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Mortgage Servicing and Loan Modifications: 3.11.2 Contractual Right to Notice of Violation and Opportunity to Cure

The Fannie Mae/Freddie Mac Single-Family Uniform Instrument contains a provision (section 20) that neither the borrower nor lender may “commence, join, or be joined to any judicial action (as either an individual litigant or the member of a class)” against the other party alleging that the party “breached any provision of, or any duty owed by reason of,” the mortgage or deed of trust, without first giving the other party notice of the breach and a reasonable period to take corrective action.1491 Defendants in RESPA litigation have sought di

Mortgage Servicing and Loan Modifications: 3.11.3.2 No Conflict Between RESPA and Bankruptcy Code

Servicers have also attempted to rely upon a troubling line of cases which have held that some state consumer protection laws are preempted by the Bankruptcy Code.1498 While these cases are wrongly decided,1499 they are of questionable application to the mortgage servicing situation in which the requirements in question are imposed by another federal statute (RESPA), one that is not in conflict with the Bankruptcy Code.

Mortgage Servicing and Loan Modifications: 3.12.1 Introduction

In contrast with other sections of RESPA, section 2605(f) provides an express private right of action for violations of the servicing requirements in section 2605.1516 The borrower1517 may recover actual damages, statutory damages, costs, and reasonable attorney fees.1518 The availability of punitive damages is uncertain.1519 An action seeking relief under section 2605 may be brought in federa

Mortgage Servicing and Loan Modifications: 3.12.2.1 Generally

The question of whether the plaintiff has standing to maintain an action in federal court is not typically raised in RESPA servicing actions seeking remedies under section 2605(f). This is because the challenges of pleading and proving a “pattern or practice” of noncompliance in order to obtain statutory damages under RESPA, as discussed below, means that plaintiffs generally do not bring RESPA actions seeking solely statutory damages.

Mortgage Servicing and Loan Modifications: 3.12.2.2 Application of Spokeo and Ramirez to RESPA Servicing Claims for Statutory Damages

In cases in which the plaintiff has adequately pleaded actual damages stemming from a RESPA servicing violation, standing is clearly established and Spokeo and Ramirez should not be a concern.1541 Although not typically brought for violations of RESPA § 2605, the plaintiff may elect to plead only a claim for statutory damages.1542 In this situation, the plaintiff must plead and prove that there has been a violation of a legally protected interest under RESPA that is “concre

Mortgage Servicing and Loan Modifications: 3.12.4.1 Generally

The remedy provision in section 2605 provides that in addition to actual damages, a court may award “additional” damages in an amount not to exceed $2000 if the evidence reveals a “pattern or practice of noncompliance.”1596 The statute’s reference to “additional” damages has led some courts to suggest that an action seeking statutory damages alone for a violation of section 2605 may not be pursued.1597

Mortgage Servicing and Loan Modifications: 3.12.4.2 The “Pattern or Practice” Requirement

The availability of statutory damages is obviously limited by the evidentiary burden of showing a “pattern or practice” of noncompliance. It is conceivable that this requirement can be established through evidence of the servicer’s dealings simply with the named plaintiff in an action. In Ploog v. Homeside Lending, Inc.,1601 the plaintiff alleged that the servicer failed to respond to five separate qualified written requests she had sent to the servicer.

Mortgage Servicing and Loan Modifications: 3.12.5 Availability of Injunctive Relief

RESPA does not expressly provide for injunctive relief or other equitable remedies. Thus, a number of courts have refused to enjoin or set aside a foreclosure sale or provide other injunctive relief based on violations of RESPA.1613 These decisions have focused on the language in RESPA § 2605(e) providing for specific, but limited, remedies, and have ignored the inherent power of federal courts to issue injunctive and declaratory relief.

Mortgage Servicing and Loan Modifications: 3.12.6.1 Generally

In cases in which there have been RESPA violations that relate to whether the mortgage loan is in default or whether the mortgage holder has the right to foreclose, consumers in nonjudicial foreclosure states should be able to use these violations in an action brought under the state procedure that allows consumers to request that an unlawful foreclosure sale be enjoined.

Mortgage Servicing and Loan Modifications: 3.12.6.3 Preservation of Contract Rights—Section 2615

Some courts have held that because RESPA § 2615 provides that “[n]othing in this chapter shall affect the validity or enforceability of any sale or contract for the sale of real property or any loan, loan agreement, mortgage, or lien made or arising in connection with a federally related mortgage loan,” a violation of RESPA cannot be raised directly in a foreclosure proceeding as a valid defense to a foreclosure.1652 This is a misreading of section 2615, as discussed in an earlier section in this chapter.

Mortgage Servicing and Loan Modifications: 3.12.8 Demand for Jury Trial

A borrower may wish to demand a jury trial on claims involving violations of the RESPA servicing requirements. A potential obstacle in obtaining a jury trial is that the borrower may have signed a waiver of this right in the mortgage documents.1683 Although a jury trial waiver is not a standard provision in the uniform mortgage, it may be included in the non-uniform covenants section of the mortgage or deed of trust signed by the borrower. For example, the Florida uniform security interest contains the following non-uniform covenant:

Mortgage Servicing and Loan Modifications: 3.13.1 General Preemption Under RESPA

The general RESPA provision relating to preemption expressly provides that state laws are preempted only to the extent of their inconsistency with RESPA.1707 State law is not inconsistent with RESPA if a servicer can comply with similar requirements under both state and federal law, such as a state law that requires servicers to respond to borrower inquiries.1708 State law would be inconsistent with RESPA if it precludes a borrower from exercising rights or obtaining relief under RESPA.

Mortgage Servicing and Loan Modifications: 3.14 RESPA Servicing Claims Chart

The chart below lists citations to each obligation imposed by RESPA on servicers involving the servicing of a mortgage loan. The chart indicates whether a specific remedy exists, provides a description of the remedy, and states the applicable statute of limitations.

Mortgage Servicing Claims Chart

Real Estate Settlement Procedures Act (RESPA)

Mortgage Servicing and Loan Modifications: 10.1 Introduction

Most everyone loses when a home is sold through a foreclosure—the homeowner, the family, the lender, the investor, and the community. As a result, certain private and government sponsored programs encourage and require servicers to affirmatively consider loan modifications before foreclosures may be completed.1