Sixth Circuit Rejects TILA Rescission Claim Based on Alleged Failure to Give Notice of Assignment

The Sixth Circuit recently rejected borrowers’ foreclosure challenge premised on the lender’s alleged failure to give notice of assignment of the deed of trust from MERS to the trustee of the securitized trust.  The district court had entered summary judgment in favor of U.S. Bank, and the Sixth Circuit affirmed.

In Robertson v. U.S. Bank, N.A., the plaintiffs had taken out a mortgage loan in 2005, which they stopped paying in 2011.  The promissory note had been endorsed from the originating lender, through other entities, to U.S. Bank, as trustee of the securitized trust that owned the loan, in 2006.  MERS was the nominal beneficiary of the deed of trust securing the loan, until it assigned the deed of trust to U.S. Bank as trustee after default.  Non-judicial foreclosure proceedings were initiated in July of 2014, and the borrowers responded with a “notice of rescission” premised upon U.S. Bank’s alleged violation of the Truth in Lending Act (TILA), 15 U.S.C. § 1641(g), by not giving notice of the assignment of the deed of trust from MERS.  Plaintiffs also challenged U.S. Bank’s standing to foreclose, and made other arguments.

Section 1641(g) was added to TILA by the Helping Families Save their Homes Act of 2009.  It requires “the new owner or assignee of” “a mortgage loan that is sold or otherwise transferred or assigned” to “notify the borrower in writing of such transfer” within 30 days.  “Mortgage loan” is defined as “any consumer credit transaction that is secured by the principal dwelling of a consumer.”

The Court of Appeals held:  1) Section 1641(g) requires notice of assignment of the debt, not of the security instrument securing the debt; 2) the assignment of the debt in this case occurred before § 1641(g) was enacted; and 3) even if § 1641(g) had been violated, that provision does not give rise to a claim for rescission—only for monetary damages.

The Court of Appeals also rejected the plaintiffs’ standing argument, holding that under the verbal acts doctrine, written assignments are not hearsay and are both admissible and sufficient to establish ownership of the note.

The WBK Firm regularly represents companies throughout the United States in litigation, including suits under TILA and other federal statutes.