Alert March 11, 2008

Federal Appeals Court Rules Mortgage Broker not a Creditor Under TILA

The Fourth Circuit ruled that a mortgage broker is not a “creditor” under § 1602(f) of the Truth in Lending Act simply because it had previously acted as creditor in unrelated transactions. If the mortgage broker had been a creditor, then certain title and closing charges would have made the loan a high-cost mortgage, requiring additional disclosures under TILA’s Home Ownership and Equity Protection Act provisions. The Fourth Circuit held that TILA defines a creditor as “a person who both (1) regularly extends . . . consumer credit . . . and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness.” The Court concluded that the provision of § 1602(f) regarding a person who originates two high-cost mortgages in a 12 month period merely qualifies the meaning of “regularly extends” and is not a stand-alone alternative definition of “creditor” as plaintiff had argued. Because the broker was not a creditor, no HOEPA disclosures were required. Click here for a copy of Cetto v. LaSalle Bank Nat’l Ass’n, No. 06-1720 (4th Cir. Feb. 29, 2008).