Eleventh Circuit: Loan Servicer Not Required To Provide Written Notice Of An Assignment To Obligor Under TILA Where Assignment Is For Purpose Of Foreclosure

In Reed v. Chase Home Finance, LLC, --- F.3d ----, 2013 WL 3868079 (11th Cir. 2013), the Eleventh Circuit Court of Appeals evaluated one of the more recent additions to the Truth in Lending Act ("TILA"), 15 U.S.C. 1641(g), which requires a loan servicer to provide written notice of an assignment to the obligor. In Reed, the Plaintiff's claimed that Chase violated 1641(g) by failing to inform them that Chase had been assigned an interest in the Plaintiff's mortgage by virtue of an assignment of mortgage. However, the Eleventh Circuit affirmed the summary judgment entered in favor of Chase by the District Court which held that as the servicer of the loan, Chase fell into the "safe harbor" exception of 15 U.S.C. § 1641(f), which provides that a servicer is exempt from the § 1641(g) disclosure requirements when the assignment is "solely for the administrative convenience of the servicer in servicing the obligation." 15 U.S.C. § 1641(f)(2). Chase was able to establish that the assignment made to Chase was "solely for . . . administrative convenience" by submitting evidence that the sole purpose of the assignment was to permit Chase to foreclose the mortgage, a task it undertook in its capacity as servicer. The case hinged on the proper interpretation of the phrase "administrative convenience," a term which TILA does not define despite its importance to the operation of Section 1641(g). The Eleventh Circuit held that since the term was not defined by the statute, court's should simply give the term it's ordinary meaning, utilizing simple dictionary definitions of the term. After a review of such definitions, the Court noted that foreclosure by Chase would not have been possible without the assignment and that foreclosure was Chase's servicing obligation. Consequently, the Court held that an assignment to a servicer solely for purposes of foreclosure is one made "solely for . . . administrative convenience" as the phrase is used in Section 1641(g) and, therefore, no notice of assignment is required by the servicer. The Court did not find persuasive the Plaintiff's assertion that since the legal effect of an assignment of mortgage is to make Chase the legal owner of the mortgage, such assignment could not be solely for administrative convenience. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.

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