Six Ways to Find Out Who Owns and Services the Mortgage By: John Rao1 National Consumer

Law Center jrao@nclc.org A mortgage loan is typically assigned several times during its term, and may be held by one entity but serviced by another. Different disclosure requirements apply depending upon whether information is sought about the ownership of the mortgage loan or its servicing. Knowing exactly who owns and services the mortgage is a critical first step to negotiating a binding workout or loan modification. The information is needed to send a notice of rescission under the Truth in Lending Act, to identify the proper party to name and serve in a lien avoidance proceeding, and to identify other potential parties in litigation. This information may also provide a defense to foreclosure or stay relief in bankruptcy if these proceedings are not initiated by a proper party.2 1. Send a TILA 1641(f)(2) Request to the Servicer The Truth in Lending Act requires the loan servicer to tell the borrower who the actual holder of the mortgage really is.3 Upon written request from the borrower, the servicer must state the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.4 One problem with this provisions enforcement had been the lack of a clear remedy for the servicers non-compliance. However, the Helping Families Save Their Homes Act of 20095 amends TILA to explicitly provide that violations may be remedied by TILAs private right of action found in 1640(a), which includes recovery of actual damages, statutory damages, costs and attorney fees.6 The amendment adds the owner disclosure provision found in 1641(f)(2) to the list of TILA requirements that give rise to a cause of action against the creditor if there is a failure to comply. Although 1 John Rao is an attorney with the National Consumer Law Center, Inc., where he focuses

on consumer credit and bankruptcy issues. This article may be reprinted with the permission of the author and the National Consumer Law Center. NCLC publishes Consumer Bankruptcy Law and Practice (8th ed. 2006 and Supp.), which may by ordered at www.consumerlaw.org or by calling 617-542-9595. 2 See NCLC Foreclosures (2d ed. 2007 and Supp.), 4.3.4. 3 15 U.S.C. 1641(f)(2). The provision should require disclosure to the borrowers advocate with a properly signed release form. See NCLC Foreclosures, Appx. A, Form 3, infra. 4 If the servicer provides information about the master servicer, a follow-up request should be made to the master servicer to provide the name, address, and telephone number of the owner of the obligation. 5 Pub. L. No. 111-22, 404 (May 20, 2009). 6 See 15 U.S.C. 1640(a). 1640(a) refers to any creditor who fails to comply, by specifically adding as an actionable requirement a disclosure provision which Congress knew is directed to servicers and therefore involves compliance by creditors through their servicers, Congress chose to make creditors liable to borrowers for noncompliance by servicers. The TILA provision does not specify how long the servicer has to respond to the request. Perhaps because no parties were directly liable under 1640(a) for violations of the disclosure requirement before the 2009 amendment, no case law had developed on what is a reasonable response time. In the future, courts may be guided by recent regulations issued by the Federal Reserve Board requiring servicers to provide payoff statements within a reasonable time after request by the borrower.7 In most circumstances, a reasonable response time is within five business days of receipt.8 Applying this benchmark to 1641(f)(2) requests would seem appropriate since surely no more time is involved in responding to a request for ownership information than

preparing a payoff statement. Alternatively, a 30-day response period should be the outer limit for timeliness since that is the time period Congress used in 1641(g). 2. Review Transfer of Ownership Notices The Helping Families Save Their Homes Act of 2009 also added a new provision in TILA which requires that whenever ownership of a mortgage loan securing a consumers principal dwelling is transferred, the creditor that is the new owner or assignee must notify the borrower in writing, within 30 days after the loan is sold or assigned, of the following information: the new creditors identity, address, and telephone number; the date of transfer; location where the transfer is recorded; how the borrower may reach an agent or party with authority to act on behalf of the new creditor; and any other relevant information regarding the new owner.9 The new law applies to any transfers made after the Acts effective date, which was May 20, 2009. The Mortgage Electronic Registration System (MERS) recently announced a program to implement the new law.10 7 Reg Z 226.36(c)(1(iii); NCLC Truth in Lending, 9.9.3 (6th ed. 2007 and 2008 Supp.). 8 Official Staff Commentary 226.36(c)(1)(iii)-1. 9 See 15 U.S.C. 1641(g)(1)(A)(E). 10 Under MERS InvestorID, notices will be automatically generated whenever a Transfer of Beneficial Rights occurs on the MERS system. A sample Transfer Notice and Training Bulletin are available for download at www.mersinc.org/news. MERS is taking the position, based on the wording of the statute (which refers to place where ownership of the debt is recorded), that it can comply by disclosing only the location where the original security instrument is recorded because the note is not a recordable Attorneys should request that clients provide copies of any ownership notices they have received based on this new law. Assuming that there has been

