Why each of the various arguments used to avoid dispossessory after foreclosure fail. Print E-mail
Written by Kerry S. Doolittle   
Monday, 09 January 2012

    Purpose Statement

    I will endeavor to explain the offensive strategies for prosecuting a dispossessory action to a quick eviction after a foreclosure sale; and how to respond to the various defensive arguments commonly argued by former owners.  I speak specifically of the State of Georgia.  States vary in their laws and procedures.  Nevertheless, sufficient similarities exists that the information contained herein should prove of some value in understanding the basic issues.

    If you are a current owner facing foreclosure or a former owner facing eviction, you probably found this page by accident.  I urge you, however, to consider reading this article because the information here may well help you to avoid being scammed out of your hard earned money.  At the very least you will gain an understanding of the difference between Internet hype and the cold hard reality of legal proceedings.

    Summary

    When prosecuting a dispossessory action to evict the former owner of a home following a foreclosure sale, such former owner may assert desperate arguments to “save his home.”  The former owner may file an appeal simply to cause more delay in the eviction process.  A few go so far as to file a federal court action or seek removal of the case to federal court in an attempt to delay eviction.  In each case, the former owner argues some variation of “wrongful foreclosure,” contending that he still owns the home. 

    A great deal of information and material is widely available through the Internet, but often of dubious accuracy.  Predators abound who seek profit from the hardship of others.  Others with good intent spread incorrect information. The result is a former owner who asserts a basketful of legal jargon, fully convinced he ought to prevail, even though he has no substantive understanding of any argument being made.  It is simply rote repetition of what others wrote somewhere. 

    Such former owners usually act pro se, representing themselves, but are occasionally represented by an attorney who feels compassionate and wants to help.  Unfortunately, an ethical and knowledgeable attorney can do very little to help after the foreclosure sale.  The die has been cast.

    A worrying trend which seems to be developing is for non-attorney individuals calling themselves “expert witnesses” to offer assistance to these former owners, I assume for a price.  These individuals are prepared to testify and regurgitate the internet hype and media exposes, but lack fundamental understandings of the legal issues.  I suspect at least one I recently met prepared the former owner’s court pleadings, which constitutes a clear criminal violation of practicing law without a license. 

    In most cases, the former owner will readily admit that he was in default on his home loan, that the bank did conduct a foreclosure sale of the property, and that he has not made a loan payment in many months.  Essentially, the former owner concedes that he lived “rent free” for many months.  How then can he justify remaining on the property rent free when everyone else in the courtroom has to pay rent or mortgage installments to remain in their homes?  That is the fundamental question these former owners lose sight of in their desperate attempt to keep their home.  If you do not pay, you cannot stay. 

    Who is the real victim here?  The former owner who did not pay his debt, or the lender who is forced to foreclose a hugh volume of defaulted loans?  How many local banks have you seen fail in the last few years?  How many tax dollars have been spent by Fannie Mae, Freddie Mac and the FDIC on loan guarantees?  How many people lost their jobs because of the housing collapse, causing them to default on their own loans?  In this circumstance, the question is not about victimhood, it is about contract terms and property rights. 

    In my experience, as soon as you are able to obtain a writ of possession, and the former owner can no longer delay eviction, the fight is generally over.  Staying in the home was the objective.  Once that issue is lost, most former owner’s lose interest in litigation they cannot afford and do not understand. 


    Motion to Compel Payment of Rent.

    The single biggest weakness of most former owners is lack of money, otherwise they could have paid their loan to avoid foreclosure.  That makes the best offensive weapon a motion to compel payment of a reasonable rent.  I ask the Court to calculate rent from the date the affidavit of dispossessory was filed until the defendant surrenders possession, whether voluntarily or through execution of a writ of possession.  You can argue the rent should start on the date of the foreclosure sale or the date of a demand for possession, but I prefer the filing date because it is definite, reasonably justified and difficult for the former owner to argue against.

    Some Magistrate Judges will order the payment of rent in the event of appeal, and if not paid into court, the judge will issue the writ of possession.  Be sure to ask for that relief.

    If the Magistrate Judge does not add this rent requirement to his order, then once the appeal is docketed in Superior Court, file a motion to compel rent with rule nisi as quickly as possible.  By the time the motion is heard, usually at least two months after the initial filing of the dispossessory affidavit, the Superior Court Judge will order rent be paid.  With two months worth already owed and a third month due or quickly approaching, the former owner suddenly finds that he owes a very large sum of money because of his delaying tactics.  Often the amount owed is enough to compel the former owners to voluntarily surrender possession in exchange for not paying the court ordered rent (and dismissing my client from any federal action).  On the flip side, if the former owner pays the rent, at least the current owner is collecting compensation during the delay, which helps to offset his attorney’s fees.

    Foreclosure Sale Not Set Aside.

    The second biggest weakness of former owners is the fact that the foreclosure sale already occurred, at which point it is too late to make a difference.

    Under Georgia law, “The purchaser at a foreclosure sale under a power of sale in a security deed is the sole owner of the property until and unless the sale is set aside. It is not germane to a dispossessory proceeding to allege that a contract under which the plaintiff claims to derive title from the defendant is void and should be canceled. If the sale of the premises under the power of sale in the loan deed was void on account of its improper exercise, or because the loan was not mature, this [can]not be set up as a defense to a dispossessory proceeding under ... O.C.G.A. § §§ 44-7-50; 44-7-53.”   Jackman v. LaSalle Bank, N.A., 683 S.E.2d 925, at 927, 299 Ga.App. 894 (2009).

    If the foreclosure sale deed has not been set aside, the former owner loses.  The arguments raised in attacking the foreclosure sale, the former lender, the original loan documents, the chain of assignments, or any other perceived flaw is irrelevant, immaterial and inadmissible in the dispossessory proceeding.

     The basic intent of all those arguments is the assertion that the foreclosure sale was in some way defective, therefore the defendant still owns the home, but Georgia law clearly holds that this argument is not a defense to a dispossessory “until and unless the sale is set aside.” 

    As noted in Jackman v. Hasty, Slip Copy March 8, 2011 WL 854878 (N.D.Ga.), “The Court of Appeals of Georgia held that ‘the alleged invalidity of a foreclosure sale cannot be asserted as a defense in a subsequent dispossessory proceeding.’ [cit. omitted]  This Court will not provide Plaintiff with relief she has already been denied by two Georgia courts.”

    Incidently, the litigation process to challenge and set aside a foreclosure sale is lengthy, expensive, and requires an experienced attorney to prosecute.  The odds of winning such a case and actually obtaining an order setting aside the foreclosure sale is slim to none because most foreclosures are justified by a significant default and were carried out correctly.  In the rare case where some error actually occurred, the bank will usually acknowledge the error and start the foreclosure process over again, leaving little to be gained but a couple more months rent free. 

    Modification Agreement.

    I frequently hear former owners argue that they had a modification agreement with the lender to lower their payments, therefore the lender should not have foreclosed their home.  The best response to this is to ask to see a copy of the modification agreement with the lender’s signature.  In most cases you will find the former owner does not have a written modification agreement.  An oral agreement is not binding and the former owner usually has no evidence to even suggest the existence of an oral agreement beyond his own testimony.

    Often the lender offered the former owner a trial period modification for three to six months, during which the former owner must make all the payments on time and meet all of the other lender requirements to qualify for a permanent modification.  Former owners seem to assume such trial modifications are permanent.  If the lender proceeded to foreclose after that, it means the former owner did not qualify and a substantial default still exists since the trial period payments are lower.  No progress is made in curing the default. 

    Former owners will assert that they made every payment on time during the trial period, and continued to make the trial payments afterwards, but never received a permanent modification agreement from the lender.  The response to this is found in the preceding section.  The foreclosure sale occurred and the deed has not been set aside, so the court must assume the sale was valid and the purchaser, or his successor, is the current owner of the property. 

