Today mortgage loans, particularly more expensive loans marketed to those with poor credit histories, are likely to be purchased by investment trusts, bundled into large geographically diverse pools with many other loans, and sold as securities to investors. … Assignee liability rules render the holder of an assigned mortgage loan liable for legal violations made in the origination of the loan. … If a mortgage loan is covered by the relatively narrow scope of HOEPA, then the lender must deliver a special advance warning at least three days prior to consummation. … HOEPA goes further than any other federal statute in creating assignee liability for predatory mortgage lending. … Similarly, it may not be clear how state predatory lending statute assignee liability provisions should be interpreted if the underlying mortgage includes a waiver of defense clause, and the state has not banned those clauses in consumer contracts. … the primary mechanism for distributing liability to a secondary wrongdoer for predatory origination is by assignee liability rules, including the common law of assignment, section 141 of the TILA, the HOEPA’s due diligence standard, and various state predatory lending provisions. … The FTC’s holder-notice rule steers a responsible middle road on this question by capping investor liability at the amount paid by a consumer under the loan in question. …
The Hedge 