## Facts

- Rachel L. Berghaus obtained a $68,000 residential mortgage loan in December 2003, secured by her home in Newport, Kentucky.
- The loan was a “2/28” hybrid adjustable-rate mortgage with a 7.49% initial rate for two years, followed by semiannual adjustments subject to caps and a maximum rate of 13.49%.
- At closing, Berghaus signed the promissory note and a Truth in Lending disclosure statement describing the adjustable-rate terms and the potential maximum rate.
- The loan was assigned in March 2004 to U.S. Bank as trustee for a securitized trust.
- The servicer provided advance written notices of periodic rate increases; by July 2007 the rate increased to about 12.625%, and Berghaus stopped making payments.
- U.S. Bank filed a foreclosure action in February 2009.
- Berghaus asserted counterclaims seeking, among other relief, TILA-based recoupment and claims styled as predatory lending based largely on alleged misrepresentations and inadequate explanation of the ARM’s risks.
- The trial court dismissed the counterclaims and later granted summary judgment for foreclosure and entered an order of sale.

## Issues

1. Whether an assignee may be held liable (including through recoupment) for alleged TILA violations and related disclosure misconduct that are not apparent on the face of the assigned loan documents under 15 U.S.C. § 1641.
2. Whether TILA recoupment can avoid limitations barriers yet still satisfy § 1641’s limits on assignee liability.
3. Whether summary judgment and an order of sale were proper when supported by an allegedly deficient affidavit and entered without full and complete discovery.

## Decision

- The Court of Appeals of Kentucky affirmed the dismissal of Berghaus’s TILA-based counterclaims against U.S. Bank to the extent they sought to impose assignee liability for non-facial disclosure defects and alleged oral misrepresentations by the originator.
- The court held that § 1641 limits assignee liability to violations apparent on the face of the disclosure statement and assigned documents, and the documents described the adjustable-rate features and maximum rate.
- The court vacated the summary judgment of foreclosure and the judgment and order of sale.
- The court remanded for further proceedings because the bank’s supporting affidavit was deficient and the trial court curtailed discovery, making summary judgment premature.

## Legal Principles

- Under 15 U.S.C. § 1641, a TILA assignee is liable only for violations that are apparent on the face of the disclosure statement or other assigned documents.
- Alleged predatory lending practices or misleading oral explanations by the originator do not create TILA assignee liability absent a facial disclosure defect.
- TILA recoupment may be available defensively after the limitations period for affirmative TILA claims, but it does not expand the substantive scope of assignee liability beyond § 1641.
- Foreclosure summary judgment requires competent evidentiary support; a conclusory or insufficiently grounded affidavit, combined with restricted discovery, can render summary judgment improper.

## Conclusion

The court limited TILA exposure of loan assignees to facially apparent disclosure violations, affirming dismissal of the borrower’s TILA counterclaims against the assignee, but vacated the foreclosure judgment and order of sale because the evidentiary showing and discovery record did not support summary judgment.


Berghaus v. U.S. Bank, 360 S.W.3d 779 (Ky. Ct. App. 2012)