The U.S. Court of Appeals for the Eleventh Circuit recently affirmed a summary judgment in favor of a mortgagee on claims of wrongful attempted foreclosure, trespass, breach of contract and violation of the RESPA.
While affirming the order on the grounds that no damages could have been sustained by the borrower, the Eleventh Circuit ruled that a breach of contract claim could exist where the purported breach arises from incorporated HUD regulations for which there is no private right of enforcement. The Eleventh Circuit also held that the RESPA was not violated by the mortgagee’s timely QWR response, and that no causes of action lie on the mortgagor’s other claims.
A copy of the opinion is available at: http://www.gpo.gov/fdsys/pkg/USCOURTS-ca11-13-15340/pdf/USCOURTS-ca11-13-15340-0.pdf
The borrower sought the recovery of damages on the basis that the mortgagee: 1) allegedly wrongfully attempted to foreclose, 2) supposedly trespassed on her property while carrying out illegal property inspections, 3) allegedly breached the terms of the mortgage deed, and 4) allegedly violated section 2605(e)(2) of the federal Real Estate Settlement Procedures Act (“RESPA”) by failing to provide a compliant response to the
In late 2011, the mortgagee began the process of setting a non-judicial foreclosure sale. However, prior to any such sale being set, the borrower sent in a Qualified Written Request (“QWR”) regarding the rejection of the partial payments, in response to which the mortgagee timely advised her of the reasons behind its decision to reject the attempted partial payments. Following the QWR, the borrower made no further payments. Thereafter, the subject litigation ensued. The mortgagee refrained from scheduling a sale of the property.
The Eleventh Circuit addressed the breach of contract claim. The mortgagor had claimed that the mortgagee breached the terms of the federally-insured mortgage deed when it allegedly failed to strictly comply with “certain regulations promulgated by the Department of Housing and Urban Development (“HUD”).
In rejecting this claim below, the district court had held that “it would be anomalous” to allow a breach of contract claim to stand that is based upon regulations that do not provide a private right of action for violations. The Eleventh Circuit disagreed, however, holding that as the federally-insured mortgage contemplated compliance with the HUD regulations as a condition precedent to the mortgagee’s right to non-judicially foreclose, a breach of contract action would otherwise lie for the violation of that condition.
The Eleventh Circuit rejected the mortgagee’s arguments that no private right of action exists to enforce HUD regulations encapsulated in a contract, that the mortgagor’s claim is barred by the first-breach doctrine, and that the mortgagor’s claim is barred under the pre-existing duty rule.
The Court noted that this is an issue of first instance in Georgia, as well as within the Eleventh Circuit, and nationally it appears as if courts are split on this question. See, e.g., Wells Fargo Home Mortg. Inc. v. Neal 922 A.2d 538, 543-47 (Md. 2007)(“holding that mortgagor could not assert breach of contract claim in view of fact that deed was a form not drafted by lender and HUD regulations do not create a private right of action); but see, e.g., In re Silveira, No. 11-44812-MSH, 2013 Bankr. LEXIS 1904, at *45 (Bankr. Mass. May 3, 2013)(“While these HUD regulations do not provide a mortgagor with a private right of action … if they are incorporated into the various loan documents … they become enforceable by the parties to the loan documents.”).
Notwithstanding the fact that it had found a contractual duty, the Eleventh Circuit further determined that there was no evidence in the record of damages arising from the alleged breach.
Section 2605(e)(2) of the RESPA requires a servicer to respond to a qualified written request “after conducting an investigation, provide the borrower with a written explanation or clarification that includes – (i) to the extent applicable, a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer, and (ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower.” Id.
The Eleventh Circuit also quickly dispensed with the mortgagor’s claim that the mortgagee’s property inspections had constituted a trespass on her property, given that the subject mortgage deed provided the mortgagee the right to carry out such inspections.
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