By Nicole D. Prysby, J.D.
Regulation X of RESPA forbids a loan servicer from moving for a foreclosure order of sale after a borrower has submitted a complete loss-mitigation application, but does not prohibit rescheduling a previously ordered foreclosure sale.
A motion to reschedule a previously ordered foreclosure sale is not a motion for order of sale under Regulation X of the Real Estate Settlement Procedures Act (RESPA), held the Eleventh Circuit Court of Appeals. Therefore, because a loan servicer had secured a foreclosure judgment and order of sale before a consumer submitted her completed loss-mitigation application, 12 CFR 1024.41(g) prohibited the servicer only from conducting the actual foreclosure sale, not from rescheduling it (Landau v. Roundpoint Mortgage Servicing Corporation, June 11, 2019, Rosenbaum, R.).
Background. The consumer’s home was the subject of an order of foreclosure sale. After that order was entered, the mortgage loan servicer approved the consumer for a trial loan-modification plan. Because the previously issued order of sale had set a foreclosure sale during what became the six-month trial loan-modification period, the loan servicer filed a motion to reschedule the sale so it would not be held unless the consumer failed to comply with her loan-modification plan during the trial period. The consumer sued, arguing that 12 CFR 1024.41(g) of Regulation X prohibits a loan servicer from moving for an order of foreclosure sale after a borrower has submitted a complete loss-mitigation application. Based on this regulation, the consumer argued that the motion to reschedule the foreclosure sale (as opposed to canceling it altogether) violated Section 1024.41(g) because that motion was itself a motion for order of foreclosure sale. The district court disagreed and dismissed the case and the consumer appealed.
Consumer failed to state a claim for a violation of Regulation X. Looking to the language of Section 1024.41(g), the Eleventh Circuit agreed with the district court that the consumer failed to state a claim for a violation of Regulation X. The parties disputed whether a motion to reschedule a previously set foreclosure sale constitutes a motion for "order of sale." The court concluded it does not. The plain language of Section 1024.41(g) provides only that "a servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale" after a borrower has submitted a complete loss-mitigation application. It does not prohibit a servicer from moving to reset an already-scheduled foreclosure sale. Regulation X does not define "order of sale" so the court looked to the common usage of the phrase. Based on dictionary definitions, an "order of sale" is a legal document issued by a court that commands or directs property to be sold so that a transfer of ownership of title to the property will occur for a price. Therefore, the court concluded, a motion for order of sale is a substantive and dispositive motion that seeks authorization from a court to conduct a foreclosure sale at all, while a motion to reschedule a foreclosure sale under an already-existing order of sale is a non-substantive, housekeeping-type motion that does no more than seek permission to change the date of sale that the court has previously ordered.
The consumer’s proposed interpretation of Section 1024.41(g) to include motions to reschedule foreclosure sales that were previously set under an existing order of sale would also be inconsistent with the consumer-protection purposes of RESPA. It would disincentivize loan servicers from offering loss-mitigation options to delinquent borrowers and helping them complete loss-mitigation applications any time a foreclosure sale had already been scheduled. Working with borrowers to complete loss-mitigation applications would necessarily mean that a lender or servicer would forgo the ability to foreclose on a previously defaulted property for which the servicer already had a foreclosure order. As a result, servicers that had a foreclosure order in hand would have little reason to engage with borrowers to modify their loans to enable them to escape foreclosure and stay in their homes. The consumer’s interpretation is also at odds with the Consumer Financial Protection Bureau’s interpretation of Regulation X. The CFPB suggests that Regulation X prohibits only the filing of dispositive motions and has explained that "it is appropriate to suspend a foreclosure sale when a borrower is performing under an agreement on a loss mitigation option." The CFPB’s discussion unambiguously contemplates "suspen[sion]," not cancellation, of a foreclosure sale when a borrower is performing under a loss-mitigation agreement.
The case number is No. 17-11151.
Attorneys: Matthew D. Bavaro (Loan Lawyers, LLC) for Rachel Landau. Harold Keith Thomerson (Chartwell Law Offices LLP) for RoundPoint Mortgage Servicing Corp.
Companies: RoundPoint Mortgage Servicing Corp.
MainStory: TopStory AlabamaNews FloridaNews GeorgiaNews Mortgages RESPA
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