On March 1, 2016, the U.S. Court of Appeals for the Eleventh Circuit held that a borrower does not have a claim against a creditor’s assignee for a servicer’s failure to give the borrower a payoff statement under TILA.
In Evanto v. Federal National Mortgage Association, a borrower sued the creditor’s assignee, Fannie Mae, for his servicer’s alleged failure to provide a payoff statement within seven days as required under 15 U.S.C. § 1639g. Fannie Mae moved to dismiss. The court had to decide whether a creditor’s assignee could be liable for a servicer’s failure under the statute. The court said no and dismissed the complaint.
The statute clearly requires a creditor or servicer to provide a payoff statement within seven days of a borrower’s request. 15 U.S.C. § 1639g. However, the remedies against a creditor’s assignee are permissible only if: 1) the violation is apparent on the face of the disclosure statement; and 2) the assignment was voluntary. 15 U.S.C. § 1641(e)(1). The only issue before the court was the first requirement that the violation be apparent on the disclosure statement.
Importantly, the court found that a “disclosure statement” could only be the document provided to a borrower prior to the loan transaction. According to the court, “there is no way that the failure to provide a payoff balance can appear on the face of the disclosure statement” because such a request can only occur after the loan transaction.
Thus, the court held that a creditor’s assignee cannot be held liable for a servicer’s alleged failure under § 1641.
The opinion is available at: http://media.ca11.uscourts.gov/opinions/pub/files/201511450.pdf.