784 F.3d 971
5th Cir.2015Background
- Stacy and Nicholas Barzelis refinanced their home in 2007; only Nicholas signed the promissory note, though the security instrument covered the couple’s homestead. The loan was later assigned to Flagstar, a federal savings association.
- Nicholas died in October 2009; Stacy submitted the death certificate and later filed Chapter 13. Flagstar refused payments from Stacy (and the trustee), saying only Nicholas, the note-signatory, could pay.
- Stacy sent two Qualified Written Requests (QWRs) to Flagstar seeking loan information; Flagstar declined to provide substantive responses absent proof Stacy was authorized to act for Nicholas’s estate.
- Flagstar initiated foreclosure; Stacy sued in state court asserting state-law claims (breach of contract, negligent misrepresentation, violations of the Texas Debt Collection Act) and a RESPA claim; Flagstar removed the case and moved to dismiss state claims as preempted by HOLA and for summary judgment on RESPA.
- The district court dismissed all state-law claims as HOLA-preempted and granted summary judgment for Flagstar on RESPA; the Fifth Circuit reviewed preemption de novo and considered OTS’s regulatory guidance under 12 C.F.R. § 560.2.
- Applying the two-step HOLA preemption framework, the Fifth Circuit affirmed in part, reversed in part, and remanded: it held some statutory/theory-based claims preempted, others not; it reversed summary judgment on RESPA because Texas community-property law could make Stacy the borrower.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Texas Property Code § 51.002(d) (notice-before-foreclosure) is preempted by HOLA | § 51.002(d) protects borrowers by requiring default notice and cure period; it governs foreclosure process | Flagstar: statute regulates credit terms/disclosures and falls within § 560.2(b) preempted categories | Held preempted under § 560.2(b) (notice/disclosure and loan-term categories) |
| Whether breach-of-contract claim based on the Security Instrument survives HOLA preemption | Breach-of-contract based on parties’ contract terms is enforceable even if similar state law would be preempted | Flagstar: HOLA preempts state-law-based aspects of breach claim | Court reversed dismissal as to contract-based theories grounded in the Security Instrument (not preempted) |
| Whether negligent misrepresentation claim (based on loan/foreclosure notices) is preempted | Stacy: tort duty not to misrepresent applies generally and should not be preempted | Flagstar: claim targets credit-related disclosures and thus is preempted under § 560.2(b)(9) | Held preempted because claim targets adequacy of disclosures in credit documents |
| Whether TDCA (Texas Debt Collection Act) claims are preempted | TDCA prohibits deceptive/abusive debt-collection practices and governs general commercial norms; effect on lending is incidental | Flagstar: TDCA affects loan collection and is thus preempted under § 560.2(b) | Held not preempted: TDCA provisions are generally applicable consumer-protection laws with only incidental effect on lending and consistent with § 560.2(a) purposes |
| Whether Stacy was a "borrower" under RESPA for QWRs after Nicholas’s death | Stacy: under Texas community-property and estate law she became successor-debtor/surviving spouse and thus a borrower entitled to RESPA protections | Flagstar: Stacy was not a signatory or proven estate administrator, so not a borrower or authorized agent; no duty to respond | Held: reversed summary judgment for Flagstar; under Texas law Stacy may be successor-debtor/borrower and RESPA claim should be reconsidered on remand |
Key Cases Cited
- Fidelity Fed. Savs. & Loan Ass'n v. de la Cuesta, 458 U.S. 141 (1982) (establishes HOLA preemption and OTS regulatory authority)
- Kaufman v. Allied Pilots Ass'n, 274 F.3d 197 (5th Cir. 2001) (standard of de novo review for preemption issues)
- In re Ocwen Loan Servs., LLC Mortg. Serv. Litig., 491 F.3d 638 (7th Cir. 2007) (contractual protections may be enforced despite HOLA preemption of similar state law)
- Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008) (disclosure-defect misrepresentation claims can be preempted under § 560.2(b)(9))
- McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551 (4th Cir. 2013) (state consumer-protection laws not necessarily preempted by HOLA)
- Molosky v. Washington Mut., Inc., 664 F.3d 109 (6th Cir. 2011) (similar conclusion that general consumer-protection statutes survive HOLA preemption)