792 F.3d 600
6th Cir.2015Background
- Jerry and Liliane Rush obtained a mortgage in 2008; mortgage recorded with MERS as nominee and later assigned to Bank of America, which foreclosed by advertisement after plaintiffs defaulted.
- Freddie Mac purchased the property at the sheriff’s sale; plaintiffs failed to redeem within Michigan’s six-month statutory redemption period.
- Plaintiffs removed an eviction counterclaim to federal court and alleged: (1) foreclosure violated Mich. Comp. Laws § 600.3204(3) for lack of chain of title/standing; (2) negligence for failure to evaluate them under HAMP; (3) wrongful foreclosure under state law; and (4) Fifth Amendment due process violation because Freddie Mac is a government actor under FHFA conservatorship.
- District court dismissed on the pleadings under Fed. R. Civ. P. 12(c); the Sixth Circuit reviews de novo and affirms.
- Court held plaintiffs failed to show a defective chain of title or prejudice from any alleged defect, HAMP creates no private duty under Michigan negligence law, and statutory foreclosure procedures satisfied due process even if Freddie Mac were a government actor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to foreclose under Mich. Comp. Laws § 600.3204(3) | Bank of America lacked a recorded chain showing ownership and thus could not foreclose | MERS assigned mortgage to Bank of America and assignment was recorded; statute requires chain for mortgage only | Assignment to Bank of America was recorded; plaintiffs failed to show prejudice; foreclosure valid |
| Whether note-holder must be assignee to foreclose | Foreclosure invalid if note owner differs from mortgage holder | Michigan law allows mortgage holder, servicer, or owner of indebtedness to foreclose; mortgage and note need not be unified | Michigan precedents permit foreclosure by mortgagee of record even if note separated; foreclosure permissible |
| Negligence based on HAMP failure | Freddie Mac negligently failed to evaluate/seek HAMP modification | HAMP establishes no private right/duty under Michigan common law; duties governed by mortgage contract | HAMP does not create a tort duty to homeowners; negligence claim dismissed |
| Due process (government actor) | Freddie Mac (under FHFA conservatorship) is a governmental actor; foreclosure deprived property without due process | Foreclosure-by-advertisement under Michigan law provides constitutionally adequate notice; Garcia controls | Claim waived procedurally; on merits, statutory notice suffices even if Freddie Mac is government actor; due process claim fails |
Key Cases Cited
- Sensations, Inc. v. City of Grand Rapids, 526 F.3d 291 (6th Cir. 2008) (standard of review for Rule 12(c) motions)
- JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577 (6th Cir. 2007) (Rule 12(c) pleading principles)
- Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329 (Mich. 2012) (prejudice requirement to set aside foreclosure sale for statutory noncompliance)
- Residential Funding Co., L.L.C. v. Saurman, 805 N.W.2d 183 (Mich. 2011) (mortgagee of record may foreclose by advertisement separate from note ownership)
- Conlin v. Mortg. Elec. Reg. Sys., Inc., 714 F.3d 355 (6th Cir. 2013) (discussion of Michigan foreclosure statutory scheme)
- Garcia v. Fed. Nat’l Mortg. Ass’n, 782 F.3d 736 (6th Cir. 2015) (even if FHFA conservatorship makes enterprise a government actor, compliance with Michigan foreclosure-by-advertisement satisfies due process)