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 just recently verified dismissal of a house owner's claims under the federal Real Estate Settlement Procedures Act (RESPA), where the house owner plaintiff only signed the home mortgage, but not the note evidencing the loan.

The Sixth Circuit's holding enhanced that a complainant who does not have individual responsibilities under the loan agreement is not a "customer," and therefore can not assert claims under RESPA, which extends reasons for action just to "borrowers."

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

Couple borrowers secured a loan protected by a mortgage on their brand-new home. Both debtors performed the home mortgage, however only the hubby executed the promissory note evidencing the loan. As is customary, the home loan expressly supplied that anyone "who co-signs this [home loan] however does not perform the [note]- i.e., the spouse - "is not personally bound to pay the amounts protected by this [home loan]"

The customers later divorced and the other half took title to the house. The hubby passed away quickly afterwards. Although she was not an obligor on the note, the wife continued to make payments in an effort to keep the home, but ultimately fell back in her payments. After her loss mitigation efforts with the mortgage loan's loan servicer stopped working, the home was foreclosed upon and sold to a third-party purchaser.

The partner filed fit against the servicer and third-party purchaser, raising claims under numerous federal and state laws, including a claim versus the servicer under RESPA, 12 U.S.C. § 2601, et seq., and its carrying out guideline ("Regulation X"), 12 C.F.R. § 1024, et seq., for supposedly stopping working to correctly examine her ask for mortgage help before it foreclosed on her home.

The trial court dismissed the better half's RESPA declares against the servicer, concluding that she was not a "debtor" because she was never personally obliged under the loan, and thus can not specify a reason for action under RESPA. 12 U.S.C. § 2605(f) ("Whoever fails to comply with any arrangement of this area shall be accountable to the borrower ..."). The instantaneous appeal followed.

On appeal, the sole question provided to the Sixth Circuit was whether the partner had a reason for action under RESPA, having just co-signed the home loan, 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 determination of whether a plaintiff has a reason for 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 determining whether the wife was a "borrower" - a term not specified under the statute, and which the court needs to offer its normal meaning. 12 U.S.C. 2605(f); Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 566 (2012 ).

The Sixth Circuit initially repeated the difference between a loan and a home mortgage: "under a loan, the loan provider provides you money now, and you assure to pay it back later on. A home mortgage is a separate document that offers additional assurance to the lender that you will pay them back-if you do not, the lender can take your home."

Noting that synchronous dictionaries are beneficial to analyze the words of a statute, the Sixth Circuit pointed out meanings of the term from editions of standard English and legal dictionaries released around the relevant times RESPA and area 2605 were enacted (1974 and 1990, respectively), all of which showed that a "borrower" is personally obligated on a loan.

Using the context of the term's use in the statute as another tool of interpretation likewise revealed "borrower" to consistently describe a relationship with a lender under regards to a loan, supplying extra evidence that a "debtor" should be personally obliged on a loan, regardless of whether they signed a home loan or own a home, and just a "debtor" can sue under RESPA.

The Sixth Circuit found the wife's arguments unconvincing.

First, the spouse counted on the liberal building and construction canon to argue that a "remedial statute" like RESPA should be "interpreted broadly to effectuate its function." While keeping in mind that the liberal construction canon had been conjured up in prior RESPA cases, here, the better half's dependence upon it was predicated on 2 mistaken ideas: (1) that statutes have a particular function and (2) that Congress wants statutes to extend as far as possible in service of that function.

Instead, the Court acknowledged that statutes have numerous contending functions, which Congress balances by negotiating and crafting statutory text, and courts ought to not broaden the text on the concept that "Congress 'must have planned something broader.'" 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 cited valuable and genuine tools of interpretation to specify "customer" and broadening the term to include the partner would not be "broadly construing" RESPA, however rewriting it. As such, the spouse's attempts to use the liberal construction canon were rejected.

Next, the better half proffered that recent regulations from the Consumer Financial Protection Bureau specify "borrower" in § 2605(f) to consist of "followers in interest"-i.e., "a person to whom an ownership interest in a residential or commercial property securing a mortgage ... is moved from a borrower." 12 C.F.R. § 1024.30. Although the wife appears to fulfill this meaning since her (previous) other half transferred his interest in the residential or commercial property to her after their divorce, she acknowledges that these guidelines do not apply to her directly because they ended up being efficient in April 2018, after the events that led to her suit. 12 C.F.R. § 1024.30; 81 Fed. Reg. 72,160-01.

Because the text of the statute is clear and the better half's argument relied entirely upon these supplementary CFPB policies (Regulation X and 12 C.F.R. 1026, Regulation Z), the Sixth Circuit rejected this argument also. Cf. Pereira v. Sessions, 138 S.