be interpreted to impose liability on servicers. The Sixth Circuit said they do not. The relevant amendments were part of the Helping Families Save Their Homes Act of 2009. The Act amended TILA in two ways: First, it added subsection (g) to § 1641, requiring that new owner-assignees of loans (referred to as new creditors) notify the borrower of certain information about the assignment. Second, it added the phrase subsection (f) or (g) of section 1641 to the civil liability provision, § 16 so that section now reads Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including any requirement under … subsection (f) or (g) of section 1641 of this title … is liable to such person …. By adding to the civil-liability provisions of § 1640(a) a reference to the failure to meet a requirement under subsection (f) or (g) of § 1641, which pertains only to servicers, Plaintiff contends that Congress created a private cause of action for violation of those sections upon servicers, notwithstanding that the introductory language of § 1640 refers only to creditors. Plaintiff asserted that Congress, knowing borrowers frequently cannot identify the creditor of their obligation, specifically amended TILA to create civil liability against the unidentifiable creditor for its violation of a provision under which the creditor has no obligation. Because TILA does not impose liability upon a servicer who is not an owner or assignee of a mortgage loan for breaches of § 1641(f)(2), and because the owner cannot breach that provision since it requires nothing of the owner, the cause of action against the owner created by § 1640(a), for failure to comply with requirements of §1641(f), would be meaningless. The court did not think so. As other courts have noted, the amendment may have been an attempt to hold creditors vicariously liable for servicer violations of § 1641(f)(2). Further, had Congress intended to hold servicers liable for violations under § 1641(f)(2), it would have included the word servicer in § 1640(a). Instead, § 1640(a) imposes liability only on creditors. Plaintiff also pointed to language at the end of § 1640(a): [w]ith respect to any failure to make disclosures required under this part … liability shall be imposed only upon the creditor required to make disclosure, _except as provided in section 1641_. Plaintiff asserts that the last clause indicates that liability may be imposed on entities other than the creditors as provided by § 1641, which would include servicers. The court was not persuaded by this argument either. Section 1641 clearly imposes liability, as opposed to obligations, only on servicers who are also creditors or creditor-assignees. In short, the court held that TILA expressly exempts servicers and there is virtually no support in case law to hold a servicer liable under TILA.

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