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Mortgage Servicing and Loan Modifications: 11.7.5.4.1 Where federal plaintiff was not a party to the state court action
The Supreme Court has made it clear that the Rooker-Feldman doctrine does not apply if the federal plaintiff was not a party to the state case.538 Even if the federal plaintiff is in privity with a party to the state case for preclusion purposes, the doctrine does not apply.539 Thus, a prior state court judgment against one of two
Home Foreclosures: 8.7.5.9.1 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 prohibited by res judicata or claim preclusion, but Rooker-Fel
Mortgage Servicing and Loan Modifications: 11.7.5.4.2 Where federal defendants were not parties to the state court action
Some courts have suggested that if the federal defendants were not parties to the state court proceedings, this may be a reason not to apply the Rooker-Feldman doctrine even though the federal plaintiff was a party.546 The Tenth Circuit has held that merely adding defendants beyond those involved in the state court case does not avoid th
Home Foreclosures: 8.7.5.8 Claims Asserted in Bankruptcy
Many courts have held that the Rooker-Feldman doctrine is inapplicable to certain types of actions in bankruptcy court.562 These courts rely on the fact that federal bankruptcy courts have original jurisdiction that explicitly allows them to avoid, modify, and discharge state judgments in certain circumstances.
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: 11.7.5.6 Where Federal Plaintiff Was Also the Plaintiff in State Court
There is some limited authority that the Rooker-Feldman doctrine does not apply if the federal plaintiff was also the plaintiff in the state court proceeding. For example, before filing in federal court the homeowner may have brought suit in state court to try to stop a non-judicial foreclosure.
Truth in Lending: 11.5.2.5.7 Where consumer has “independent” TILA claims
The Supreme Court made clear in Exxon that the Rooker-Feldman doctrine does not apply if a federal plaintiff presents a claim that is independent from the state court action.558 The decision notes that a claim can be independent even if it “denies a legal conclusion that a state court has reached in a case to which [the federal plaintiff] was a party.”559
Mortgage Servicing and Loan Modifications: 11.7.5.7 Claims the Homeowner Could Not Have Raised in the State Court Case; Claims Arising After State Court Case
The Rooker-Feldman doctrine does not apply to claims that the homeowner could not have possibly raised in the state court proceeding.556 Simply, a federal suit cannot be characterized as an “appeal” of a decision that the state court not only did not make, but could not even consider.
Consumer Bankruptcy Law and Practice: 9.6.1 Actions Taken in Violation of the Stay Are Void
It has long been held that actions taken in violation of the stay are void.303 This principle means that any actions taken after the bankruptcy filing, including foreclosure sales, repossessions and judgments, are without effect.304 This rule applies whether or not the violator acted with knowledge of the stay, though there are limited exceptions to this general rule.305
Mortgage Servicing and Loan Modifications: 11.7.5.8 Claims Asserted in Bankruptcy
Many courts have held that the Rooker-Feldman doctrine is inapplicable to certain types of actions in bankruptcy court.562 These courts rely on the fact that federal bankruptcy courts have original jurisdiction that explicitly allows them to avoid, modify, and discharge state judgments in certain circumstances.
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
Home Foreclosures: 5.2.5 Right to Cure a Default
Twenty-two states, the District of Columbia, and Puerto Rico provide by statute that the borrower can cure a default in payments by paying the amount due, plus any permissible costs and fees, by a time certain before the sale.29 This amount would only include payments due up to the date of the cure (including interest), but not future payments or accelerated payments.30 If the borrower becomes current in the obligations by the cure deadline, the foreclosure is stopped and the mortgage is reinstated.
Home Foreclosures: 5.2.6 Redemption
All states allow the homeowner to redeem the mortgage by paying the total outstanding balance, including costs, prior to the sale. The homeowner may be able to exercise the equitable right of redemption by taking a new loan to pay off the defaulted loan, selling the home, and repaying the mortgage from the proceeds, or by selling the redemption right.43
Truth in Lending: 11.5.2.5.1 Definition of the doctrine
If a related state proceeding has concluded with a final judgment, the Rooker-Feldman doctrine is another potential impediment to relief in federal court. Under this doctrine, a federal court lacks subject matter jurisdiction over a case that is the functional equivalent of an appeal from a state court judgment.528 If the Rooker-Feldman doctrine applies, it prevents the federal court from exercising subject matter jurisdiction over the claim.529
Mortgage Servicing and Loan Modifications: 11.7.5.9.2 Are TILA rescission claims independent?
In an unpublished decision, the Seventh Circuit held that the Rooker-Feldman doctrine would not bar a TILA rescission claim, as that injury occurred when the creditor provided unclear rescission deadline disclosures during the loan closing.
Mortgage Servicing and Loan Modifications: 11.7.5.9.3 Constitutional challenges as independent claims
A challenge to the constitutionality of a statute on which an earlier state court decision was based is not a challenge to that decision itself, so is not barred.615 In Feldman, the Supreme Court did not bar plaintiff’s claim attacking the constitutionality of a rule that the state court had enforced.616 Likewise, in
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
Mortgage Servicing and Loan Modifications: 11.7.6 Res Judicata and Collateral Estoppel
Younger abstention, the Anti-Injunction Act, Colorado River abstention, and the Rooker-Feldman doctrine all apply only in federal court (although state courts may have similar doctrines). But even if an action gets beyond those obstacles, or is filed in state court, the plaintiff may still have to contend with res judicata or collateral estoppel if there is a prior state foreclosure or post-foreclosure eviction judgment.
Home Foreclosures: 9.1 Introduction
A consumer facing the loss of a home through foreclosure or execution on a judgment lien may be able to secure temporary or permanent relief in the bankruptcy court. A complete discussion of the bankruptcy process can be found in NCLC’s Consumer Bankruptcy Law and Practice treatise,1 and we recommend that treatise for those considering using bankruptcy to assist their clients.
Mortgage Servicing and Loan Modifications: 11.7.7 The Bankruptcy Automatic Stay as an Alternative
If an eviction or foreclosure case or some other type of collection action is pending against the homeowner, the consumer should consider bankruptcy court as a forum. In most cases, as soon as a bankruptcy case is filed, all such actions are automatically stayed without the need to consider the impediments to relief discussed above. Using bankruptcy to prevent foreclosure is discussed in detail in NCLC’s Home Foreclosures.645
Mortgage Servicing and Loan Modifications: 11.9.1 Introduction
Because of a federal law prohibiting mandatory arbitration in mortgage loans, arbitration requirements are rarely found in mortgage transactions today. This section provides an overview of this federal requirement, and then briefly summarizes other approaches where a defendant seeks to enforce an arbitration requirement. Far more detail on these other approaches is found in NCLC’s Consumer Arbitration Agreements treatise.646
Mortgage Servicing and Loan Modifications: 11.9.2.1 Scope
The Truth in Lending Act (TILA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), effectively prohibits forced arbitration of disputes involving closed-end loans secured by a dwelling and open-end loans secured by a consumer’s principal dwelling.647 TILA defines a residential mortgage loan as “a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the co