Servicing and Foreclosure Litigation

Servicing and Foreclosure Litigation

The Servicing and Foreclosure Litigation Panel at MBA’s Legal Issues and Regulatory Conference in Chicago highlighted some of the important state and federal developments in 2014 and early 2015.  High-level takeaways from Sunday’s Litigation Panel:

  • West Virginia has recently passed Senate Bill 542, which amended West Virginia’s law  governing debt collection activities.  Some amendments include a 72-hour timeframe to cease and desist collection activities upon notice from a consumer, limitations on the number of debt collection calls per week, and limitations on the maximum allowable late fees. 
  • Numerous cases in Florida have dealt with the issue of whether foreclosure action is barred by the statute of limitations where the debt has been accelerated, and subsequently voluntarily or involuntarily dismissed.   While various courts have held that the dismissals do not preclude subsequent actions based on statute of limitations grounds where the debt was accelerated, the court in Deutsche Bank Trust Co. Ams. v. Beauvais, 2014 WL 7156961 (Fla. 3d DCA Dec. 17, 2014) held that the acceleration triggered the statute of limitations period and the filing of the subsequent action after the limitations period was barred.  See also, Singleton v. Greymar, 882 So.2d 1004 (Fla. 2004); U.S. Bank v. Bartram, 140 So. 3d 1007 (Fla. 5th DCA 2014); Evergrene Partners v. Citibank, 143 So. 3d 954 (Fla. 4th DCA 2014).
  • There are some recent decisions in Florida dealing with the issue of servicers authenticating business records in foreclosure actions.  See Hunter v. Aurora Loan Services, 137 So. 3d 570 (Fla. 1st DCA 2014); Burdshaw v. Bank of New York Mellon, 2014 WL 5099352 (Fla. 1st DCA Oct. 13, 2014); Bank of New York v. Calloway, 157 So. 3d 1064 (Fla. 4th DCA Jan. 7, 2015).  The Court in Calloway held that merely relying on business records created by others without more is insufficient and must do more than blindly rely on prior servicer’s records.   Some suggest that a best practice is to ensure that you are obtaining a certification from the prior servicer when the subject file is transferred.  
  • The Supreme Court’s decision in  Jesinoski v. Countrywide Home Loans, Inc.,135 S.Ct. 790 (2015) provides that a plaintiff seeking TILA rescission need only serve written notice of rescission within three (3) years of closing.  This decision overruled various Circuit Courts and leaves an open question about the deadline for Borrowers to file suit if a Lender fails to agree to rescission.
  • The Panel also addressed developments in the FDCPA.  Recent decisions highlight the risks associated with attempting to collect on stale or waived debts.  See, Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014); Stratton v. Portfolio Recovery Associates, LLC, 770 F.3d 443 (6th Cir. 2014);
  • In addition, the Panel discussed recent cases arising under RESPA’s revised servicing rules and specifically, a consumer’s Notice of Error and Request for Information.  In Kilgore v. Ocwen Loan Servicing, LLC, 2015 U.S. Dist. LEXIS 29756 (E.D.N.Y.  March 6, 2015), the court dismissed plaintiff’s RESPA claims because the plaintiff failed to attach the subject letter or allege any facts such as when and to whom the letter was sent, along with the contents of the letter.  In Nunez v. J.P Morgan Chase Bank, N.A., 2015 U.S. Dis. LEXIS 48260 (M.D.Fla. April 13, 2015), the Court dismissed the plaintiff’s RESPA claims finding, among other things, that the subsequent servicer was under no obligation to respond to a duplicative notice of error because prior servicer adequately responded.  Other courts have dismissed a plaintiff’s RESPA claims where they have not plead sufficient facts demonstrating that plaintiff’s damages were proximately caused by a RESPA violation.  See Yanes v. Ocwen Loan Servicing, LLC, 2015 U.S. Dist. LEXIS 18125 (E.D.N.Y. February 12, 2015); Miller v. HSBC Bank USA, N.A., 2015 U.S. Dist. LEXIS 16736 (S.D.N.Y. February 11, 2015), but see,  Burdick v. Bank of Am., N.A., 2015 U.S. Dist. LEXIS 53614 (S.D. Fla. April 14, 2015).  One court recently dismissed a plaintiff’s RESPA claim on the basis that plaintiff’s notice of error claim does not create a private right of action under Section 1024.35.  Miller v. HSBC Bank USA, N.A., 2015 U.S. Dist. LEXIS 16736 (S.D.N.Y.  February 11, 2015).  Much more litigation is expected as plaintiffs’ counsel begin to explore opportunities in the new servicing regulations. 

For more information on this session recap or to discuss your questions, please contact Ryan DiClemente.