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From Banking and Finance Law Daily, December 15, 2015

Mortgage transfer notice law not retroactive

By Richard A. Roth, J.D.

A Truth in Lending Act provision that requires mortgage loan transferees to give borrowers a specific notice within 30 days does not have retroactive effect, according to the U.S. Court of Appeals for the Ninth Circuit. Making the 2009 amendment to TILA retroactive would pose significant problems for the mortgage lending industry, and there was no indication that Congress intended to do so, the appellate court said in what it noted was a case of first impression in the circuit (Talaie v. Wells Fargo Bank, NA, Dec. 14, 2015, Gould, R.).

The facts of the case were quite simple—the consumers’ mortgage loan was transferred from Wells Fargo to US Bank in 2006, and Congress amended TILA to require the transferee’s notice in 2009. The consumers subsequently brought a putative class action alleging that the notice requirement, imposed by 15 U.S.C. §1641(g), had retroactive effect and claiming damages for a violation.

Standards for retroactivity. As a general rule, laws are not retroactive, the court began. Conduct ordinarily should be judged under the law that was in effect at the time of that conduct. In Landgraf v. USI Film Prods., 511 U.S. 244 (1994), the Supreme Court described three considerations that were relevant to whether a law had retroactive effect:

  • the law would impair the rights a person had when he acted;
  • the law would increase a person’s liability for past conduct;
  • the law would impose new duties on transactions that had been completed.

If any of these considerations was present, a law would have retroactive effect only if Congress clearly said it was to be retroactive.

Effect of notice requirement. Making the transfer notice requirement retroactive would give rise to all three concerns, the court said. First, the banks had a right to transfer the loan without giving notice at the time the transfer was accomplished. Second, the amendment would impose new liability on the banks for their past actions. Third, the amendment would impose a new notice duty on a completed transaction.

Since the Landgraf standards had been met, the TILA amendment would be considered to be retroactive only if it was clear that Congress intended it to be retroactive. The court found no indication of such an intent.

It would have been impossible for creditors to comply with the law for any transfers that were completed more than 30 days before the amendment took effect, the court pointed out. It was unlikely that Congress would have made creditors liable for violating the notice requirement without also giving them some avenue to comply with the requirement for transactions that already were complete.

The case is No. 13-56314.

Attorneys: Lenore L. Albert for Mohammad Ali Talaie and Rosa W. Talaie. Paul W. Sweeney (K&L Gates LLP) for Wells Fargo Bank, NA, and US Bank NA.

Companies: US Bank NA; Wells Fargo Bank, NA

MainStory: TopStory AlaskaNews ArizonaNews CaliforniaNews ConsumerCredit GuamNews HawaiiNews IdahoNews Loans MontanaNews Mortgages NevadaNews OregonNews TruthInLending WashingtonNews

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