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

The Sixth Circuit's holding strengthened that a complainant who does not have personal obligations under the loan arrangement is not a "debtor," 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 readily available at: Link to Opinion.

Husband and spouse customers took out a loan secured by a home loan on their new home. Both customers executed the mortgage, but just the hubby carried out the promissory note evidencing the loan. As is customary, the mortgage specifically provided that anybody "who co-signs this [home mortgage] but does not carry out the [note]- i.e., the other half - "is not personally bound to pay the amounts secured by this [mortgage]"

The borrowers later divorced and the wife took title to your home. The partner passed away quickly afterwards. Although she was not an obligor on the note, the other half continued to pay in an effort to keep the home, but ultimately fell behind in her payments. After her loss mitigation efforts with the mortgage loan's loan servicer failed, the home was foreclosed upon and offered to a third-party buyer.

The other half submitted suit versus the servicer and third-party buyer, raising claims under various federal and state laws, consisting of a claim versus the servicer under RESPA, 12 U.S.C. § 2601, et seq., and its carrying out regulation ("Regulation X"), 12 C.F.R. § 1024, et seq., for supposedly stopping working to effectively examine her demands 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 "borrower" due to the fact that she was never ever personally obligated under the loan, and thus can not specify a reason for action under RESPA. 12 U.S.C. § 2605(f) ("Whoever fails to adhere to any provision of this section shall be responsible to the customer ..."). The instantaneous appeal followed.

On appeal, the sole concern presented to the Sixth Circuit was whether the spouse 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 reason for action is a "simple concern 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 sue, the Sixth Circuit was entrusted with determining whether the wife was a "borrower" - a term not defined under the statute, and which the court must offer its common significance. 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 mortgage: "under a loan, the loan provider offers you cash now, and you promise to pay it back later. A mortgage is a different document that provides extra assurance to the lender that you will pay them back-if you do not, the lending institution can take your house."

Noting that synchronous dictionaries work 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 pertinent times RESPA and area 2605 were enacted (1974 and 1990, respectively), all of which highlighted that a "debtor" is personally obliged on a loan.

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

The Sixth Circuit discovered the other half's arguments unconvincing.

First, the spouse relied on the liberal building canon to argue that a "remedial statute" like RESPA should be "construed broadly to effectuate its purpose." While noting that the liberal construction canon had been conjured up in prior RESPA cases, here, the partner's reliance upon it was premised on two mistaken ideas: (1) that statutes have a particular 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 numerous contending purposes, which Congress balances by negotiating and crafting statutory text, and courts should not expand the text on the idea that "Congress 'should 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 omitted). In this case, the Sixth Circuit mentioned handy and legitimate tools of analysis to define "borrower" and broadening the term to consist of the other half would not be "broadly interpreting" RESPA, but rewriting it. As such, the spouse's efforts to apply the liberal building canon were declined.

Next, the better half proffered that current policies from the Consumer Financial Protection Bureau define "debtor" in § 2605(f) to consist of "followers in interest"-i.e., "an individual to whom an ownership interest in a residential or commercial property protecting a mortgage ... is moved from a debtor." 12 C.F.R. § 1024.30. Although the wife appears to fulfill this meaning because her (former) other half moved his interest in the residential or commercial property to her after their divorce, she acknowledges that these regulations do not apply to her straight because they ended up being reliable in April 2018, after the events that caused her suit. 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 solely upon these secondary CFPB guidelines (Regulation X and 12 C.F.R. 1026, Regulation Z), the Sixth Circuit rejected this argument as well. Cf. Pereira v. Sessions, 138 S.