Federal Court Addresses New Mortgage Regulation

In one of the first decisions regarding the new regulations promulgated by the Consumer Financial Protection Bureau (“CFPB”) pursuant to the Dodd-Frank Act, a court denied plaintiff injunctive relief.

In Cataldi v. New York Community Bank, No. 1:13-CV-3972 (N.D. Ga. Feb. 3, 2014), the plaintiff alleged that the defendant servicers failed to perform certain actions in connection with his request for a loan modification and subsequent foreclosure proceedings. The servicer extended multiple modification offers, but the plaintiff rejected them, and foreclosure ensued.  The federal court identified several claims in the lawsuit, including FDCPA violations, alleged violations of the Dodd-Frank Act and new regulations for not offering and negotiating loss mitigation actions, and wrongful foreclosure based on misstatements during the foreclosure proceeding.  Plaintiff sought an injunction to stop the foreclosure of his residence.

The Court concluded that the FDCPA did not give rise to equitable relief, and it stated that the “Dodd-Frank claim” did not give rise to injunctive relief, either.  The Court concluded that plaintiff could privately enforce the Dodd-Frank claim under Section 6(f) of the Real Estate Settlement Procedures Act (12 U.S.C. 2605(f)), see 12 C.F.R. § 1024.41(a).  However, section 6(f) of RESPA only allows suits for damages and costs, not injunctive relief.  The Court noted that “[n]othing in § 1024.41 imposes a duty on a servicer to provide any borrower with any specific loss mitigation option.” 12 C.F.R. § 1024.41(a).

If your organization has questions regarding its servicing activities and compliance with Dodd-Frank or the CFPB regulations, please contact Spilman or other knowledgeable counsel.

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by R. Scott Adams

R. Scott Adams

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