Two recent decisions have clarified the scope and effect Section 131(g)(1) of the Truth-in-Lending Act's ("TILA"), which requires that a borrower be notified within 30-days of the sale, transfer, or assignment of a mortgage loan to a new owner. 15 U.S.C. § 1641(g)(1). Section 131(g) states that "not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer," and include information regarding the new creditor. The section was added to the law to provide notice of a change in ownership of the mortgage debt or note, in addition to the previously required notice of a change in the servicer of the loan.
The Real Estate Settlement Procedures Act (RESPA) was enacted by Congress in 1974 in order to promote "more effective advance disclosure to home buyers and sellers of settlement costs." 12 U.S.C. § 2601(b)(1). In particular, RESPA requires the issuance of forms to the borrower that "conspicuously and clearly itemize all charges imposed upon the borrower and all charges imposed upon the seller in connection with the settlement." 12 U.S.C. § 2603(a). The related Truth-in-Lending Act (TILA) of 1968 requires that, "in the case of any consumer credit transaction," the lender "shall clearly and conspicuously disclose" to the borrower certain material terms and shall provide notice of right to cancel. 15 U.S.C. § 1635(a).
The 7th U.S. Circuit Court of Appeals has held that borrowers are not assured of conditions that would allow them to rescind a home mortgage loan pursuant to the federal Truth in Lending Act ("TILA"), 15 U.S.C. 1601 et seq., and that a court can condition rescission of the loan on the borrowers' tender of the full principal balance of the loan. The Court in Iroanyah v. Bank of America, et al., 2014 WL 2198562 (7th Cir. May 28, 2014) affirmed the determination of the district court that conditioned the borrowers' rescission, and the attendant release of the banks' security interests in the home, on the borrowers' tender of the remaining principal balances within 90-days.
The federal Circuit Courts of Appeal are split on the important question of what is required of a consumer who claims not to have received the proper disclosures from a lender and who wishes to rescind the loan within the three-year period following the closing.