§1641 Liability of assignees

Summary

Buyers of consumer loans can only be sued for a lender’s paperwork mistakes when the error is obvious from the loan disclosure papers or when the loan was assigned to them against their will. An obvious error means the disclosure is clearly incomplete or wrong when compared with the note or other required papers, or it fails to use the required words or format. If a borrower signs a written receipt showing they got the required statement, later buyers without contrary knowledge can rely on that proof. A borrower who has the right to cancel a loan can cancel it against any buyer. For certain kinds of mortgages, a buyer is responsible for the same claims and defenses a borrower could use against the original lender unless the buyer can prove, more likely than not, that a reasonable person could not tell from the required documents that the mortgage was that kind. Remedies are limited: damages for the covered law are capped as stated in the statute for violations, and for other claims recovery cannot exceed the remaining debt plus all amounts the borrower paid, with overlap reduced. Sellers must give a clear notice about this possible liability. Loans secured by a home follow the same rule: a buyer can be sued only for errors that are obvious on the disclosure and only if the assignment was voluntary. A servicer (the company that collects payments) is not treated as a buyer unless it actually owns the loan, and it isn’t made the owner just because it was given the loan to service for convenience. If a borrower asks in writing, the servicer must give the owner’s or master servicer’s contact info. The servicer rule applies to loans existing or made on or after September 30, 1995. When a mortgage loan is sold or transferred, the new owner must notify the borrower in writing within 30 days and provide the new owner’s contact details, transfer date, where ownership is recorded, and other relevant information.