Fowler v. U.S. Bank, Nat. Ass’n, 2014 WL 850527 (S.D. Tex. Mar. 4, 2014)
In this action, plaintiff alleged, inter alia, a cause of action under TILA § 1639b(c) (relating to the payment of a “yield spread premium”) stemming from a residential mortgage loan transaction plaintiffs entered into with defendants in 2006. Section 1639b(c) was recently amended as part of the broader Dodd-Frank Mortgage Rule Amendments that became generally effective January 10, 2014 with the exception of certain provisions. The court held that the recently implemented loan originator compensation rule does not retroactively apply to mortgage loan transactions originated prior to the January 1, 2014 effective date of the rule.
Plaintiffs alleged the broker and original lender’s conduct in connection with a payment of a yield spread premium violated 15 U.S.C. §1639b(c) because such conduct amounted to a steering incentive, which the statute was designed to prohibit. Defendants argued plaintiffs’ claim was barred by the three-year statute of limitations for claims under §1639b(c). The court recognized that although 15 U.S.C. §1640(k) provides an exception to the three-year statute of limitation for claims brought in the context of foreclosure, plaintiffs’ § 1639b(c) claim failed because it did not retroactively apply to their 2006 mortgage loan transaction. After analyzing the legislative history of the loan originator compensation rule, 15 U.S.C. §1639b, the court held that the final rule was effective on January 1, 2014 and that the CFPB’s implementing regulations did not intend to apply the regulations retroactively. According to the court, “the operative presumption, after all, is that Congress intends its laws to govern prospectively only.” Without any basis to infer otherwise, the court presumed that §1639b(c) does not apply retroactively to the 2006 mortgage loan transaction. Thus, although the conduct complained of by plaintiffs was prohibited under 12 C.F.R. §226.36 as early as April 1, 2011, plaintiff’s claim under §1639b(c) was due to be dismissed.