6th Cir. Holds Non-Borrower Mortgagor could not Sue Under RESPA
google.com
Home" Mortgage Banking Foreclosure Law" RESPA" 6th Cir. Holds Non-Borrower Mortgagor Could Not Sue Under RESPA
The U.S. Court of Appeals for the Sixth Circuit recently affirmed termination of a house owner's claims under the federal Real Estate Settlement Procedures Act (RESPA), where the homeowner complainant just signed the mortgage, however not the note evidencing the loan.
The Sixth Circuit's holding strengthened that a plaintiff who does not have personal commitments under the loan arrangement is not a "customer," and hence can not assert claims under RESPA, which extends causes of action only to "borrowers."
A copy of the viewpoint in Keen v. Helson is available at: Link to Opinion.
Husband and partner customers took out a loan protected by a home mortgage on their new home. Both customers performed the home mortgage, but only the hubby executed the promissory note evidencing the loan. As is popular, the mortgage specifically provided that anybody "who co-signs this [home mortgage] but does not perform the [note]- i.e., the other half - "is not personally bound to pay the sums secured by this [home mortgage]"
The borrowers later separated and the spouse took title to the home. The husband died soon thereafter. Although she was not an obligor on the note, the better half continued to make payments in an effort to keep the home, however ultimately fell back in her payments. After her loss mitigation efforts with the home loan's loan servicer failed, the home was foreclosed upon and sold to a third-party purchaser.
The better half submitted suit versus the servicer and third-party purchaser, raising claims under numerous federal and state laws, consisting of a claim versus the servicer under RESPA, 12 U.S.C. § 2601, et seq., and its implementing regulation ("Regulation X"), 12 C.F.R. § 1024, et seq., for supposedly stopping working to properly review her ask for home loan assistance before it foreclosed on her home.
The trial court dismissed the spouse's RESPA declares versus the servicer, concluding that she was not a "debtor" since she was never ever personally bound under the loan, and hence can not mention a cause of action under RESPA. 12 U.S.C. § 2605(f) ("Whoever stops working to abide by any arrangement of this area shall be accountable to the borrower ..."). The immediate appeal followed.
On appeal, the sole concern presented to the Sixth Circuit was whether the wife had a cause of action under RESPA, having just co-signed the mortgage, and not likewise the note evidencing the loan.
In contrast to a concern of whether she has "statutory" or "prudential" standing, the appellate court noted that decision of whether a complainant has a cause of action is a "straightforward question of statutory interpretation." Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 125-129 (2014 ).
As RESPA only authorizes "borrowers" to take legal action against, the Sixth Circuit was charged with identifying whether the partner was a "customer" - a term not specified under the statute, and which the court needs to provide its regular meaning. 12 U.S.C. 2605(f); Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 566 (2012 ).
The Sixth Circuit at first restated the distinction between a loan and a home mortgage: "under a loan, the lending institution offers you money now, and you assure to pay it back later on. A home loan is a different file that supplies extra guarantee to the loan provider that you will pay them back-if you do not, the lending institution can take your home."
Noting that contemporaneous dictionaries work to translate the words of a statute, the Sixth Circuit cited definitions of the term from editions of basic English and legal dictionaries released around the pertinent times RESPA and area 2605 were enacted (1974 and 1990, respectively), all of which highlighted that a "customer" is personally bound on a loan.
Using the context of the term's use in the statute as another tool of analysis likewise revealed "borrower" to consistently refer to a relationship with a lending institution under regards to a loan, providing extra proof that a "debtor" must be personally bound on a loan, despite whether they signed a home mortgage or own a home, and only a "customer" can sue under RESPA.
The Sixth Circuit found the wife's arguments unconvincing.
First, the spouse depended on the liberal construction canon to argue that a "therapeutic statute" like RESPA ought to be "construed broadly to effectuate its purpose." While noting that the liberal building and construction canon had been invoked in previous RESPA cases, here, the better half's dependence upon it was predicated on 2 mistaken ideas: (1) that statutes have a singular purpose and (2) that Congress wants statutes to extend as far as possible in service of that function.
Instead, the Court acknowledged that statutes have lots of competing functions, which Congress balances by working out and crafting statutory text, and courts ought to not expand the text on the notion that "Congress 'should have meant something more comprehensive.'" Dir., Office of Workers' Comp. Programs, Dep't of Labor v. Newport News Shipbuilding & Dry Dock Co., 514 U.S. 122, 135-36 (1995 ); Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 794 (2014) (citation left out). In this case, the Sixth Circuit mentioned useful and legitimate tools of interpretation to define "customer" and expanding the term to include the better half would not be "broadly construing" RESPA, however rewording it. As such, the better half's efforts to use the liberal building canon were rejected.
Next, the other half proffered that current regulations from the Consumer Financial Protection Bureau define "customer" in § 2605(f) to consist of "followers in interest"-i.e., "an individual to whom an ownership interest in a residential or commercial property securing a home loan ... is transferred from a borrower." 12 C.F.R. § 1024.30. Although the better half appears to fulfill this definition due to the fact that her (former) hubby transferred his interest in the residential or commercial property to her after their divorce, she acknowledges that these do not use to her directly due to the fact that they ended up being reliable in April 2018, after the occasions that caused her claim. 12 C.F.R. § 1024.30; 81 Fed. Reg. 72,160-01.
Because the text of the statute is clear and the other half's argument relied exclusively upon these secondary CFPB regulations (Regulation X and 12 C.F.R. 1026, Regulation Z), the Sixth Circuit declined this argument too. Cf. Pereira v. Sessions, 138 S.