Private Lenders: Skipping This Notice Looks Risky—But It Probably Isn’t
Why the transfer of ownership rule under § 2924.13 doesn’t apply to most private lenders
With over 23 years in real estate litigation and foreclosure, loan documents have become second nature. And one thing is clear: private money lenders often get pulled into rules that don’t really apply to them. Today’s so-called “unlawful practice” under California Civil Code § 2924.13 is a good example.
The rule says a foreclosure can be challenged if:
“The mortgage servicer failed to provide a transfer of loan ownership notice to the borrower when required to provide that notice by law, including, but not limited to, the federal Truth in Lending Act (TILA), and investor or guarantor requirements.”
Just like yesterday’s post on servicing transfer notices, this rule only applies if two things are true:
The notice was required by law, and
The notice was required by investor or guarantor rules
And here’s the key: TILA, the law referenced here, only applies to consumer-purpose loans.
That means for business purpose loans, like the ones most private lenders make, TILA does not apply—and there’s no legal requirement to send a loan ownership transfer notice.
If the loan was never sold, assigned, or transferred and has been held by the original lender since origination, then this rule does not apply at all. And even if the loan was transferred, TILA and RESPA do not apply to business purpose loans, and no other law requiring an ownership transfer notice could be found. Without a legal obligation and a matching investor or guarantor requirement, there is no violation under § 2924.13(b)(3).
Another rule that sounds scary—but doesn’t apply to most private lenders.
Follow along as we continue breaking down the remaining triggers in § 2924.13.