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 termination of a homeowner’s claims under the federal Real Estate Settlement Procedures Act (RESPA), where the house owner complainant just signed the home loan, however not the note evidencing the loan.

The Sixth Circuit’s holding enhanced that a complainant who does not have individual obligations under the loan contract is not a “customer,” and thus can not assert claims under RESPA, which extends reasons for action just to “customers.”

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

Couple debtors secured a loan secured by a home mortgage on their new home. Both borrowers carried out the home mortgage, but just the partner performed the promissory note evidencing the loan. As is traditional, the home loan specifically provided that anyone “who co-signs this [home loan] however does not carry out the [note]- i.e., the partner - “is not personally bound to pay the amounts secured by this [home loan]”

The debtors later on divorced and the better half took title to the house. The hubby died shortly afterwards. Although she was not an obligor on the note, the partner continued to make payments in an effort to keep the home, but eventually fell back in her payments. After her loss mitigation efforts with the home loan’s loan servicer failed, the home was foreclosed upon and offered to a third-party buyer.

The better half filed match against the servicer and third-party purchaser, raising claims under various federal and state laws, including a claim versus the servicer under RESPA, 12 U.S.C. § 2601, et seq., and its implementing policy (“Regulation X”), 12 C.F.R. § 1024, et seq., for supposedly failing to correctly review her demands for mortgage support before it foreclosed on her home.

The high court dismissed the other half’s RESPA claims versus the servicer, concluding that she was not a “debtor” because she was never ever personally bound under the loan, and hence can not mention a reason for action under RESPA. 12 U.S.C. § 2605(f) (“Whoever fails to comply with any arrangement of this section will be accountable to the borrower …”). The instantaneous appeal followed.

On appeal, the sole question presented to the Sixth Circuit was whether the better half had a cause of action under RESPA, having only co-signed the home mortgage, and not also 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 “uncomplicated concern of statutory interpretation.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 125-129 (2014 ).

As RESPA only authorizes “debtors” to sue, the Sixth Circuit was entrusted with identifying whether the partner was a “customer” - a term not defined under the statute, and which the court needs to give its normal meaning. 12 U.S.C. 2605(f)