Higley v. Flagstar Bank, FSB
910 F. Supp. 2d 1249
D. Or.2012Background
- Higleys obtained a 2008 loan secured by a trust deed in Oregon; default occurred in 2010; foreclosure pursued under OTDA by Northwest Trustee Services and Flagstar Bank, FSB.
- MERS assigned the note/trust deed to Flagstar in 2010; NWTS appointed as successor trustee and recorded notices of default and sale in 2010; foreclosure sale scheduled but not completed.
- The Higleys filed suit in 2012 seeking to halt nonjudicial foreclosure and obtain a declaration about OTDA/foreclosure mechanics; Flagstar later filed a sworn affidavit transferring the note and assignment of the deed.
- NWTS was dismissed from the suit; the amended complaint names Flagstar only.
- Higleys asserted two claims: (1) HOLA preempts OTDA, invalidating nonjudicial foreclosure; (2) not all assignments were recorded, baring nonjudicial foreclosure.
- Flagstar moved to dismiss under Fed. R. Civ. P. 12(b)(6) arguing lack of notice-and-cure compliance and lack of HOLA preemption of OTDA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the notice-and-cure provision bar the second claim? | Higleys argue failure to comply is nonmaterial and does not bar relief | Flagstar argues noncompliance bars the claim | Second claim dismissed without prejudice. |
| Does HOLA preempt the OTDA, prohibiting nonjudicial foreclosure? | HOLA preempts OTDA in full | HOLA does not preempt OTDA in full; preemption is limited | HOLA does not preempt OTDA; first claim dismissed with prejudice. |
Key Cases Cited
- Copeland-Turner v. Wells Fargo Bank, 800 F.Supp.2d 1132 (D. Or. 2011) (preemption of OTDA §560.2(b)(10) by HOLA discussed)
- Sovereign Bank v. Sturgis, 863 F.Supp.2d 75 (D. Mass. 2012) (preemption framework for HOLA/foreclosure)
- Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008) (three-step HOLA preemption analysis; strong presumption against preemption)
- Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (U.S. 1982) (historical context of federal regulation of savings associations)
- Medtronic, Inc. v. Lohr, 518 U.S. 470 (U.S. 1996) (preemption analysis depends on congressional intent)
- BFP v. Resolution Trust Corp., 511 U.S. 531 (U.S. 1994) (foreclosure regulation as a state interest; limits of federal preemption)