    Rescission Requires Restitution.

    On of the more creative attempts by former owners is the attempt to claim that the former owner unilaterally rescinded the security deed and now owns free and clear title to the property.  Of course, this claim never succeeds.  First, the former owner does not have any right to unilaterally rescind the loan documents.  Second, the former owner never tenders a refund of the money borrowed back to the lender.  An essential element of rescission is that both parties be restored to the position each was in prior to the transaction.  The bank has to be paid back its money if the borrower wants to rescind.  This is generally impossible since the former owner used the loan proceeds to either buy the property or refinance an earlier debt or to cash out equity.  If the former owner had the money to tender in rescission, the former owner could have simply paid off the debt to avoid foreclosure in the first place.  Third, the former owner has no grounds for rescission.  The typical claim is that some disclosure or notice required by law was not given at the original closing, therefore the borrower can rescind at any time.  Before getting into the accuracy of that argument, consider how long ago the closing took place.  Generally a claim relating to the alleged error is barred by the applicable statute of limitations.  Then remember the first point, the foreclosure sale deed has not been set aside.

    Georgia's procedure for cancelling security interests is laid out in O.C.G.A. § 44 14 3, which requires a creditor to direct the clerk of court to cancel the security interest within 60 days of the debt's being paid in full and to send the debtor the cancellation document.  In one case, the plaintiff contended that her Clayton County Notices cancelled the defendant's security interest in the Property, even though the loan had not been paid in full.  Plaintiff sought a declaratory judgment that she held free and clear title to the Property.  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011).  The Notice of Right to Cancel recorded by the plaintiff stated that she was exercising a right to rescind the mortgage transaction, effective in 60 days without defendant's consent, with the effect that she retained free and clear title to the property and defendant was obligated to return all her payments, principal and interest, on the loans, as well as pay her an additional $1,000,000.  The plaintiff also attempted to quitclaim the Deed from herself to herself.   Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011), found that to the extent that Plaintiff was asking the court to ratify her Clayton County Notices by cancelling defendant's security interest in the Property, Georgia law did not give the District Court such authority.  See Taylor, Bean & Whitaker Mortg. v. Brown, 276 Ga. 848, 583 S.E.2d 844, 846 (Ga.2003) ( [T]his Court has held that a plaintiff may not use equity to obtain the cancellation of a security deed or promissory note if the plaintiff has not paid the note or tendered payment of the note. ). “There is not any basis for the Court to find that the self-assignment Plaintiff manufactured prevents Defendant from foreclosing on the Property.  Plaintiff's request for declaratory judgment is required to be dismissed.”  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011).

    Wrongful Foreclosure.

    An allegation of wrongful foreclosure can be found in many guises, each of which generally asserts some sort of underlying defect in the documents or procedure.  As noted above, attacking the foreclosure is not a defense to the dispossessory, but since the arguments will be made, it helps to have a response shooting down such arguments.

    To assert a claim of wrongful foreclosure, Georgia law requires the plaintiff  to establish a legal duty owed to it by the foreclosing party, a breach of that duty, a causal connection between the breach of that duty and the injury it sustained, and damages.  Heritage Creek Dev. Corp. v. Colonial Bank, 268 Ga.App. 369, 601 S.E.2d 842, 844 (Ga.Ct.App.2004). To foreclose on a property, O.C.G A. § 44 14 162(b) stipulates that  [t]he security instrument or assignment thereof vesting the secured creditor with title to the security instrument shall be filed prior to the time of sale in the office of the clerk of the superior court of the county in which the real property is located.   Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    To prove wrongful foreclosure under Georgia law, a plaintiff  must establish a legal duty owed to it by the foreclosing party, a breach of that duty, a causal connection between the breach of that duty and the injury it sustained, and damages.  Gregorakos v. Wells Fargo Nat. Ass'n., 285 Ga.App. 744, 647 S.E.2d 289, 292 (Ga.App.2007).

    In one case the Plaintiff claimed Defendant's attempt to foreclose on the Property violated O.C.G.A. § 44 14 162(b) because foreclosure was allegedly pursued without notifying Plaintiff at least 30 days prior.  Defendant argued that it was not liable for wrongful foreclosure because (1) it was not the entity that foreclosed on the Property and (2)  FNMA had no duty to Plaintiff to postpone or cancel the Foreclosure.   No facts suggested that either the foreclosure or sale violated Georgia law, or that Defendant had a duty to Plaintiff.  Most importantly, Defendant was not the entity that foreclosed on the Property.  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    That situation demonstrates the circumstance frequently encountered in a post foreclosure dispossessory.  The bank conducts the foreclosure sale, buys the property at the foreclosure sale, and then transfers the property to Fanny Mae or Freddy Mac under a loan guarantee program.  Then Fanny or Freddie files the dispossessory.  In addition to the fact that the sale has not been set aside, the two points made here demonstrate that the former owner cannot assert such claims in the dispossessory.

    Under Georgia law,  [i]t is clear that a security deed which includes a power of sale is a contract and its provisions are controlling as to the rights of the parties thereto and their privies.  Gordon v. S. Cent. Farm Credit, ACA, 213 Ga.App. 816, 446 S.E.2d 514, 515 (Ga.Ct.App.1994).

    O.C.G.A. § 23 2 114 mandates that powers of sale be fairly exercised, and, similarly, O.C.G.A. § 44 14 82 bars suits to recover property when an action to foreclose and the exercise of power of sale are barred.  Although a breach of the duties imposed by these statutes can give rise to a cause of action, the proper cause of action is not negligence, but rather wrongful foreclosure.  Stimus v. Citimortgage, Inc., Slip Copy 2011 WL 2610391 (M.D.Ga. July 1, 2011).

     Where a grantee does not comply with the statutory duty under O.C.G.A. § 23 2 114 to exercise fairly the power of sale in a deed to secure debt, the debtor may sue for damages for the tort of wrongful foreclosure. DeGolyer v. Green Tree Servicing, LLC, 291 Ga.App. 444, 448, 662 S.E.2d 141, 147 (2008) (citing Calhoun First Nat. Bank v. Dickens, 264 Ga. 285, 285 86, 443 S.E.2d 837, 838 (1994)).

    However, this rule that powers of sale in deeds of trust, mortgages, and other instruments shall be strictly construed and fairly exercised does not apply if the power is unambiguous and is being exercised as the deed provides.  Atlanta Dwellings, Inc. v. Wright, 272 Ga. 231, 527 S.E.2d 854 (2000).  In other words, if the debtor defaults and the lender follows the correct procedures to foreclose, then the power has been exercised fairly.  I did find one case which found the lender had not exercised the foreclosure sale fairly, because the lender foreclosed on the wrong tract of land, one which was not included in the security deed. 

    Note and Deed to Secure Debt Split.

    The argument that a lender cannot foreclose on the property when the Note and Security Deed are “split”, meaning each is held by a different entity, has been rejected by the federal courts of Georgia. 

    In one case, Plaintiff argued that since MERS only possessed the Deed, the Deed is all it could transfer to LaSalle, and because LaSalle did not also possess the Note, it could not foreclose on the Property.  Magistrate Judge Alan J. Baverman rejected this argument in a Report and Recommendation adopted by Judge Julie E. Carnes. See Nicholson v. OneWest Bank, No. 1:10-cv-0795-JEC/AJB, 2010 WL 2732325, at *4 (N.D.Ga. April 20, 2010) ( [T]he nominee of the lender has the ability to foreclose on a debtor's property even if such nominee does not have a beneficial interest in the note secured by the mortgage. ). Plaintiff failed to draw the Court's attention to any Georgia statute or decision interpreting Georgia law that precludes the holder of the security deed from proceeding with a foreclosure sale simply because it does not also possess the promissory note.  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011).

