Stites & Harbison, PLLC

On May 20, 2009 Congress passed the Helping Families Save Their Homes Act of 2009.   Buried in this massive Act is a short amendment to the Truth in Lending Act (TILA), which could have enormous ramifications for mortgage lenders and servicers. 

According to Section 404 of the Act, if a mortgage loan is sold, transferred or assigned to a third party, the new creditor or the assignee must notify the borrower of the transfer within 30 days.  The new disclosure requirement applies to all transfers of mortgage loans, including first and second lien mortgages, home equity lines of credit, and any other consumer credit transaction secured by the consumer’s principal dwelling.  

When the loan is transferred, the new creditor or assignee must provide written notice to the borrower including: (i) the name, address and telephone number of the new creditor; (ii) the transfer; (iii) how to contact an agent having authority to act on behalf of the new creditor; (iv) where the transfer of ownership is recorded; and (v) any other relevant information about the new creditor.  If the new creditor fails to provide this notice, each violation may be subject to TILA’s damage provisions, which include actual damages, statutory damages of up to $4,000, and reasonable costs and attorneys’ fees. 

The amendment took immediate effect on May 20, 2009, but the Federal Reserve has still not provided any guidance to lenders and servicers regarding compliance with this new disclosure requirement or indicated whether TILA’s existing definitions will apply to the new amendment.  We will continue to monitor this amendment and the other proposed amendments to TILA, but please contact Rick Vance (rvance@stites.com) or Katie Bell (kabell@stites.com) if you have any questions or need assistance with this new amendment.