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Foley v. Wells Fargo Bank, N.A

By Kerry McInerney • Monday, October 15, 2012

In this case, Foley sued Wells Fargo Bank in connection with the 2009 amendment to the Truth-in­ Lending Act (TILA). The TILA amendment requires a transferee or assignee of a mortgage loan to send a new, specific notice to the borrower, and was a part of President Obama’s 2009 Helping Families Save Their Homes Act.

On January 22, 2007, the borrower executed a promissory note and mortgage.    American Brokers was the original lender, and Mortgage Electronic Registration Systems, Inc. (MERS) was shown as mortgagee on the mortgage.   On February 7, 2007, American Brokers transferred the beneficial ownership of the note to the defendant, Wells Fargo, through a special endorsement.  On March 13, 2007, Wells sold the note  and  mortgage  to  Freddie  Mac, which  was  reflected by  an endorsement  to  the  note  in  blank, pursuant  to Freddie Mac’s document procedures handbook.  In addition, the sale of the loan from Wells to Freddie Mac was evidenced by business entries into Wells’ system showing that as of March 20, 2007, Freddie Mac was the investor for this loan.

Wells remained   the servicer and the custodian   of the note. The  note  remained in  Wells  Fargo’s possession  in  Wells’  secured  vault  pursuant  to  Freddie  Mac’s  document custody  manual,  and  MERS remained mortgagee under  the mortgage.   In July 2010, the borrower defaulted on the loan and Wells hired a Freddie Mac approved attorney to file the foreclosure action in the name of Wells Fargo pursuant to Freddie Mac’s guidelines.   On October 7, 2010, MERS, through a designated signing officer, executed and delivered a mortgage   assignment   to Wells Fargo. This mortgage   assignment stated that the mortgage and the debt were being transferred from MERS to Wells Fargo. The foreclosure firm sent two letters to the borrower. The first was a notice required under the FDCPA, stating that 11the plaintiff, Wells Fargo Bank, N.A. is the creditor to whom the debt is owed by those individuals who are obligated under the promissory note and mortgage.”  The second letter identified Wells Fargo Bank, N.A. as a creditor and Wells Fargo Home Mortgage as a servicer. The court  acknowledged that  the  foreclosure firm’s letters  were  misrepresentations, but  the  law  firm’s  misrepresentations did  not  necessarily  prove  that Wells Fargo was the owner  of the loan when the letters  were sent, nor that a change in ownership of the loan had actually occurred.

In April 2011, Wells Fargo filed a foreclosure complaint in Broward County.  The borrower subsequently filed  the  instant  case alleging  that  Wells  Fargo violated  the  Truth-in-Lending Act by failing  to  send a notice  of transfer  as defined  by 15 USC § 1641(g)(l) within 30 days of October  7, 2010 (the date of the mortgage  assignment  assigning the  mortgage  out  of  MERS into  Wells  Fargo).   This provision of TILA requires   a lender  to  send  a notice  to  a borrower within 30  days after  /Ia  mortgage  loan  is sold  or otherwise transferred or assigned to a third  party.”  The obligation requires the new owner or assignee to send the notice and it must contain, among other items, the name of the new owner of the loan as well as its contact information.

The court  concluded  that  since Wells Fargo had not owned  the loan since March  2007, it could not have violated this provision of TILA which  came into  effect  in May  2009.  The court  acknowledged that interest  in the mortgage  was conveyed to Wells Fargo by the October  7, 2010 assignment  from MERS into  Wells, but  this  assignment  was  insufficient to  trigger  the  notice  requirements, even though  the mortgage  assignment  stated that  it was assigning both the mortgage  and the note.  The court also rejected the borrower’s claim that Wells Fargo was liable under TILA because the mort­ gage assignment made it the “apparent owner.” The court held that there was no reference whatsoever in the TILA amendment about   apparent ownership,” and that the language of the statute refers only to the “owner or assignee of the debt.”    For these reasons, the court dismissed the borrower’s complaint.


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