    Plaintiff's argument is also foreclosed by the plain language of the Deed she granted to MERS. The plain language of the Deed granted by Plaintiff to MERS recognizes that the Note is held by the  Lender,  but nonetheless expressly grants MERS and its assigns  the right to foreclose and sell the Property.  (Dkt. [9-1] at 19). The deed discloses no intent on the part of Plaintiff to restrict MERS or its assigns from selling the property if the Note and Deed were not in the possession of the same entity.  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011).

    Plaintiff's theory based upon the  splitting  of the Note and Deed is not valid,  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011).

    To the extent that Plaintiff asserts in her Complaint and Response to Defendants' Motion to Dismiss that a foreclosure cannot occur because MERS did not hold the Note or that the separation of the Note and Security Deed renders the Security Deed invalid, variations of this argument have been repeatedly rejected by the Court, and the Court is unaware of any Georgia statute or decision interpreting Georgia law that precludes the holder of the security deed from proceeding with a foreclosure sale simply because it does not also possess the promissory note.  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011).

    Robo-Signers.

    One new argument is the allegation that documents within the chain of events leading to the foreclosure were signed by so called Robo-Signers.  This term refers to individuals hired by loan servicing companies, sometimes with little or no experience, to put together the documents in preparation for the foreclosure process.  Because of the large number of defaulted loans being processed, emphasis is sometimes placed on speed over thoroughness. 

    Two different types of arguments spring from this scenario.  One is that these Robo-Signers lack authority to sign assignments on behalf of MERS or other banks because they are merely employees of the loan servicing company.  That argument is dealt with in the next section.  The other argument is that these Robo-Signers are preparing false affidavits of foreclosure because the affidavit in part states that they reviewed the file and make the affidavit on the basis of their personal knowledge of the facts, i.e. that the debt is in default, the creditor holds the note, and foreclosure is appropriate.  Because Robo-Signers execute so many documents so fast, the argument goes, they do not have time to personally review the file, thus the affidavit is argued to be fraudulent and the resulting foreclosure a nullity.

    Putting aside the question of how much information a personal review requires (most of the vital details can be summarized on one computer screen, and those are the same details which go into the foreclosure documents), this argument amounts to pure speculation.  True, some of the larger banks who handle the highest volume at times suspended foreclosures until they could review such procedures.  True a few “whistle blowers” allege that they essentially rubber stamped the paperwork without reviewing the files.  But how does that make a former owner who lost their home through foreclosure the victim of some financial scam by the giant mega banks?  In one reported case, where one bank took over a loan from a failed bank and some of the payment records were lost, the bank foreclosed despite the loan not actually being in default.  That was a mistaken foreclosure, but it was one out of thousands which were truly in default.  One example of an actual mistake does not mean every foreclosure is tainted by mistakes.

    Let us face facts.  The former owner, for whatever reason, failed to pay his mortgage debt.  He borrowed that money to buy his home (or refinance an earlier loan), and enjoyed the fruits of that money by living in the home many years.  He was well aware of his not making payments, and that defaulting on his loan would eventually result in forelcosure.  He continued to live in the home “rent free” for months or years, while his lender plodded through all the other defaulted loans ahead of him before finally taking action on his.  There is no doubt that he owes the debt.  There is no doubt that the debt is in default.  There is no doubt that the lender has the right and power to foreclose on the property.  There is no doubt that he should lose the home because he failed to pay for it.  But because someone somewhere, trying to get something for nothing, thought up this argument and posted it on the Internet or sold it in some fashion, suddenly the former owner views himself as a victim entitled to get his home, which he did not pay for, back, along with a windfall of hundreds of thousands of dollars to punish his lender for daring to exercise its legal rights. 

    This argument is purely form over substance.  It is designed to pick at insignificant detail while ignoring the big picture. 

    One last thought.  This argument really only applies in states with a judicial foreclosure process which requires an affidavit to be filed as part of that process.  In Georgia, a non-judicial foreclosure state, no such affidavit is required in the first place.

    Assignment Invalid - Signed by Non-Employees.

    Another claim often asserted is the argument that the people who signed (or Robo-Signed) the assignment of a security instrument on behalf of MERS were not employees of MERS, therefore the assignment is invalid and the subsequent foreclosure sale wrongful.  Such former owners usually find such claims on one of several web sites purporting to help stop foreclosure fraud by listing names of individuals signing various assignments and pointing out that such individuals are employed by different companies.  This is one of those arguments which sound good to the uninitiated, but falls apart upon close scrutiny.

    Jackman v. Hasty, Slip Copy March 8, 2011 WL 854878 (N.D.Ga.), addressed the question on a motion to dismiss when the court found insufficient evidence to determine whether the so called “robosigners” had authority to sign the MERS assignment.  Therefore, initially, the motion to dismiss was denied in part.  However, that order was reconsidered by the same court at Jackman v. Hasty, November 15, 2011 WL 5599075 (N.D.Ga.), which then found in evidence “a MERS Corporate Resolution appointing Defendants Hasty and Krueger as agents with authority to execute documents relating to mortgage loans, and a copy of an ‘Agreement for Signing Authority’ entered into pursuant to that resolution. . . . In this case, Defendants Hasty and Kruger were appointed as agents of MERS by a corporate resolution duly adopted by the MERS Board of Directors. (Dkt. [30 1] at 6). According to the resolution, Hasty and Krueger have authority to, among other things, ‘[ a]ssign the lien of any mortgage loan registered on the MERS  System that is shown to be registered to Wells Fargo Home Mortgage a Division of Wells Fargo Bank, NA or its designee,’ and ‘[e]xecute any and all documents necessary to foreclose upon the property securing any mortgage loan registered on the MERS system’  (Id.). The resolution is signed by William C. Hultman, the Corporate Secretary of MERS, and appears to bear the MERS corporate seal. (Id.). . . . The evidence thus shows that Defendants Hasty and Krueger, although not employees of MERS, were duly appointed agents of MERS who had authority to assign the Security Deed and Note to LaSalle on behalf of MERS. LaSalle thus had legal authority to foreclose on the Property.”

    Fair Debt Collection Practices Act (the  FDCPA ), 15 U.S.C. 1692, et seq.

    Former Owners often argue that some violation of the Fair Debt Collection Practices Act makes the foreclosure wrongful.  A typical claim is that the former owner made a qualified written request for confirmation of the debt which the creditor allegedly never provided, therefore the creditor could not legally pursue collection by foreclosure until it complied with the request.  Of course, the earlier responses still apply, the foreclosure deed has not been set aside and the current owner is not the party accused of the violation, but there is also a more direct response to this argument.

    To prevail, the plaintiff must show: (1) he has been subject to collection activity arising from a consumer debt; (2) the defendant qualifies as a  debt collector  under the FDCPA; and (3)  the defendant has engaged in a prohibited act or has failed to perform a requirement imposed by the FDCPA.  [Cits. Omitted.]  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011). 

    Occasionally the debt is not a consumer debt.  If the collateral was a vacation home, a rental property, a business or commercial property, the FDCPA does not apply.  Usually in these situations the property is the primary residence of the former owner, but it never hurts to verify. 

    The primary response is that the creditor is not a “debt collector.”

    The FDCPA  regulates the practices of debt collectors.  Nadalin v. Auto. Recovery Bureau, Inc., 169 F.3d 1084, 1085 (7th Cir.1999), a term that is defined as excluding repossessors and other enforcers of security interests, 15 U.S.C. § 1692a(6), except that a repossessor may not take or threaten to take nonjudicial action to dispossess a person of property if  there is no present right to possession of the property claimed as collateral through an enforceable security interest.  § 1691f(6)(A).”  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011).  The caveat does not apply.  By definition pursing a dispossessory action is a judicial action to dispossess the former owner.  The current owner is not acting as a debt collector in pursuing the dispossessory.  The foreclosing creditor is not considered a debt collector in attempting to collect a debt owed to the creditor through foreclosure of a security interest.  Therefore, the FDCPA does not apply.  

