Gale v. First Franklin Loan Services

2012 U.S. App. LEXIS 18545 (9th Cir. 2012)
The Court of Appeals for the Ninth Circuit (the "Court of Appeals") affirmed in part the District Court's ruling. The Court of Appeals held that First Franklin Loan Services ("Franklin") was not legally required to respond in its capacity as loan servicer under 15 U.S.C. § 1642(f)(2), because Franklin, while the original creditor and loan servicer, was not also the assignee of the loan. Reading the statute as a whole, the Court of Appeals concluded that the duty to provide notice under § 1642(f)(2) applies only to a servicer-assignee. The Court of Appeals remanded the remaining wrongful foreclosure state law claims.
Procedural context:
Richard S. Gale ("Gale") filed suit against several actors, including Franklin, alleging amongst other things violations of the Truth in Lending Act ("TILA"). The District Court for the District of Nevada dismissed Gale's Nevada law claims with prejudice, but granted leave to amend as to the TILA claims. The District Court then dismissed the first amended complaint without leave to amend. This is the amended opinion as published by the Court of Appeals, which inserts certain language to its earlier Gale v. First Franklin Loan Servs., 686 F.3d 1055 (9th Cir. 2012) opinion. With the opinion as amended, the panel voted to deny the petition for rehearing and rehearing en banc.
In November 2006, Gale refinanced his home mortgage loan with Franklin. Franklin was both the creditor and servicer for the loan. The deed of trust on his residence designated Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary acting solely as the nominee for Franklin and Service Link as the trustee. By June 2008, Gale had lost his job. Facing financial difficulties, Gale sent a letter to Franklin in June explaining his condition. He also asked that Franklin confirm the name and address of the true owner of the obligation or holder of the promissory note under 15 U.S.C. § 1642(f)(2). Gale received no response and wrote again in August 2008. Franklin still did not respond. In August 2008, MERS substituted defendant Cal-Western in place of Service Link as trustee of Gale's deed of trust. Then, MERS and Cal-Western initiated non-judicial foreclosure proceedings. Later that month, MERS assigned all beneficial interest to LaSalle Bank as trustee for the First Franklin Mortgage Loan Trust. In November 2008, Cal-Western recorded a Notice of Trustee's Sale. The wrong, as alleged by Gale, is that: 1) Franklin failed to reply to Gale's letter in violation of § 1642(f)(2); and 2) the defendants wrongfully foreclosed on his home. As to the first allegation, Gale's argument is that Franklin, as his loan servicer, and under the plain language of § 1642(f)(2), was obliged to respond to his inquiry.
Sidney R. Thomas, M. Margaret McKeown, and William A. Fletcher, Circuit Judges. Opinion by Judge McKeown.

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