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From Banking and Finance Law Daily, November 9, 2018

Homeowner can’t show harm resulting from servicer’s RESPA violation

By Richard A. Roth, J.D.

A homeowner who began having trouble making his mortgage payments in 2007 and has been staving off a foreclosure suit for at least six years was unable to demonstrate that he suffered any actual harm from the loan servicer’s failure to respond fully to his qualified request for information on his mortgage. According to the U.S. Court of Appeals for the Seventh Circuit, the harm the homeowner described was not a result of any violation of the Real Estate Settlement Procedures Act by Wells Fargo Bank, the servicer (Moore v. Wells Fargo Bank, N.A., Nov. 7, 2018, Hamilton, D.).

The homeowner’s difficulties began less than two years after his 2006 home purchase. Over the following years, three loan modification agreements, two foreclosure suits, and two bankruptcy filings ensued. While a sheriff’s sale in the second foreclosure originally was scheduled for June 2013 and eventually was held in November 2016, the sale still has not been confirmed. According to the court, the homeowner and his wife still live in the home.

RESPA litigation. In 2016, seeking information to counter the second foreclosure suit, the homeowner sent Wells Fargo a letter asking what the court described as "twenty-two wide ranging questions" about his loan. Wells Fargo treated the letter as a qualified written request under RESPA and responded in a timely manner with a three-page letter that the court said had 58 pages of attachments.

However, the homeowner claimed the response was inadequate. He and his wife, who was not a legal owner of the home and had signed neither the note nor the mortgage, sued for damages. They claimed that Wells Fargo had not satisfied its duty to respond to the QWR as required by 12 U.S.C. §2605(e) and a comparable Wisconsin state law.

Standing to sue. Before considering the merits of the RESPA claim, the court needed to address whether the two had standing to sue Wells Fargo. The homeowner had standing to sue, the court said, but his wife did not.

The wife had no legal interest in the property, the court pointed out, because she was not a legal owner and was not obligated to repay the loan. She was not a party to either of the bankruptcy cases and had not signed the latter of the two mortgage modification agreements. Her lack of an ownership interest meant she was not an aggrieved person who could rely on the state law, the court added, even though she had contributed her own money to the down payment on the home in 2006.

On the other hand, the homeowner had standing, the court decided. He claimed that Wells Fargo’s inadequate response to the QWR impaired his ability to contest the foreclosure, caused him to have headaches and made him emotionally upset, and even interfered with his ability to talk with his wife about the foreclosure problems. Those claims met the criteria for standing.

Harm resulting from violation. While the homeowner had described enough of an actual injury to give him standing to sue, he had not met the RESPA standard for showing actual harm that resulted from Wells Fargo’s violation, the court then said. The harm he claimed to have suffered would have resulted from other factors.

The court rejected the homeowner’s claim that fees he paid to an attorney to review Wells Fargo’s response constituted actual harm that resulted from the asserted violation. Even if the servicer had failed to respond as required, the fees would not have been paid "as a result of the failure," the court said. Moreover, the need to file a suit due to a violation would not constitute actual damages resulting from that violation, especially since RESPA elsewhere provided for attorney fees.

The court then rebuffed the homeowner’s assertion that the physical and emotional distress he experienced due to the potential loss of his home in foreclosure constituted actual harm resulting from Wells Fargo’s inadequate response. Emotional distress can constitute actual harm under RESPA, the court conceded. However, all of the ill effects the homeowner described would have resulted from the ongoing foreclosure litigation, home sale, and potential eviction, the court said, not from the servicer’s inadequate response to the QWR.

The case is No. 18-1564.

Attorneys: Briane F. Pagel, Jr. (Lawton & Cates SC) for Terrance Moore and Dixie Moore. Stephanie L. Dykeman (Litchfield Cavo LLP) for Wells Fargo Bank, N.A.

Companies: Deutsch Bank; Wells Fargo Bank, N.A

MainStory: TopStory ConsumerCredit IllinoisNews IndianaNews Loans Mortgages RESPA WisconsinNews

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