    In one case the Plaintiff alleged that Defendant violated  Plaintiff's Rights to make requests under the [FDCPA]  because  [a]lthough requests for information ha[ve] been repeatedly made, Plaintiff has never been supplied with proper evidence that FNMA is still in fact the legal holder of the mortgage.   Defendant argued that liability under the FDCPA cannot attach because (1) it was not a debt collector as defined by the law and (2) the foreclosure did not constitute a debt collection.  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    The court ruled that a  debt collector  is  any person who uses any instrumentality of interstate commerce [for which the] principal purpose ... is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.  15 U.S.C. § 1692a(6). The FDCPA only applies to debt collectors, not creditors in the process of collecting their own debt. [Cits. Omitted.]  No facts suggested FNMA acted as a debt collector. Therefore, the FDCPA did not apply to Defendant.  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    The FDCPA defines  debt collector  to exclude  any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor.  Id. § 1692a(6) (A).  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011).  To state a plausible claim under the FDCPA, Plaintiff must show that Defendant is a debt collector. Plaintiff has not, however, alleged that Defendant is a debt collector, and the Court finds as a matter of law that Defendant is not engaged in debt collection.  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011). 

    Plaintiff cites Jackman v. Hasty, 2011 WL 854878, at *4 *5 (N.D.Ga. Mar. 8, 2011), to argue that Defendant is a  debt collector  for the purposes of § 1692f(6)(A). To the extent that this case stands for the proposition that a servicer creditor can be a  debt collector,  it is incorrect because § 1692a(6)(A) states that creditors are not debt collectors. Jackman seems to have erroneously relied on Selby v. Bank of Am., Inc., 2010 WL 4347629, at *2 (S.D.Cal. Oct.27, 2010), which involved a servicer who was not a creditor. See, e.g., Montgomery v. Huntington Bank, 346 F.3d 693, 699 (6th Cir.2003) ( [T]he federal courts are in agreement: A bank that is a creditor is not a debt collector for the purposes of the FDCPA and creditors are not subject to the FDCPA when collecting their accounts. ) (internal quotation marks omitted); Aubert v. Am. Gen. Fin., Inc., 137 F.3d 976, 978 (7th Cir.1998) ( Creditors who collect in their own name and whose principal business is not debt collection, therefore, are not subject to the [FDCPA]. ).  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011). 

    Real Estate Settlement Procedures Act ( RESPA ).

    The Act expressly provides that RESPA  does not apply to credit transactions involving extensions of credit-(1) primarily for business, commercial, or agricultural purposes [.]  12 U.S.C. § 2606(a)   Oliver v. LIB Properties, Ltd., Slip Copy 2010 WL 2867932 (N.D.Ga. June 21, 2010).

    Congress enacted the RESPA  to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices.  12 U.S.C. § 2601(a). Under the RESPA, any servicer of a federally related mortgage loan  shall provide a written response acknowledging receipt of the correspondence within 20 days  if the servicer  receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan.  Id. § 2605(e)(1)(A). Furthermore, within 60 days of receiving the qualified written request, the servicer must conduct an investigation about the request, make appropriate corrections in the borrower's account, and provide to the borrower a written explanation of the servicer's conclusions from the investigation. Id. § 2605(e)(2). If a servicer does not comply with the statute, it shall be liable for  any actual damages to the borrower as a result of the failure.  Id. § 2605(f)(1).  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    Plaintiff claims Defendant has  continued to pursue the Sale under Power in direct violation of [t]he [RESPA]  and that  FNMA has shown a practice or pattern of refusing to produce the necessary documents requested in violation of [the] RESPA [§ ] 2605(e).  (Dkt. No. [2] at    16, 27). Defendant argues that there is no RESPA violation because (1) Plaintiff has admitted that Defendant did not violate any contractual provision, law, or regulation in connection with the loan or foreclosure; (2) no evidence suggests FNMA received a qualified written request; and (3)  Plaintiff failed to allege that he sustained any actual, recoverable damages as a direct and proximate result of FNMA's alleged failure to respond to [Worrell's] inquiry.  (Dkt. No. [11 1] at 19 24).  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    Indeed, the RESPA applies only if the borrower makes a written request to the servicer. 12 U.S.C. § 2605(e)(1)(A). The closest Plaintiff came to pleading that he submitted a written request is that he  has requested documents from FNMA.  (Dkt. No. [2] at   26). Even assuming that the Court could draw a reasonable inference that a request was written, Plaintiff nevertheless must quantify damages incurred in dealing with a RESPA violation. See McLean v. GMAC Mortg. Corp., 595 F.Supp.2d 1360, 1370 71 (S.D.Fla.2009) (noting that a plaintiff must quantify damages for RESPA violations). Plaintiff failed to quantify damages.  Worrell v. Fed. Nat. Mortg. Assoc., Slip Copy 2011 WL 2489951 (N.D.Ga. June 21, 2011).

    The Plaintiff has not adequately alleged a claim under section 2605 of RESPA. Section 2605 imposes a duty upon mortgage loan servicers to (1) provide a notice of receipt of a qualified written request within 20 days of receipt of said request; and (2) take certain action with respect to the qualified written request within 60 days of the receipt of said request. See 12 U.S.C. § 2605(e)(1)-(2). Nowhere in the Plaintiff's complaint does she state what actions of CitiMortgage allegedly violated RESPA other than her conclusory allegation that the  Defendant breached legal duties ... under [RESPA] in servicing residential mortgage loans.  (Doc. 16 2 at   183). Such an allegation does not support a claim under the statute.  Stimus v. Citimortgage, Inc., Slip Copy 2011 WL 2610391 (M.D.Ga. July 1, 2011).

    RESPA allows consumers to request from their lenders information on the nature and costs of real estate transactions. 26 U.S.C. § 2601; see also McCarley v. KPMG Int'l, 293 Fed. App'x 719, 722 (11th Cir.2008).  Under RESPA, loan servicers  ha[ve] a duty to respond to a borrower's inquiry or qualified written request.    Mallaly v. BAC Loan Servicing, LLC, No. 3:10 CV 0074, 2010 WL 5140626, *7 (N.D.Ga. Oct. 6, 2010) (quoting 12 U.S.C. § 2605(e)).FN5 Under the statute, the term  qualified written request  is defined as written correspondence relating to the servicing of a loan that (1) includes or otherwise enables the servicer to identify the name and account of the borrower and (2) contains a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower. 12 U.S.C. § 2605(e)(1).  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011).

    Servicing is defined as  receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan ... and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan.  12 U.S.C. § 2605(i)(3). Under RESPA, servicers may designate an exclusive office and address to receive and handle qualified written requests. 24 C.F.R. § 3500.21(e)(1). A servicer who fails to respond to a qualified written request is liable for the failure, but a borrower is limited to actual damages unless the failure to respond was part of a  pattern or practice of noncompliance  with RESPA's requirements. See 12 U.S.C. § 2605(f).  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011).

