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 only signed the home mortgage, but not the note evidencing the loan.

The Sixth Circuit's holding enhanced that a plaintiff who does not have personal responsibilities under the loan arrangement is not a "borrower," and hence can not assert claims under RESPA, which extends reasons for action only to "customers."

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

Husband and spouse customers secured a loan protected by a home mortgage on their brand-new home. Both debtors performed the mortgage, however just the other half carried out the promissory note evidencing the loan. As is traditional, the home loan expressly offered that anybody "who co-signs this [mortgage] however does not execute the [note]- i.e., the partner - "is not personally bound to pay the sums secured by this [mortgage]"

The borrowers later on divorced and the other half took title to your house. The husband died shortly thereafter. Although she was not an obligor on the note, the other half 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 home loan's loan servicer stopped working, the home was foreclosed upon and sold to a third-party purchaser.

The other half filed match versus the servicer and third-party purchaser, raising claims under different federal and state laws, including a claim against the servicer under RESPA, 12 U.S.C. § 2601, et seq., and its implementing guideline ("Regulation X"), 12 C.F.R. § 1024, et seq., for purportedly stopping working to correctly evaluate her ask for home mortgage help 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 "borrower" since she was never ever personally obliged under the loan, and therefore can not state a cause of action under RESPA. 12 U.S.C. § 2605(f) ("Whoever stops working to abide by any provision of this section shall be responsible to the debtor ..."). The instant appeal followed.

On appeal, the sole question presented to the Sixth Circuit was whether the better half had a reason for action under RESPA, having just 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 kept in mind that decision of whether a complainant 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 only licenses "debtors" to sue, the Sixth Circuit was charged with identifying whether the spouse was a "debtor" - a term not defined under the statute, and which the court needs to give its ordinary 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 mortgage: "under a loan, the lending institution offers you money now, and you guarantee to pay it back later. A home mortgage is a separate file that provides extra assurance to the lender that you will pay them back-if you do not, the lender can take your home."

Noting that coexisting dictionaries work to analyze the words of a statute, the Sixth Circuit cited definitions of the term from editions of standard English and legal dictionaries published around the relevant 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 interpretation likewise showed "borrower" to consistently describe a relationship with a loan provider under regards to a loan, offering extra proof that a "debtor" need to be personally obligated on a loan, regardless of whether they signed a home mortgage or own a home, and just a "borrower" can sue under RESPA.

The Sixth Circuit found the spouse's arguments unconvincing.

First, the other half depended on the liberal construction canon to argue that a "restorative statute" like RESPA should be "interpreted broadly to effectuate its purpose." While keeping in mind that the liberal building and construction canon had actually been conjured up in prior RESPA cases, here, the other half's reliance upon it was postulated on 2 incorrect concepts: (1) that statutes have a particular function and (2) that Congress desires statutes to extend as far as possible in service of that purpose.

Instead, the Court acknowledged that statutes have numerous completing functions, which Congress balances by working out and crafting statutory text, and courts ought to not expand the text on the concept that "Congress 'need to have meant something wider.'" 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 pointed out practical and genuine tools of analysis to specify "customer" and broadening the term to include the other half would not be "broadly interpreting" RESPA, however rewording it. As such, the wife's efforts to use the liberal building canon were declined.

Next, the better half proffered that recent policies from the Consumer Financial Protection Bureau define "customer" in § 2605(f) to include "followers in interest"-i.e., "an individual to whom an ownership interest in a residential or commercial property protecting a home loan ... is moved from a debtor." 12 C.F.R. § 1024.30. Although the partner seems to fulfill this meaning due to the fact that her (previous) hubby 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 because they ended up being reliable 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 solely upon these ancillary CFPB regulations (Regulation X and 12 C.F.R. 1026, Regulation Z), the Sixth Circuit rejected this argument as well. Cf. Pereira v. Sessions, 138 S.