The Eleventh Circuit recently reduced mortgage assignees’ potential exposure to liability for a servicer’s alleged violation of the Truth in Lending Act (“TILA”). In Evanto v. Federal National Mortgage Association, No. 15-11450, (11th Cir. Mar. 1, 2016), the Court held that TILA does not create a cause of action against an assignee for a mortgage servicer’s failure to timely provide a payoff balance to a mortgagor.
After Steve Evanto obtained a home mortgage, Amnet Mortgage, Inc., the original mortgagee, voluntarily assigned the mortgage to the Federal National Mortgage Association (“Fannie Mae”). The mortgage was serviced by Green Tree Servicing, LLC. (“Green Tree”). Evanto defaulted on the loan, and Fannie Mae commenced foreclosure proceedings. Evanto allegedly requested a payoff balance from Green Tree, but allegedly never received one. Subsequently, Evanto sued Fannie Mae for Green Tree’s alleged failure to provide the payoff balance within seven days as required by 15 U.S.C. § 1639g. Fannie Mae moved to dismiss the complaint, and the District Court granted the motion.
Evanto appealed to the Eleventh Circuit Court of Appeals, who affirmed the district court’s judgment. The Court noted that, although TILA provides certain remedies for violations, it limits the type of remedies available against an assignee. Specifically, the Court referenced the TILA provision stating that “any civil action against a creditor for a violation of [15 U.S.C. § 1639g, et seq.]. . . with respect to a consumer credit transaction secured by real property may be maintained against an assignee of such creditor only if . . . the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement provided in connection with such transaction pursuant to this subchapter.” See 15 U.S.C. § 1641(e)(1).
The Court reasoned that Evanto had failed to state a claim against Fannie Mae because Green Tree’s failure to provide a payoff balance was not a “violation . . . apparent on the face of the disclosure statement.” Specifically, the Court held that the plain meaning of the term “disclosure statement,” the statutory usage of the term in other sections of TILA, the definition of the term on the Consumer Financial Protection Bureau’s website, and the use of the term by other Circuit Courts of Appeals, supported the conclusion that “the disclosure statement,” as used in section 1641(e)(1), referred to documents provided to consumers before the extension of credit. Because a payoff balance cannot be requested by a consumer until after credit is extended, the Court concluded that the Green Tree’s alleged failure to provide a payoff balance could not, as a matter of law, appear on the face of the disclosure statement. Evanto contended that absolving Fannie Mae of liability merely because it was an assignee would be contrary to the purposes of TILA. The Court disagreed, holding that the plain language of TILA dictated dismissal, notwithstanding the potential conflict with the “basic objective of the statute.”