Eleventh Circuit Affirms Dismissal of RESPA Claims, Holds Servicer Not Required to Cancel Foreclosure Sale Once Borrower Entered Modification Plan

The United States Court of Appeals for the Eleventh Circuit recently affirmed the dismissal of a Real Estate Settlement Procedures Act (“RESPA”) claim against a servicer, finding that the servicer did not violate RESPA by rescheduling, rather than canceling, a foreclosure sale after the borrower entered into a loan modification plan.  See Landau v. RoundPoint Mortg. Servicing Corp., 925 F.3d 1365 (11th Cir. 2019).  In the case, the borrower defaulted on her mortgage and her home was scheduled to be sold in a foreclosure sale.  The borrower later was approved for a six-month trial loan modification plan, and the servicer filed a motion to reschedule the sale that was scheduled to take place just days after the modification plan was to begin.  The borrower then brought this action, alleging that the motion to reschedule the sale was a violation of 12 CFR § 1024.41(g).  This provision states that a servicer “shall not move for foreclosure judgment or order of sale” if a borrower submits a complete loss mitigation more than 37 days before a scheduled foreclosure sale, absent some circumstances not present here.  The District Court dismissed the action.

On appeal, the Court affirmed.  It found that a motion to reschedule a previously-scheduled sale was not a motion “for foreclosure judgment or order of sale” prohibited by RESPA.  “A motion for order of sale is a substantive and dispositive motion that seeks authorization from a court to conduct a foreclosure sale at all, while a motion to reschedule a foreclosure sale under an already-existing order of sale is a non-substantive, housekeeping-type motion that does no more than seek permission to change the date of sale that the court has previously ordered.”  Further, the Court found that the borrower’s argument would undercut RESPA’s consumer-protection purposes.  If servicers were forced to cancel sales rather than simply reschedule them, “servicers would be heavily disincentivized against offering loss-mitigation options to delinquent borrowers and helping them complete loss-mitigation applications.”  Accordingly, the Court affirmed the dismissal.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Dylan Goetsch at dgoetsch@riker.com.