    Plaintiff's information document requests are not a proper qualified written request under RESPA because they do not relate to the servicing of the loan.{FN6 . . .According to the allegations of the counterclaim, the letter sought information about the validity of the loan and mortgage documents, but made no inquiry as to the status of the [defendants'] account balance. Therefore, the request did not relate to  servicing  of the loan. }  (See id.). Having failed to allege any factual basis for any loss as a result of improper servicing, Plaintiff's Fourth Complaint fails to state a claim under RESPA because it does not indicate information she requested in a qualified written request and has not alleged damages she claims to have suffered. The Court finds that her RESPA claims based on failure to respond to her QWR must be dismissed for failure to state a claim on which relief could be granted.FN7  Liggion v. Branch Banking and Trust, Slip Copy 2011 WL 3759832 (N.D.Ga. Aug. 24, 2011). 

    Qualified Written Request.

    As mentioned in the preceding section, many former owners attempt to make a Qualified Written Request pursuant to RESPA to delay foreclosure.  Such attempts typically fail for one or more of several reasons discussed above.  Here is another.

    To the extent Plaintiff contends that the Law Firm Defendants failed to respond to a Qualified Written Request pursuant to the Real Estate Settlement Procedures Act ( RESPA ), 12 U.S.C. § 2601, et seq., such a claim fails because RESPA does not provide for such a claim against foreclosure counsel or its employees.  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011). 

    Federal Trade Commission Act ( FTCA ).

    The Federal Trade Commission Act ( FTCA ), 15 U.S.C. § 57b, provides for civil actions for violations of, inter alia, the rules respecting unfair or deceptive acts or practices in violation of 15 U.S.C. § 45(a). The Act authorizes suits by the Federal Trade Commission-it does not grant private individuals or other entities the right to bring a civil action. See 15 U.S.C. § 57b(a).  Oliver v. LIB Properties, Ltd., Slip Copy 2010 WL 2867932 (N.D.Ga. June 21, 2010).

    Equal Credit Opportunity Act ( ECOA ).

    The Equal Credit Opportunity Act ( ECOA ), 15 U.S.C. § 1691, et seq., makes it  unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction :
    (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract);
    (2) because all or part of the applicant's income derives from any public assistance program; or
    (3) because the applicant has in good faith exercised any right under this chapter.

    15 U.S.C. § 1691(a); and see Regulation B, 12 C.F.R. § 202.1, et seq. A credit applicant may bring a civil action against  [a]ny creditor who fails to comply with any requirement imposed under [ECOA].  15 U.S.C. § 1691e(a). However, the Act provides:  No [ECOA] action shall be brought later than two years from the date of the occurrence of the violation[.]  15 U.S.C. § 1691e(f).  [T]he violation occurs, and the limitations period begins to run, upon the signing of the note.  Stern v. Espirito Santo Bank of Florida, 791 F.Supp. 865, 868 (S.D.Fla.1992) (citations omitted). See also Beaulialice v. Federal Home Loan Mortg. Corp., 2007 WL 744646, at *5 n. 9 (M.D.Fla. March 6, 2007) (finding no controlling legal authority for applying the continuing violation doctrine to ECOA claims; untimely ECOA claims dismissed on summary judgment).  Oliver v. LIB Properties, Ltd., Slip Copy 2010 WL 2867932 (N.D.Ga. June 21, 2010).

    Fair Credit Reporting Act ( FCRA ).

    The Fair Credit Reporting Act ( FCRA ), 15 U.S.C. § 1681, et seq., imposes duties on those who furnish information to credit reporting agencies in an effort to  ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.  Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 52, 127 S.Ct. 2201, 2205, 167 L.Ed.2d 1045 (2007). However, the FCRA does not apply to mortgage companies and their nominees. See Chipka v. Bank of America, 2009 WL 4598327, at *2 (11th Cir. December 8, 2009) (citing Smith v. First Nat'l Bank of Atlanta, 837 F.2d 1575, 1578 (11th Cir.1988) (holding that a bank reporting information solely on its own experience with one of its customers was not acting as a  consumer reporting agency  within the meaning of the FCRA)); and see 15 U.S.C. §§ 1681a(d)(2)(A)(i) and (f).  Oliver v. LIB Properties, Ltd., Slip Copy 2010 WL 2867932 (N.D.Ga. June 21, 2010).

    Federal Action Seeking a Temporary Injunction to Set Aside the Foreclosure Sale and Stop Dispossessory.

    When Plaintiff seeks a temporary injunction to set aside the foreclosure sale, and to stop the Dispossessory proceedings, Federal Rule of Civil Procedure 65(c) states:  The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. 

    Typically, the former owner is unable and/or unwilling to provide security for if the former owner possessed such financial means, then he most likely could have paid the debt, avoided default, and thereby avoided foreclosure.  Most former owners will necessarily admit that they did not pay the installments required and will offer no security.

    To obtain a preliminary injunction, the movant must establish: (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered if the relief is not granted; (3) that the threatened injury outweighs the harm the relief would inflict on the non-movant; and (4) that entry of the relief would serve the public interest. Schiavo ex rel. Schindler v. Schiavo, 403 F.3d 1223, 1225 26 (11th Cir.2005).  [A] preliminary injunction is an extraordinary remedy not to be granted unless the movant clearly established the  burden of persuasion  as to each of the four prerequisites.  Redford v. Gwinnett Cnty. Judicial Circuit, 350 F. App'x 341, 345 (11th Cir.2009) (citations omitted).  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011).

    Georgia’s Uniform Commercial Code.

    [T]he Uniform Commercial Code does not provide a basis for federal question jurisdiction. [It] is not a federal statute.... Thus, a civil action based on the UCC does not arise under the laws of the United States, and ... does not provide a court with federal question jurisdiction.  Citibank, N.A. v. Gumbs, 2007 WL 3491744, at *4 (N.D.Ga. November 6, 2007) (citations omitted).  Oliver v. LIB Properties, Ltd., Slip Copy 2010 WL 2867932 (N.D.Ga. June 21, 2010).


    Georgia's Uniform Deceptive Trade Practices Act and Fair Business Practices Act.

    “Plaintiff attempts to assert claims under the Uniform Deceptive Trade Practices Act ( UDTPA ), O.C.G.A. § 10-1-370, et seq., and the Fair Business Practices Act ( FBPA ), O.C.G.A. § 10-1-390, et seq.  However, both statutes do not apply to conduct subject to rules and regulations promulgated by a regulatory agency of Georgia or the United States. O.C.G.A. § 10-1-374(a)(1); O.C.G.A. § 10-1-396(1).  Because the servicing of mortgages and foreclosure sales are regulated by other state and federal rules and statutes, claims relating to either are exempt from the UDTPA and FBPA.”  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011).

    Fraud.

    “To state a claim for fraud under Geogia law, a plaintiff must plead five essential elements:  (1) That the defendant made the representations; (2) that at the time he knew they were false; (3) that he made them with the intention and purpose of deceiving the plaintiff; (4) that the plaintiff relied on the representations; [and] (5) that the plaintiff sustained the alleged loss and damage as the proximate result of their having been made.”  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011).

    Former owners generally fail to plead fraud with the required specificity, and are generally unable to demonstrate reliance or proximate damage. 

    A former owner’s conclusory allegations of fraud are insufficient to satisfy the special pleading requirement under Rule 9(b) of the Federal Rules of Civil Procedure for pleading fraud claims with specificity and otherwise fail to allege the required elements of a claim of fraud.  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011).

    Slander of Title.

    A former owner may throw in a slander of title claim by arguing that the foreclosure was wrongful, therefore he still owns the property, therefore the assertions that he does not own the property are slanderous.  Such a claim is by nature dependent upon establishing the wrongful foreclosure first.  Even then, making the claim is difficult.  For example, court pleadings are privileged, and therefore cannot serve as a basis for slander of title.  This privilege rules out the dispossessory affidavit as a basis for the claim.  Another difficulty lies in proving all of the elements of such a claim.

