New Disclosure Obligation Imposed on Assignees of Residential Mortgage Loans

Purchasers (including hedge funds and other investment funds) of residential mortgage loans will have affirmative disclosure obligations to consumers under The Helping Families Save Their Homes Act of 2009 (Act), which Congress passed last week and sent to President Obama for his signature.  While most have focused attention on the Act’s “safe harbor” for servicers and amendments to the FHA Hope for Homeowners Program, this new statutory obligation will subject purchasers of mortgage loans to civil liability if they fail to make the required disclosures.  This provision does not require regulations first to be promulgated and is effective upon the President’s signature.  In a guest article, Laurence E. Platt and Kerri M. Smith, Partner and Associate, respectively, at K&L Gates LLP, discuss this underappreciated provision in the Act – which can have a powerful impact on the returns (and reputations) of hedge funds involved in buying and selling residential mortgage loans.

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