Texas Federal Court Holds Individual Could Not Bring RESPA Claim for Loan Issued to Her LLC

The United States District Court for the Western District of Texas recently dismissed an individual plaintiff’s RESPA claims because the borrower under the loan was actually her LLC.  See Cocchia v. LendingHome Funding Corp., 2020 WL 1879223 (W.D. Tex. Apr. 15, 2020).  Plaintiff purchased the subject property “with an LLC, . . . for the initial purpose of using the property as a rental.”  In January 2020, after a default under the loan documents, plaintiff brought this action seeking to enjoin the foreclosure sale of the property scheduled for that month.  In the complaint, she alleged that she had submitted a qualified written request (“QWR”) to the servicer and the servicer had not responded, and that she had submitted a loss mitigation application but had not received a denial letter.  After the state court stayed the foreclosure, the servicer removed the action and filed a motion to dismiss.

The Court granted the motion to dismiss.  Under 12 C.F.R. § 1041(g), if a borrower files a timely loss mitigation application, a servicer cannot hold a foreclosure sale until it responds.  Likewise, a servicer is required to respond to a QWR under 12 C.F.R. § 1035.  Nonetheless, the Court found that, by plaintiff’s own admission, her LLC purchased the property for a business purpose and is the borrower on the loan documents, regardless of her claim that it is now her homestead.  Because RESPA does not apply to “credit transactions involving extensions of credit . . . primarily for business, commercial, or agricultural purposes,” plaintiff could not bring a RESPA claim.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Anthony Lombardo at alombardo@riker.com.