     The owner of any estate in lands may bring an action for libelous or slanderous words which falsely and maliciously impugn his title if any damage accrues to him therefrom.  O.C.G.A. § 51-9-11.  In order to sustain an action of this kind, the plaintiff must allege and prove the uttering and publishing of the slanderous words; that they were false; that they were malicious; that he sustained special damage thereby; and that he possessed an estate in the property slandered.  Latson v. Boaz, 598 S.E.2d 485, 487, 278 Ga. 113 (Ga.2004) (citation omitted). Plaintiff has not alleged that she sustained any special damages and therefore fails to allege an essential element of the cause of action.  Jackman v. Hasty, Slip Copy 2011 WL 854878 (N.D.Ga. March 8, 2011). 

    Removal from State to Federal Court.

    One strategy which might be employed by a former owner is attempting to remove the dispossessory case from state to federal court in order to further delay the process.  I end with this section because I do not claim expertise in federal court practice.  I merely provide the following excerts of authority to argue that the dispossessory case should not be removed to federal court or should be remanded to state court if removal occurred. 

    A defendant may remove a case from State to federal court if the federal court has original jurisdiction over the case. 28 U.S.C. § 1441(a).  [A] court should inquire into whether it has subject matter jurisdiction at the earliest possible stage in the proceedings. Indeed, it is well settled that a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking.  Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir.1999). A district court lacks subject matter jurisdiction over a removal action when it does not have  original jurisdiction over the plaintiff's claims.  Id. Original jurisdiction under § 1441 arises if there is diversity of parties or a federal question. See 28 U.S.C. § 1441(b); Geddes v. Am. Airlines, Inc., 321 F.3d 1349, 1352 n. 2 (11th Cir.2003); Blab T.V. of Mobile, Inc. v. Comcast Cable Commc'ns, Inc., 182 F.3d 851, 854 (11th Cir.1999).  The district court may remand a case sua sponte for lack of subject matter jurisdiction at any time.  Corporate Mgmt. Advisors, Inc. v. Artjen Complexus, Inc., 561 F.3d 1294, 1296 (11th Cir.2009); see also 28 U.S.C. § 1447(c) ( If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. ).  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    Diversity Jurisdiction

    Under 28 U.S.C. § 1332, district courts have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000 and is between citizens of different states. 28 U.S.C. § 1332(a). Under § 1332(a), an in-State plaintiff may invoke diversity jurisdiction in a federal court that sits in the State where the plaintiff resides. Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005). The removal statute does not provide an in-State party defendant the same flexibility in removing cases. Id. at 89-90 ( The scales are not evenly balanced, however[,]  for plaintiffs bringing a case under diversity jurisdiction and for defendants removing a case under diversity jurisdiction.). Instead, § 1441(b) bars removal on the basis of diversity if the  part[y] is a citizen of the State in which [the] action is brought.  Id. at 90 (quoting 28 U.S.C. § 1446(b)); see also Caterpillar Inc. v. Lewis, 519 U.S. 61, 69 (1996).  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    The Court concludes that Defendant cannot show diversity jurisdiction for two reasons.

    First, Defendant cannot meet the amount in controversy requirement. As a District Judge in the Northern District of Georgia has held in a similar context:  In this case, Defendant has failed to demonstrate that either there is diversity of citizenship between him and Defendant or that the amount in controversy in this matter exceeds $75,000.00. As a dispossessory proceeding under Georgia law is not an ownership dispute, but rather only a dispute over the limited right to possession, title to the property is not at issue and, accordingly, the removing Defendant may not rely on the value of the property as a whole to satisfy the amount in controversy requirement. See Novastar Mortgage, Inc. v. Bennett, 173 F.Supp.2d 1358, 1361-62 (N.D.Ga.2001) (holding on nearly identical facts that claim for ejectment in summary dispossessory proceeding after foreclosure sale cannot satisfy the amount in controversy requirement as a matter of law). Accordingly, 28 U.S.C. § 1332 cannot serve as a basis for removal.  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010).  Fed. Home Loan Mortg. Corp. v. Williams, Nos. 1:07-CV-2864-RWS, 1:07-CV-2865-RWS, 2008 WL 115096, *2 (N.D.Ga. Jan. 29, 2008). As a result, Defendant cannot meet the amount in controversy requirement in this dispossessory proceeding.  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    Second, even if Defendant could establish the amount in controversy requirement, the Court finds that § 1441(b) does not permit removal on diversity grounds to the Northern District of Georgia because Defendant is a citizen of the State of Georgia, which is the State where the Bank's dispossessory proceeding was brought. Stated another way, Defendant, a citizen of Georgia, cannot remove the case to a federal court in Georgia because Plaintiff Bank brought the dispossessory action in Georgia. See Fed. Nat'l Mortg. Ass'n v. LeCrone, 868 F.2d 190, 194 (6th Cir.1989) (holding that defendant's removal of foreclosure action brought in an Ohio Magistrate Court to an Ohio federal court was improper because defendant was a citizen of Ohio); see also Bregman v. Alderman, 955 F.2d 660, 663 (11th Cir.1992) (finding removal improper because although there was diversity of citizenship, two of the parties were citizens of the forum state).  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

