Sixth Circuit Affirms Dismissal of RESPA Claim, Holds Plaintiff Homeowner Had No Standing Because She Was Not Obligated Under the Loan

The United States Court of Appeals for the Sixth Circuit recently affirmed the dismissal of a homeowner’s claims under the Real Estate Settlement Procedures Act (“RESPA”), finding that the plaintiff-mortgagor was not obligated under the loan and therefore had no standing to bring the claim.  See Keen v. Helson, 930 F.3d 799 (6th Cir. 2019).  In the case, a husband and wife received a loan to purchase a home.  Although both signed the mortgage securing the loan, only the husband was obligated under the loan.  The husband later conveyed title to the wife after they divorced, and she continued making payments on the loan.  She later defaulted and, after the property was sold via a foreclosure sale, brought this action against defendants claiming they violated RESPA by not properly reviewing her loan modification requests.  The District Court dismissed the action, finding that the plaintiff-wife was not a borrower and therefore could not bring a RESPA claim. 

On appeal, the Court affirmed.  RESPA states that “[w]hoever fails to comply with any provision of this section shall be liable to the borrower for each such failure . . .” 12 U.S.C. § 2605(f).  Although RESPA does not define “borrower,” the Court referred to dictionary definitions that borrowers are those obligated on loans.  Moreover, Section 2605 states that it applies to a “federally related mortgage loan[s]” not “federally related mortgages.”  Therefore, because plaintiff signed the mortgage but was not obligated under the loan, she had no standing to bring a RESPA claim.  The Court also rejected plaintiff’s reliance on the Consumer Financial Protection Bureau’s regulation 12 CFR § 1024.30, which defines “borrower” to include a “successor in interest”.  Although the Court agreed that plaintiff seemed to meet this definition because her husband transferred his interest in the property to her, these regulations did not become effective until April 2018, which was after the events at issue in this action.  More importantly, the Court found that RESPA’s text was clear and that there was no need to look at any other regulations for further guidance. 

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.