Yesterday, in In re Madera, the United States Court of Appeals for the Third Circuit rejected the appellants claim that the Truth in Lending Act (“TILA”) requires lenders to disclose title insurance fees if the amount charged is higher than the prevailing rates set forth in the Manual of Title Insurance Rating Bureau of Pennsylvania (“TIRBOP Manual”), finding that the appellants had failed to raise an issue of fact on summary judgment.
The appellants/borrowers alleged that their lender failed to disclose a title insurance charge set at the “basic rate,” rather than the lower “refinance rate.” Although TILA specifically exempts title insurance fees from the definition of “finance charge,” Section 226.4 of Regulation Z requires the disclosure of title insurance fees that are not “reasonable in amount.” From this provision, the borrowers argued that TILA imposes strict liability requiring lenders to disclose title insurance fees where they exceed what is set forth in the TIRBOP Manual. The lender argued that it was not required to disclose the fees because the borrowers did not provide notice of their right to a lower rate prior to closing.
The Third Circuit held that “irrespective of which party bears notice burdens under TILA,” the borrowers, when confronted with a summary judgement motion, were required to establish that there was a genuine issue of material fact; that is, “that under the TIRPOP Manual they were entitled to receive the refinance rate” instead of the basic rate charged by the lender. Because the borrowers failed to do this, the Court held that summary judgment was appropriate on the borrowers’ TILA claim.
Click here for a copy of the Third Circuit’s decision.