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Mortgage Servicing and Loan Modifications: 11.5.1.1 Overview

A federal forum is potentially available whenever the homeowner has a claim under federal law, such as the Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), or federal Racketeer Influenced and Corrupt Organizations Act (RICO). State courts also have jurisdiction over claims under these federal statutes.

Mortgage Servicing and Loan Modifications: 11.5.1.1b Standing

In foreclosure and mortgage servicing cases, homeowners may raise a combination of federal and state claims (e.g., RESPA, TILA, FDCPA, state UDAP and breach of contract). In addition to asserting a federal claim or diversity jurisdiction, borrowers wanting to maintain an action in federal court must demonstrate that an actual case or controversy exists.335 Standing is fundamental to this case or controversy requirement.

Mortgage Servicing and Loan Modifications: 11.5.1.3 Removal of Actions

When a case has been filed in state court, the defendant may remove the case to federal court if federal jurisdiction standards are satisfied and removal procedures are followed. The party seeking removal bears the burden of establishing federal jurisdiction, including Article III standing, and generally there is a presumption against removal jurisdiction.355 Standing is an essential element of the federal court’s subject matter jurisdiction.

Mortgage Servicing and Loan Modifications: 11.5.3 Personal Jurisdiction over Out-of-State Defendants

Given the rise of mortgage securitization, it is now very common for out-of-state entities to be involved in cases related to residential home mortgages. If the homeowner brings an affirmative action against out-of-state entities, the court must have personal jurisdiction over those defendants. For cases brought in both state and federal court, jurisdiction over out-of-state parties will be governed by the state long-arm statute.392 Courts must also determine whether exercise of jurisdiction satisfies due process requirements.

Mortgage Servicing and Loan Modifications: 11.7.5.5 Where Homeowner Is Defendant in Federal Court Case

According to the Supreme Court’s formulation, the doctrine applies only to federal cases “brought by” state court losers.552 Occasionally, though, the homeowner will be the defendant rather than the plaintiff in the federal suit. For example, if the homeowner attempts to rescind the loan under the Truth in Lending Act after the state foreclosure judgment is entered, the creditor may bring an action in federal court seeking a declaratory judgment that the rescission is invalid.

Mortgage Servicing and Loan Modifications: 11.7.5.9.1 When is a claim independent?

The Rooker-Feldman doctrine does not apply if a federal plaintiff presents an independent claim.573 A claim can be considered independent even if it denies a legal conclusion that a state court reached in a case to which the federal plaintiff was a party,574 and even if the “same or a related question” was litigated in the state court.575 The case or claim might be

Mortgage Servicing and Loan Modifications: 11.7.5.9.4 Independent claims based on acts that preceded the state court suit

Several courts have held that the doctrine does not bar claims based on acts that preceded the state court suit, even if those acts ultimately led to the state court suit.624 For example, claims of fraud, deceptive practices, professional malpractice, and violations of TILA, the Equal Credit Opportunity Act, and the Fair Housing Act, all of which related to the origination of the mortgage, were independent of a state foreclosure judgment, so were not barred by the doctrine.

Mortgage Servicing and Loan Modifications: 11.7.5.9.5 Independent claims based on litigation misconduct by party in state court suit

A number of courts have held that a claim that a party procured a state court judgment by misconduct or fraud is an independent claim.626 For example, the Sixth Circuit held that a claim against a collection attorney for filing a false affidavit to initiate a state court garnishment action was an independent claim.627 The Ninth Circuit has gone so far as to develop an “extrinsic fraud” exception to the

Mortgage Servicing and Loan Modifications: 11.7.5.9.6 Other independent claims

A Fair Debt Collection Practices Act claim that a lender falsely represented the amount due after a foreclosure sale was not barred by the Rooker-Feldman doctrine because the FDCPA claim did not challenge the validity of the consumers’ obligations under the state court judgment and because their injury was not caused by that judgment.632 Likewise, FDCPA claims related to a servicer attorney’s misquote of a payo