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Consumer Banking and Payments Law: 6.7.7 Timeline to Dispute Transfers

Article 4A contains a “bank statement rule” that places duties upon the originator similar to those placed on bank customers under UCC Article 4.541 The bank customer must review any bank statements or notifications provided by the bank for any errors or unauthorized transfers. Under U.C.C.

Truth in Lending: 5.15.2.2.2 Loan-splitting and 80/20 transactions

Another version of loan-splitting involves a creditor splitting a mortgage loan into two transactions, signed on the same day or within a short period of time from each other. One loan is a large mortgage loan that usually refinances a first mortgage and, perhaps, consolidates other debts. This mortgage is typically made at about an eighty percent loan-to-value ratio. The second is a small home-equity line of credit, often at a high interest rate, and is secured by the remaining twenty percent of equity in the home. This second loan often funds the closing costs on the big mortgage loan.

Truth in Lending: 5.15.4 APR Reduction

A new obligation that has a lower annual percentage rate than the original obligation with a corresponding change in the payment schedule is not considered a refinancing.1585 Examples would include a shortened maturity date, reduced number of payments, or smaller required payments; however, the official interpretations make clear that this exception does not apply if the maturity is lengthened or if the payment amount or number of payments is increased beyond that remaining on the existing transaction.

Truth in Lending: 5.15.5 Court Agreements

Another exception to the general refinancing disclosure rules covers agreements made in the context of litigation.1588 Examples of such agreements include reaffirmation of debts discharged in bankruptcy,1589 settlement agreements, and postjudgment agreements.1590 It is important to note that these agreements, which are basically voluntary agreements between the parties and are not considered refinancings, are distinguished from court judgment

Truth in Lending: 5.15.7 Insurance Renewals

Sometimes “optional” insurance, such as credit insurance, is renewed prior to the expiration of the obligation and the cost of the new insurance premium (and the cost of financing that premium) is added to the payment schedule.

Truth in Lending: 5.15.9.2 “Existing” Residential Mortgage Transaction

Despite the plain words of Regulation Z, the official interpretations take the position that “existing” residential mortgage transaction refers to the new transaction rather than the original transaction. It gives the example of a consumer who buys a house for vacation purposes (so it is not a “residential mortgage transaction”) and sells it to a consumer who assumes the mortgage and will use the house as a principal dwelling (which is a “residential mortgage transaction”).

Truth in Lending: 5.15.9.4 Assumption Disclosures

If the transaction is an assumption for TILA purposes, the creditor must make new TILA disclosures to the subsequent consumer based on the “remaining obligation.”1640 All of the disclosures required in any credit transaction governed by TILA must be given (except for those assumptions that only require abbreviated disclosures).1641 The official interpretations give a few clues as to what those full disclosures should contain.

Truth in Lending: 5.15.9.5 Abbreviated Disclosures

Some assumptions do not require the full range of TILA disclosures and require only abbreviated disclosures. Abbreviated disclosures for assumptions may be made if the finance charge in the original transaction was calculated by the add-on or discount method (“precomputed”)1647 as opposed to the application from time to time of an interest rate to the unpaid balance (“interest-bearing”).1648

The abbreviated disclosures include only:

Truth in Lending: 9.10.3.1 Covered Transactions

The duty to respond to requests to identify the owner or master servicer of the obligation applies to any consumer obligation arising from a consumer credit transaction.1230 By its terms, TILA does not limit this duty to consumer credit transactions secured by real property. It applies to any secured and unsecured consumer credit transaction.

Truth in Lending: 9.10.3.2 Servicer Obligations

TILA requires servicers1232 to give borrowers, upon request, “the name, address, and telephone number of the owner1233 of the obligation or the master servicer of the obligation.”1234 Where the consumer asserts that the entity identified did not in fact own the loan, the court may allow a claim to proceed under section 1681(f)(2).1235

Truth in Lending: 9.10.3.4 Statute of Limitations

As discussed in § 12.2, infra, the general statute of limitations for TILA violations is one year, calculated beginning the day after the violation occurs. If a servicer provides a facially inadequate response, that likely triggers the running of the statute of limitations.1252

Truth in Lending: 9.10.3.5 Litigation and Remedies

Given the somewhat liberal pleading requirements applicable in federal courts, the borrower should avoid an early dismissal by alleging that: (1) the plaintiff is the borrower; (2) the defendant is the servicer; (3) the borrower provided the servicer with a written request seeking the specific information mentioned in section 1641(f); (4) the defendant failed or refused or inadequately identified the owner of the obligation.1255

Truth in Lending: 9.10.4.3 Timing of Periodic Statements

The periodic statements are to be delivered monthly, within a reasonable time after when the payment becomes due or at the end of the grace period for the previous payment period.1281 Four days is presumptively a reasonable time after the end of the grace period.1282 If the payment period is shorter than a month, the servicer may, but need not, aggregate the payment statements for a month and provide them together.1283

Truth in Lending: 9.10.4.4 Form of Periodic Statements

Information about the amount due must be grouped together, as must the explanation of the amount due, information about past payments, and any delinquency information.1284 The amount due must be on the top of the first page.1285 The dollar amount due must be more prominent than other information on the page.1286 The explanation of the amount due, past payment information, contact information, and, if applicable, delinquency information,

Truth in Lending: 9.10.4.5 Remedies

Because the provision requiring periodic statements is contained in section 1638(f), statutory damages are not recoverable.1292 Nonetheless, actual damages, attorney fees, and costs may be available.1293 Advocates should be careful to plead and prove the ways the consumer was harmed by not receiving periodic statements.1294 The issue regarding which party or parties (servicer, creditor, or assignee) is liable for these violations is add

Truth in Lending: 9.10.4.6 Electronic Delivery of Periodic Statements

Periodic statements may be given electronically, with consumer consent.1299 Consumer consent is presumed if the consumer receives electronic disclosures for any account with the servicer, including checking or savings accounts.1300 The electronic periodic statements need not be e-mailed to homeowners: instead, the creditor, assignee, or servicer may e-mail them a notification with a link.1301 The homeowner can opt out of receiving those

Truth in Lending: 9.10.5.1 Overview

The Truth in Lending Act also has rules governing the provision of payoff statements to a borrower. This issue is discussed in more detail in NCLC’s Mortgage Servicing and Loan Modifications.1303

Truth in Lending: 9.10.5.2.2 Form of request

The request for a payoff statement must be made in writing.1322 The written request for a payoff statement may be sent by a person acting on behalf of the consumer, including a creditor seeking to refinance the loan, an attorney, or a housing counselor.1323

The servicer can specify where and how to submit the payoff request, such as via mail or by fax. These requirements must be “reasonable.”1324

Truth in Lending: 9.10.5.2.3 What is a reasonable time?

In general, the payoff statement must be provided within seven days.1325 The seven-day period runs from when the servicer receives the request, in the form and manner specified by the servicer.1326 If the servicer must verify the identity of the person acting on behalf of the consumer, the time runs from when the servicer has verified the identity and authority of such a person.1327