Fed Appeals Court: Loan Servicer's Failure To Respond To Homeowner's Request To Modify Loan Payments Does Not Violate TILA Where It Originated M'tgage

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

• A federal appeals court has foreclosed on one avenue for financially distressed homeowners to challenge lenders.
  
  Banquet server Richard Gale defaulted on his home loan payments four years ago when paychecks from his various Strip employers started to shrink. He sent letters to First Franklin Loan Services asking it to rework the terms of his $250,000 mortgage and to find out which entity owned the loan at that point but never heard back.
  
  In its ruling on Thursday, the Ninth U.S. Circuit Court of Appeals denied Gale's bid to sue First Franklin, a subsidiary of Bank of America, under the Truth in Lending Act. Under its intricate interpretation of the act, the court excused First Franklin because it was the original lender and kept the servicing rights even though the loan was later resold. Many banks continue the collection work as a source of steady income even if they want certain loans off the books.
  
  However, if a servicer attained the position through a legal assignment from another company, then it must tell homeowners who holds the loan.
  
  The court designated the case as a published opinion, meaning that it sets a precedent for the lower courts to follow.
  
  "We are not unsympathetic to the frustration that resulted from Franklin's failure to respond to Gale's inquiry regarding his home," according to the opinion by the three-judge panel. "The service is often the only entity that the consumer is in contact with after the loan issues - unless the servicer is forthcoming, the homeowner may not know with whom to negotiate to stave off foreclosure ... ."

For more, see Appeals court rejects bid to sue under lending act.

For the court ruling, see Gale v. First Franklin Loan Services, No. 09-16498 (9th Cir. July 12, 2012).