Page 8 - John Hundley 2013

Misdated Assignment Defeats Foreclosure

An assignee of a mortgage which submits a document evidencing the assignment on a date after the
foreclosure was filed then faces a heavy burden to show that it in fact was the assignee when the
foreclosure was commenced, according to a recent decision in the Appellate Court’s Second District.

Deutsche Bank Nat’l Trust Co. v. Gilbert, 2012 IL App (2d) 120164, recognized that assignment was
an issue of standing and hence generally an affirmative defense, but held that where the complaint
exhibits named as mortgagee another party and plaintiff then submitted an assignment containing a date
after the case was filed, the mortgagor had established a prima facie case defeating the foreclosure
action. An affidavit that the assignment had occurred previously was disregarded because it failed to
attach the documents upon which it relied as required by Illinois Supreme Court Rule 191. A counterclaim
seeking damages under the Truth in Lending Act (15 U.S.C. § 1601) (“TILA”) was dismissed, however,
because TILA liability can be imposed on an assignee only where the disclosure inadequacy was
apparent on the face of the document.

Serving § 15-1502.5 Notice Before Receipt of Mortgage Doesn’t Matter

While Deutsche Bank v. Gilbert teaches that a lawsuit filed before the plaintiff is assigned the
mortgage may be a nullity, Aurora Loan Serv., LLC v. Pajor, 2012 IL App (2d) 110899, holds that a
foreclosure suit is not void just because the plaintiff serves the pre-suit notification under 735 ILCS 5/15-
1502.5 before it is assigned the mortgage.

In Aurora, Aurora sued as assignee of Mortgage Electronic Registration Systems, Inc. (“MERS”),
which itself was the nominee of the original mortgagee. Complaint exhibits showed that Aurora was not
assigned the mortgage until July 22, 2009, although it had served the § 15-1502.5 notice on April 21,
2009. Though the objection was raised post-judgment, the appellate panel refused to bar it as untimely,
but held that it was without substantive merit. No objection to the notice was made except for who mailed
it, and the court said that was a “technical” objection which was immaterial.

Mortgagees Held Vicariously Liable for Servicers’ TILA Violations

A consensus may be developing that the federal Truth in Lending Act (“TILA”) permits courts to hold
mortgagees vicariously liable for TILA violations by their independent mortgage servicers.

That’s the position taken in the majority of a rash of recent Florida cases. See Khan v. Bank of New
York Mellon, 849 F. Supp. 2d 1377 (S.D. Fla. 2012); Galeano v. Fed. Home Loan Mort. Corp., 2012 WL
3613890 (S.D. Fla. 2012); Kissinger v. Wells Fargo Bank, __ F. Supp. 2d __, 2012 WL 3759034 (S.D. Fla.
2012); Santos v. Fed. Nat’l Mort. Ass’n, __ F. Supp. 2d __, 2012 WL 3860559 (S.D. Fla. 2012); Montano
v. Wells Fargo Bank, 2012 WL 5233653 (S.D. Fla. 2012); but see Kievman v. Fed. Nat’l Mort. Ass’n, __ F.
Supp. 2d __, 2012 WL 5378036 (S.D. Fla. 2012) (contrary). Moreover, the logic of the Florida courts has
spread outside that state’s boundaries. See Rinegard-Guirma v. Bank of America, 2012 WL 1110071 (D.
Or. 2012); compare Marais v. Chase Home Finance, LLC, 2012 WL 4475766 (S.D. Ohio) (dicta).

At issue are servicers’ failures to provide debtors with prompt information about the owners of the
mortgages, as required by TILA. Ironically, the majority of cases find no cause of action against the
servicer itself, unless it is or was also a creditor.

- John T. Hundley, Jhundley@lotsharp.com, 618-242-0246
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