compliance with the statute, the attorney may be able to piece together a chain of title as to ownership of the mortgage loan (for transfers after May 20, 2009) and verify whether any representations made in court pleadings or foreclosure documents are accurate. Failure to comply with the disclosure requirement gives rise to a private right of action against the creditor/new owner that failed to notify the borrower.11 3. Send a Qualified Written Request under RESPA Any written request for identification of the mortgage owner sent to the servicer will not only trigger rights under 15 U.S.C. 1641(f) discussed earlier, but will also be a qualified written request under the Real Estate Settlement Procedures Act.12 Under RESPA, a borrower may submit a qualified written request to request information concerning the servicing of the loan or to dispute account errors. Because the servicer acts as an agent for the mortgage owner in its relationship with the borrower, a request for information about the owner should satisfy the requirement that the request be related to loan servicing. The request may be sent by the borrowers agent, and this has been construed to include a trustee in a bankruptcy case filed by the borrower.13 Details about how to send the request are covered in 8.2.2 of NCLC Foreclosures. The servicer has 20 business days after receipt to acknowledge the request, and must comply within 60 business days of receipt.14 Damages, costs and attorneys fees are available for violations, as well as statutory damages up to $1,000 in the case of a pattern and practice of noncompliance.15 4. Review the RESPA Transfer of Servicing Notices Finding the loan servicer is generally easier because the borrower is likely getting regular correspondence from that entity. Still, the law requires that

formal servicing transfer notices are to be provided to borrowers, and reviewing these can provide helpful information. RESPA provides that the originating lender must disclose at the time of loan application whether servicing of the loan may be assigned during the term of the mortgage.16 In addition, the borrower must be notified when loan servicing is transferred document. If MERS members do not agree with this interpretation, they can opt out of MERS InvestorID and presumably send their own notice. 11 See 15 U.S.C. 1640(a). 12 12 U.S.C. 2605(e). See also NCLC Foreclosures, 8.2.2. 13 12 U.S.C. 2605(e)(1)(A); In re Laskowski, 384 B.R. 518 (Bankr.N.D.Ind. 2008 (chapter 13 trustee, as agent of consumer debtor, and the debtor each have standing to send a qualified written request). 14 12 U.S.C. 2605(e)(2). 15 12 U.S.C. 2605(f). 16 12 U.S.C. 2650(a). See NCLC Foreclosures, 8.2.3. after the loan is made.17 Failure of the servicer to comply with the servicing transfer requirements subjects the servicer to liability for actual damages, statutory damages, costs and attorney fees.18 Unlike the TILA requirement discussed earlier, RESPA is limited to the transfer of servicing; it does not require notice of any transfers of ownership of the note and mortgage.19 5. Go to Fannie and Freddies Web Portals To facilitate several voluntary loan modification programs implemented by the U.S. Treasury,20 both Fannie Mae and Freddie Mac allow borrowers to contact them to determine if they own a loan. Borrowers and advocates can either call a toll-free number21 or enter the propertys street address, unit, city, state, and ZIP code on a website.22 The website information, however, sometimes refers to Fannie Mae or Freddie Mac as owners when in fact their participation may have been as the party that had

initially purchased the loans on the secondary market and later arranged for their securitization and transfer to a trust entity which ultimately holds the loan. 6. Check the Local Registry of Deeds Checking the local registry where deeds and assignments are recorded is another way to identify the actual owner. But do not rely solely on the registry of deeds to identify the obligations current holder of the obligation, as many assignments are not recorded. In fact, if MERS is named as the mortgagee, typically as nominee for the lender and its assigns, then mortgage assignments will not be recorded in the registry of deeds.23 A call to MERS is not helpful as MERS currently will only disclose the name of the servicer and not the owner.24 In addition, some assignments may be solely for the administrative convenience of the servicer, in which case the servicer may appear as the owner of the mortgage loan. 17 12 U.S.C. 2650(b). See NCLC Foreclosures, 8.2.3. 18 12 U.S.C. 2650(f). See NCLC Foreclosures, 8.2.6. 19 See, e.g., Daw v. Peoples Bank & Trust Co., 5 Fed.Appx. 504 (7th Cir. 2001). 20 See 27 NCLC REPORTS, Bankruptcy and Foreclosures Ed., Mar/Apr 2009. 21 For Fannie Mae call 1-800-7FANNIE (8 a.m. to 8 p.m. EST); Freddie Mac call 1-800FREDDIE (8 a.m. to 8 p.m. EST). 22 Fannie Mae Loan Lookup, at www.fanniemae.com/homeaffordable; Freddie Mac SelfService Lookup, at www.freddiemac.com/corporate. 23 See NCLC Foreclosures, 4.3.4A. 24 The telephone number for the automated system is 888-679-6377. When calling MERS to obtain information on a loan, you must supply MERS with the MIN number or a Social Security number. The MIN number should appear on the face of the mortgage. You may also search by property address or by other mortgage identification numbers by using MERSs online search tool at www.mers-servicerid.org.

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