        Federal Question

    A federal question exists if a civil action arises  under the Constitution, laws, or treaties of the United States.  28 U.S.C. § 1331.  To remove a case as one falling within federal-question jurisdiction, the federal question ordinarily must appear on the face of a properly pleaded complaint; an anticipated or actual federal defense generally does not qualify a case for removal.  Jefferson County, Ala. v. Acker, 527 U.S. 423, 530-31 (1999); Ervast v. Flexible Prods. Co., 346 F.3d 1007, 1013 (11th Cir.2003) (  [U]nless the face of a plaintiff's complaint states a federal question, a Defendant may not remove a case to federal court on [a federal question] basis, even though a possible defense might involve a federal question. ). The removing Defendant bears the burden of proving a federal question exists. See Friedman v. New York Life Ins. Co., 410 F.3d 1350, 1353 (11th Cir.2005); Leonard v. Enterprise Rent a Car, 279 F.3d 967, 972 (11th Cir.2002). For the reasons below, the Court finds that Defendant's five bases for removal-FDCPA, TILA, RESPA, FED. R. CIV. P. 60, and the Fourteenth Amendment-do not demonstrate that the Court has federal question jurisdiction over the dispossessory action.  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    First, the Court concludes that the FDCPA does not provide a basis for removal of the Bank's dispossessory action.  The FDCPA was designed to protect consumers from the  abusive, deceptive and unfair debt collection practices' of debt collectors.  Worch v. Wolpoff & Abramson, L.L.P., 477 F.Supp.2d 1015, 1018 (E.D.Mo.2007). There is no indication that the Bank pleaded a claim under the FDCPA in its state court dispossessory action. Indeed, it does not make sense that the Bank would have raised the FDCPA as a basis for dispossessing Defendant from the residence because the Bank's actions are a result of another's debt, so the Bank would not seek protection from collecting the debt. Instead, Defendant's reliance on the FDCPA is only a defense. See Wells Fargo Bank, N.A. v. Ricotta, No. 06-cv-1702, 2006 WL 2548339, *1 (D.Colo. Aug. 31, 2006) ( The Defendant's conclusory and uncited assertion that an attempt to foreclose somehow implicates the Fair Debt Collection Practices Act is, at best, an indication that the Defendant intends to assert a federal-law defense or counterclaim to the state-law foreclosure proceeding. ). A defense to civil action does not provide a basis for removal. See, e.g., Acker, 527 U.S. at 431 (noting that an actual or anticipated defense does not generally qualify a case for removal). As a result, the Court finds that Defendant has not shown that a federal question exists to permit removal of Plaintiff's dispossessory action by citing to the FDCPA.  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    Second, TILA and RESPA, like the FDCPA, do not provide the Court with original jurisdiction over the Bank's dispossessory action. The magistrate court dispossessory complaint does not reference TILA or RESPA on its face. Instead, Defendant argues that the foreclosure violated TILA and RESPA, indicating that Defendant seeks to use TILA and RESPA as defenses. By citing to TILA and RESPA to defend against dispossession, Defendant has not provided a basis for removing the dispossessory action. See Acker, 527 U.S. at 431; see also Homesales, Inc. v. Frierson, No. 08-cv-8607, 2009 WL 365663, *2 (C.D.Cal. Feb. 11, 2009) (remanding case where defendant alleged RESPA and TILA violations as a defense to a detainer action); United States Nat'l Ass'n v. Almanza, No. 1:09-cv-28 AWI DLB, 2009 WL 161082, *2 (E.D.Cal. Jan. 22, 2009) ( Because the RESPA and TILA defenses are insufficient to create federal question jurisdiction, and because no federal question appears within Plaintiff's complaint, Defendants' notice of removal does not show that removal was appropriate[.] ).  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    Third, FED. R. CIV. P. 60 does not provide a basis for removal on federal question grounds for two reasons. First, the magistrate court dispossessory complaint does not refer to Rule 60, indicating that Plaintiff's dispossessory action does not arise under this Rule. Second, even if the dispossessory proceeding made reference to Rule 60, this Rule would not provide the Court with federal question jurisdiction. As a rule of federal procedure, FED. R. CIV. P.60 does not provide any substantive rights. It is merely a procedural rule, so Plaintiff's lawsuit could not arise under Rule 60. See Whitaker & Co. v. Sewer Imp. Dist. No. 1 of Dardanelle, Ark., 221 F.2d 649, 652 (8th Cir.1955) (describing the Federal Rules of Civil Procedure as  adjective  and stating that  [s]ubstantive rights are not determined by these Rules ); Transwestern Pipeline Co., LLC v. 9.32 Acres, More or Less, of Permanent Easement Located in Maricopa County, 544 F.Supp.2d 939, 945 (D.Ariz.2008) ( It is well recognized that the federal rules of civil procedure are just that, and cannot be used to abridge, enlarge or modify substantive rights. ); State Police for Automatic Retirement Ass'n v. Difava, 164 F.Supp.2d 141, 156 (D.Mass.2001) ( [T]he Federal Rules of Civil Procedure do not create independently enforceable rights upon which [a plaintiff] may sue. ).  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    Finally, the Court concludes that the United States Constitution does not provide a basis for removing the Bank's dispossessory proceeding. First, the face of Plaintiff's dispossessory action does not refer to the Fourteenth Amendment, indicating that the action did not arise under federal law. See Acker, 527 U.S. at 530-31. Second, it appears that Defendant's argument concerning the Fourteenth Amendment is a defense or counterclaim to Plaintiff's dispossessory action.  [I]t is well settled that federal counterclaims and defenses are  inadequate to confer federal jurisdiction,    so Defendant cannot remove the dispossessory action based on the Fourteenth Amendment. See Chase Manhattan Mortg. Corp. v. Smith, 507 F.3d 910, 914-15 (6th Cir.2007) (affirming award of attorney's fees for improvident removal where defendants claimed in part that removal of default and foreclosure action was based on violation of due process clauses of the Fifth and Fourteenth Amendments); Wachovia Bank, N.A. v. Ellison, No. 1:07-cv-18, 2007 WL 1140437, *1 (M.D.N.C. Apr. 17, 2007) (finding that court did not have subject matter jurisdiction over removed foreclosure action and that  [a]ll of the constitutional claims raised by Defendant exist[ed] as defenses to Plaintiff's action against him and are distinctly absent from the original complaint ); Cendant Mortg. Corp. v. Clemmer, No. 5:05-cv-4068, 2005 WL 2455577, *2 (D.Kan. Oct. 5, 2005) (finding that notice of removal alleging violation of due process did not provide a court with subject matter jurisdiction over state court foreclosure action because  [r]emoval cannot be predicated on allegations contained in defendants' notice of removal or subsequent documents  and federal defenses do not provide a basis for removal). The Court therefore concludes that the Fourteenth Amendment does not provide a basis for removal.  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010)

    Accordingly, the Court finds that because Defendant has no legitimate basis to remove Plaintiff's dispossessory action to federal court under federal question or diversity jurisdiction, the case should be REMANDED to the Magistrate Court of Douglas County, Georgia.  Wells Fargo Bank v. Cyrus, Slip Copy 2010 WL 3294320 (N.D.Ga. July 15, 2010).

    What is MERS®?

    A great many of the arguments raised and confusion sown in these dispossessory after foreclosure cases arise from the involvement of MERS in the loan process.  Many have no idea what MERS is or what purpose it serves.  Perhaps this brief explanation will help.

    MERS is the acronym for Mortgage Electronic Recording Services.  Because banks and other large lenders operate nationwide, creating thousands of loan transactions, they encounter difficulty keeping track of all the paperwork.  When a loan is sold, the assignment is generally recorded in the county property records, and these types of loans are sold regularly.  The logistics of preparing paper assignements, finding where to send them for recording, tracking the paper to assure that it has been recorded, and getting it back into the file can be burdensome for one transaction, and impossible for hundreds or thousands.  Each recording also costs $10 to $25 depending upon jurisdiction.  Banks wanted a better way to keep track and spend less money.  Thus MERS was born. 

    MERS works like this: You obtain a home loan.  Instead of signing a deed to secure debt to the lender making the loan, you sign a deed to secure debt to MERS as the nominee of your lender.  The security deed is recorded and listed under the name MERS.  When your lender sells your account to another bank, instead of tracking the assignment by physical paper recorded in your local courthouse, the assignment is made electronically through MERS.  The loan may be assigned several times in this manner.  If you default on your payments and the current holder of the account wants to foreclose, MERS does a physical paper assignment of the account to the holder, which is recorded in the local courthouse.  The current holder can then proceed with the foreclosure. 

    If you check the records at the courthouse, you will only see the security deed into MERS, the assignment from MERS to the current holder, and the deed under power of sale to the purchaser at the foreclosure sale.  Any number of interim assignments of the account (or note) do not show up in the public records.  MERS only holds the security instrument, not the note, acting essentially as a trustee for whomever currently holds the note.  (Thus the argument that the security instrument is split from the note.)   

    In 2003, the Georgia Supreme Court noted that  MERS currently has over 15 million loans registered, and is registering over 40% of all mortgage loans originating in the United States.  Taylor, Bean & Whitaker Mortg. Corp. v. Brown, 276 Ga. 848, 583 S.E.2d 844, 849 n. 1 (Ga.2003). The role MERS plays in mortgage transactions is complicated, but the Georgia Supreme Court has explained that MERS:

     "is a private company created by the mortgage banking industry for the purpose of establishing a centralized, electronic system for registering the assignments and sales of residential mortgages, with the goal being the elimination of costly paper work every time a mortgage loan is sold. Under the MERS system, the borrower and the original lender name MERS as the grantee of any instrument designed to secure the mortgage loan. The security instrument is then recorded in the local land records, and the original lender registers the original loan on MERS's electronic system. Thereafter, all sales or assignments of the mortgage loan are accomplished electronically under the MERS system."


    Violations of the Making Home Affordable Program.

    The Court notes that other federal courts have found that HAMP, and the Emergency Economic Stabilization Act of 2008, neither expressly, nor impliedly, creates a cause of action or vests  mortgagors with third party beneficiary rights to enforce HAMP  agreements under Georgia law.  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011).

    Breach of Contract.


    Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011), states:

    Under Georgia law:  To constitute a valid contract, there must be parties able to contract, a consideration moving to the contract, the assent of the parties to the terms of the contract, and a subject matter upon which the contract can operate.  O.C.G.A. § 13 3 1. An action for breach of contract requires breach of a valid contract and resultant damages to the party who has the right to complain about the breach. Budget Rent A Car of Atlanta, Inc. v. Webb, 220 Ga.App. 278, 469 S.E.2d 712, 713 (Ga.Ct.App.1996).

    *7 Oral and unwritten agreements regarding interests in lands; to include reinstating a mortgage, refinancing a mortgage, or forbearing from foreclosure proceedings; are unenforceable under the Georgia Statute of Frauds. O.C.G.A. § 13 5 30; [cits. omitted.]. Promises to forbear from collecting on a debt also require new consideration from the debtor. [cits omitted.]  Performance of an act one is already legally bound to do is not sufficient consideration for the promise of another.

    Under Georgia contract law, a plaintiff asserting a breach of contract claim must allege a particular contractual provision that the defendants violated to survive a motion to dismiss. [cits. omitted.]
    Theft by Deception.

    Plaintiff's theft by deception claim is based on a criminal statute. O.C.G.A. § 16 8 3. O.C.G.A. § 16 8 3 does not provide for a civil remedy and a civil remedy cannot be implied to arise from a violation of that criminal statute.  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011).

    Breach of Duty of Good Faith and Fair Dealing.

    Conclusorily claims for a breach of good faith and fair dealing,  without any factual support, is insufficient factual content to allow  the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.  Iqbal, 129 S.Ct. at 1949.  [P]laintiffs must do more than merely state legal conclusions; they are required to allege some specific factual bases for those conclusions or face dismissal of their claims.  Jackson, 372 F.3d at 1263.  Plaintiff attempts to raise a new claim in her Response to Defendants' Motion to Dismiss that  defendants were in violation of fair faith in good dealing when they auctioned Plaintiff's property at much less than it should have gone for, and that they themselves bought it, therefore purposeful that they did not try to get the best possible price for the property.  (Pl.'s Resp. to Defs.' Mot. to Dismiss   55.) . . . . Even if this were construed as a new claim, Plaintiff's conclusory allegations regarding a breach of good faith and fair dealing in the conduct of the foreclosure sale do not state a claim for relief.  All Plaintiff alleges is that in the foreclosure sale, the home sold for much less than it should have and offers no support for this assertion beyond her one sentence, conclusory allegation. This is insufficient factual content to allow  the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.  Iqbal, 129 S.Ct. at 1949. Even if the Court were to allow amendment of the Complaint and liberally construe this as a new claim, Plaintiff has failed to state a claim for breach of any duty of good faith and fair dealing in the foreclosure sale.  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011). 

    Unjust Enrichment.

    A claim of unjust enrichment under Georgia law may only arise in circumstances where there is not a contract and a party has received a benefit from another party for which it ought to return the benefit or pay compensation for it. Engram v. Engram, 265 Ga. 804, 463 S.E.2d 12, 15 (Ga.1995).  Where security deeds are valid and controlling in foreclosure actions, a party being foreclosed upon may not seek relief based on an unjust enrichment claim. See Arko v. Cirou, 305 Ga.App. 790, 700 S.E.2d 604, 608 09 (Ga.Ct.App.2010); Donchi, Inc. v. Robdol, LLC, 283 Ga.App. 161, 640 S.E.2d 719, 724 (Ga.Ct.App.2007).  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011). 

    Negligence /GRMA.

    A claim of negligence arising under the Georgia Residential Mortgage Act (the  GRMA ), O.C.G.A. §§ 7 1 1000 to  1021 will fail.  The GRMA prohibits those in the mortgage business from  [e]ngag[ing] in any transaction, practice, or course of business which is not in good faith or fair dealing, or which operates a fraud upon any person, in connection with the attempted or actual making of, purchase of, transfer of, or sale of any mortgage loan.   Here, Plaintiff conclusorily alleges that in the servicing  of the mortgage, she was injured as a result of a breach of the duty of good faith and fair dealing required under the GRMA by Defendants.  To the extent that Plaintiff alleges harm under the GRMA from the foreclosure sale itself, Georgia courts have held that the GRMA does not apply to foreclosure sales. Geary v. Wilshire Credit Corp., 295 Ga.App. 620, 673 S.E.2d 15, 18 & n. 8 (Ga.Ct.App.2009); Roylston v. Bank of America, N.A., 290 Ga.App. 556, 660 S.E.2d 412, 416 (Ga.Ct.App.2008) (  In a foreclosure sale, title to the property is sold and transferred to the highest bidder, but the security interest itself is not sold or transferred; instead, it is extinguished altogether upon satisfaction of the debt from the sale proceeds. ).  Plaintiff again has not alleged facts to support a claim based on negligence. Iqbal, 129 S.Ct. at 1949.  Courts within this district have also found that a private cause of action does not arise under the GRMA, which does not explicitly create a private action and which contains a robust public enforcement scheme. See Jordan v. PHH Mortg. Corp., No. 1:10 cv 967, 2010 WL 5058638, at *7 8 (N.D.Ga. Nov.5, 2010), adopted by 2010 WL 5055809 (N.D.Ga. Dec.6, 2010); Reese v. Wachovia Bank, N.A., No. 1:08 cv 3461 GET, 2009 U.S. Dist. LEXIS 94802, at *5 *8 (N.D.Ga. Feb. 23, 2009).  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011). 

    Promissory Estoppel.

    In Georgia, a  promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.  O.C.G.A. § 13 3 44.  This requires plaintiffs to demonstrate a  substantial change of position to their detriment in reliance upon the promise in issue.  Balmer v. Elan Corp., 261 Ga.App. 543, 583 S.E.2d 131, 133 (Ga.Ct.App.2003).  Promissory estoppel does not apply to a promise that is vague, indefinite, or of uncertain duration.  Mariner Healthcare, Inc. v. Foster, 280 Ga.App. 406, 634 S.E.2d 162, 168 (Ga.Ct.App.2006). A claim for promissory estoppel may not be based on a plaintiff's  own preconceived intent or knowledge.  Reindel v. Mobile Content Network Co., 652 F.Supp.2d 1278, 1290 (N.D.Ga.2009).

    A simple allegatioon that Defendants  had a duty to evaluate Plaintiff for the HAMP program before conducting a foreclosure sale  and she suffered some unspecified harm, is insufficient to state a cause of action.  Kabir v. Statebridge Company, LLC 2011 WL 4500050 (N.D. Ga. Sept. 27, 2011). 

    Georgia Quiet Title Act

    The Georgia Quiet Title Act will not prove to be of much utility in this situation.  It is designed to resolve issues like boundary location, encroachments, and breaks in the chain of title.  It was not designed to attack a foreclosure situation.  Most petitioners will be unfamiliar with the act and fail to file such a claim properly.  The Act provides that the petition be verified and contain a particular description of the land to be involved in the proceeding, a specification of the petitioner's interest in the land, a statement as to whether the interest is based upon a written instrument (whether same be a contract, deed, will, or otherwise) or adverse possession or both, a description of all adverse claims of which petitioner has actual or constructive notice, the names and addresses, so far as known to the petitioner, of any possible adverse claimant, and, if the proceeding is brought to remove a particular cloud or clouds, a statement as to the grounds upon which it is sought to remove the cloud or clouds.  With the petition there must be filed (1) a plat of survey of the land, (2) a copy of the immediate instrument or instruments, if any, upon which the petitioner's interest is based, and (3) a copy of the immediate instrument or instruments of record or otherwise known to the petitioner, if any, upon which any person might base an interest in the land adverse to the petitioner.  Joseph v. CitiMortgage, 2011 WL 5156817 (N.D.Ga. Oct. 27, 2011). 

 

Last Updated ( Tuesday, 18 September 2012 )
 
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