A Tennessee woman who sued her servicer for wrongful foreclosure also alleged RESPA violations resulting from the Home Affordable Modification Program (HAMP).
However, the district court determined the plaintiff, who was not personally obligated to repay the note, cannot bring a plausible claim because she was not a “borrower” under RESPA and Regulation X.
The case is Tara L. Keen v. Ocwen Loan Servicing, LLC and Robert C. Helson (U.S. District Court, M.D., Tennessee, Nashville Division, No. 17-cv-00982).
Plaintiff Tara Keen and her late ex-husband bought a house in Portland as joint tenants with rights of survivorship in 1998. At that time, both she and her then-husband signed the deed of trust and were identified as “Borrower.” Only her ex-husband signed the note, however.
The deed of trust stated that “any borrower who co-signs this security interest but does not execute the note is co-signing this security instrument only to mortgage, grant and convey that borrower’s interest on the property and is not personally obligated to pay the sums secured by this security instrument.”
In 2011, Keen and her former husband entered into a modification agreement listing her as a borrower. The agreement stated that “all terms and provisions of the loan documents, except as expressly modified, remain in full force and effect.”
The couple divorced later that year, and she was granted a 100 percent title interest in the home. The plaintiff’s husband passed away in 2013.
In early 2016, Keen fell behind on her mortgage payments and contacted Ocwen Loan Servicing about options for avoiding foreclosure. Ocwen told the plaintiff she was not a borrower on the loan and would only be treated as an authorized third party.
Ocwen sent an information packet to her deceased husband about mortgage assistance, which the plaintiff completed. The request was approved for a HAMP modification.
The plaintiff accepted the terms of the trial payment plan, signed as the borrower and began making monthly trial payments.
In September 2016, Keen received a letter from Ocwen addressed to both her and her ex-husband, asking for documents to verify her identity. After receiving the documents, an Ocwen representative told the plaintiff to stop making payments and that she would need to assume the mortgage loan from her deceased ex-husband to be eligible for HAMP assistance.
The plaintiff claimed she sent the “family transfer package” documents to Ocwen multiple times, but never received confirmation she assumed the loan.
When she learned of the scheduled foreclosure sale, the plaintiff again contacted the servicer about how she could avoid losing her home. In April 2017, the home was sold to Robert C. Helson for $85,063. Two days later, Keen received a letter from Ocwen stating she was not eligible for a loan modification.
Judge William L. Campbell Jr. dismissed the count of wrongful foreclosure resulting from violations of RESPA and Regulation X.
“By its plain language, civil liability under RESPA is limited to ‘borrowers.’ Yet, neither RESPA nor Regulation X define the term ‘borrower,’ ” Campbell said in his opinion.
The judge noted that at the time RESPA was enacted, Black’s Law Dictionary defined ‘borrower’ as ‘he to whom a thing is lent at his request.’
“The court next examines case law on the issue of whether an individual who is not obligated to repay the note is a ‘borrower’ under RESPA,” he wrote. “The court is unaware of Sixth Circuit precedent on the issue. However, the majority of courts that have addressed whether individuals who do not have an obligation on the note are ‘borrowers’ under RESPA have held that they are not. This court follows the majority of courts in finding that ‘borrowers’ under RESPA must have signed the loan or otherwise assumed obligations on the loan.”
The judge added that the modification agreement did not alter the terms of the note to add the plaintiff as a borrower.
Campbell also disagreed with the case law the plaintiff cited (Frank v. J.P. Morgan Chase Bank, N.A., No. 15-cv-05811) to prove she has standing under RESPA after she received 100 percent title interest in the home.
“The facts in the instant case are similar to the facts in Frank, except for one crucial difference: after the plaintiff’s husband passed away, his wife was personally obligated to make the loan payments due to community property law in California,” he noted. “Tennessee is not a community property state. The court’s holding in Frank, which refers to community debt under California law, is partly based on this crucial difference.”
The judge also dismissed her claims of wrongful foreclosure resulting from HAMP violations because the plaintiff does not have standing under RESPA.