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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

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: 11.9.3a.2 Does the Court or Arbitrator Decide Whether a Clause Is Enforceable?

A preliminary matter in any challenge to the enforceability of an arbitration clause is whether the enforceability determination is to be made by a court or by the arbitrator. In Rent-A-Center, West, Inc. v. Jackson,689 the Supreme Court held that, “ordinarily,” issues about whether parties have agreed to a valid arbitration clause are for a court—not an arbitrator—to decide.