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WBK Industry News - Litigation Developments

Eleventh Circuit Dismisses Suit Against Fannie Mae Asserting TILA Violations for Servicer’s Alleged Inaction

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.