Home" Mortgage Banking Foreclosure Law" RESPA" sixth Cir. Holds Non-Borrower Mortgagor Could Not Sue Under RESPA

The U.S. Court of Appeals for the Sixth Circuit recently affirmed dismissal of a homeowner's claims under the federal Real Estate Settlement Procedures Act (RESPA), where the homeowner plaintiff just signed the home mortgage, however not the note evidencing the loan.

The Sixth Circuit's holding strengthened that a plaintiff who does not have individual commitments under the loan agreement is not a "debtor," and thus can not assert claims under RESPA, which extends reasons for action just to "customers."

A copy of the opinion in Keen v. Helson is offered at: Link to Opinion.

Couple borrowers took out a loan secured by a mortgage on their new home. Both borrowers performed the mortgage, but only the hubby performed the promissory note evidencing the loan. As is traditional, the mortgage specifically supplied that anyone "who co-signs this [mortgage] however does not carry out the [note]- i.e., the other half - "is not personally obliged to pay the amounts protected by this [home mortgage]"

The debtors later on divorced and the partner took title to your house. The spouse died quickly afterwards. Although she was not an obligor on the note, the partner continued to make payments in an effort to keep the home, however ultimately fell behind in her payments. After her loss mitigation efforts with the mortgage's loan servicer failed, the home was foreclosed upon and offered to a third-party purchaser.

The better half submitted fit versus the servicer and third-party purchaser, raising claims under different federal and state laws, including a claim versus the servicer under RESPA, 12 U.S.C. § 2601, et seq., and its executing guideline ("Regulation X"), 12 C.F.R. § 1024, et seq., for supposedly stopping working to effectively examine her requests for mortgage help before it foreclosed on her home.

The trial court dismissed the other half's RESPA declares against the servicer, concluding that she was not a "customer" since she was never personally bound under the loan, and thus can not mention a cause of action under RESPA. 12 U.S.C. § 2605(f) ("Whoever stops working to adhere to any arrangement of this section shall be responsible to the borrower ..."). The instant appeal followed.

On appeal, the sole concern presented to the Sixth Circuit was whether the wife had a cause of action under RESPA, having only 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 kept in mind that decision of whether a plaintiff has a cause of action is a "simple question of statutory analysis." Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 125-129 (2014 ).

As RESPA just authorizes "customers" to take legal action against, the Sixth Circuit was entrusted with figuring out whether the better half was a "customer" - a term not defined under the statute, and which the court needs to give its regular meaning. 12 U.S.C. 2605(f); Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 566 (2012 ).

The Sixth Circuit initially restated the distinction between a loan and a home mortgage: "under a loan, the lender offers you cash now, and you promise to pay it back later on. A home mortgage is a different document that supplies additional guarantee to the lender that you will pay them back-if you do not, the lending institution can take your house."

Noting that simultaneous dictionaries are useful to analyze the words of a statute, the Sixth Circuit pointed out definitions of the term from editions of standard English and legal dictionaries published around the appropriate times RESPA and area 2605 were enacted (1974 and 1990, respectively), all of which highlighted that a "customer" is personally obliged on a loan.

Using the context of the term's usage in the statute as another tool of analysis likewise showed "borrower" to consistently refer to a relationship with a lending institution under regards to a loan, supplying extra proof that a "customer" need to be personally obliged on a loan, despite whether they signed a home mortgage or own a home, and only a "customer" can take legal action against under RESPA.

The Sixth Circuit discovered the partner's arguments unconvincing.

First, the other half counted on the liberal construction canon to argue that a "therapeutic statute" like RESPA ought to be "interpreted broadly to effectuate its purpose." While noting that the liberal building and construction canon had actually been invoked in previous RESPA cases, here, the wife's dependence upon it was postulated on 2 mistaken ideas: (1) that statutes have a particular purpose and (2) that Congress desires statutes to extend as far as possible in service of that function.

Instead, the Court acknowledged that statutes have many competing functions, which Congress balances by working out and crafting statutory text, and courts must not expand the text on the idea that "Congress 'must have intended 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 valuable and genuine tools of analysis to specify "debtor" and expanding the term to consist of the spouse would not be "broadly construing" RESPA, but rewording it. As such, the partner's attempts to apply the liberal construction canon were rejected.

Next, the wife proffered that current regulations from the Consumer Financial Protection Bureau specify "borrower" in § 2605(f) to include "successors in interest"-i.e., "a person to whom an ownership interest in a residential or commercial property securing a home loan ... is transferred from a customer." 12 C.F.R. § 1024.30. Although the wife seems to meet this definition because her (former) partner transferred his interest in the residential or commercial property to her after their divorce, she acknowledges that these policies do not apply to her straight due to the fact that they ended up being efficient in April 2018, after the events that resulted in her suit. 12 C.F.R. § 1024.30; 81 Fed. Reg. 72,160-01.

Because the text of the statute is clear and the partner's argument relied entirely upon these ancillary 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.