Discrepancies Between The Hud-1 And An Earlier TILA Disclosure Defeat Assignee’s Argument That TILA Violation Was Not Apparent On The Face Of The Disclosures

According to the complaint in Nunez v. Aurora Loan Services, 11CV1121 DMS POR, (S.D. Cal. Oct. 25, 2011), the Plaintiff was promised a 4.75 percent interest rate when he agreed to refinance his home. He was advised that the monthly payment would be $2,999 but was informed at the closing that it could be reduced to $2,161. He was not told, however, that the loan with the lower monthly payment had an adjustable interest rate of more than 8.5 percent and a negative amortization feature. To induce him to sign the loan papers with these terms, Plaintiff was also presented with a grossly inaccurate disclosure under the Truth in Lending Act (TILA), which, among other things, understated the finance charge and total of loan payments by more than one million dollars each. Shortly after the signing, Defendant acquired the loan by assignment and later acquired the property through a non-judicial foreclosure following the Plaintiff’s default. The Plaintiff then sued the Defendant for violations of TILA. Among other defenses, the Defendant argued that it was immune from liability under TILA because the violations were not apparent on the face of the disclosures. U.S.C. §1641(a). Defendant contended that the allegations were insufficient to state a claim because the final TILA disclosure statement reflected the 8.66 percent rate. In this regard, Defendant relied on the unsigned TILA disclosure bearing the closing date. Defendant conceded that it received both disclosure statements (as well as the HUD-1 settlement statement) but had no duty to investigate the discrepancy between these two different TILA disclosure statements. The court disagreed. [A] violation apparent on the face of the disclosure statement includes, but is not limited to … a disclosure which can be determined to be incomplete or inaccurate from the face of the disclosure statement or other documents assigned …. 15 U.S.C. § 1641(a). The court held that the Defendant could have discovered the violation by comparing the final HUD-1 statement, which showed the 8.66 percent rate, and the signed TILA disclosure, which showed the 8.5 percent rate. Also, the court noted that the Defendant received two TILA disclosures with the closing date, only one of which was signed by Plaintiff. The statements did not only differ in the interest rate listed, but the one which bore Plaintiff’s signature showed the finance charge and total of loan payments at an amount approximately one million dollars less than the final TILA disclosure statement which was not signed. On the face of these two documents, they could not both be right. Either one of the two comparisons shows that a TILA violation was apparent on the face of the loan documents.

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