Eleventh Circuit Affirms TILA's Safe Harbor Exception Applies to Servicer Seeking to Foreclose

TILA Mortgage Servicing

On July 29, the U.S. Court of Appeals for the Eleventh Circuit held that a mortgage servicer moving to foreclose on borrowers pursuant to an assignment from the lender’s nominee was exempt from TILA’s debt ownership disclosure requirements. Reed v. Chase Home Fin., LLC, No. 12-15755, 2013 WL 3868079 (11th Cir. Jul. 29, 2013). The borrowers argued that the assignment made the servicer the new owner of the debt and triggered the servicer’s obligation under TILA to inform the borrowers of a change in debt ownership. The court agreed with the servicer and the district court, holding that the servicer was exempt from the disclosure requirements because it was operating under an assignment made solely for “administrative convenience,” based on the plain meaning of those terms, which are not defined in the statute. The court held that because the servicer was operating within the administrative convenience safe harbor, it was allowed to service the loan – including by seeking to foreclose on the home – without making any additional disclosure. The court affirmed the district court’s grant of summary judgment in favor of the servicer.