McGhee v. Ditech Financial LLC
2:16-cv-14266
E.D. Mich.Sep 18, 2017Background
- In 2003 the McGhees executed a mortgage on a Highland Park home; the mortgage was later assigned to Bank of New York Mellon and serviced by Ditech.
- The McGhees defaulted and a sheriff's sale occurred on January 7, 2016; the Bank bought the property and Michigan statutory redemption period expired July 7, 2016.
- The McGhees allege they faxed a completed loan-modification (loss-mitigation) package to Ditech in November 2015, were told the sale was adjourned, but the sale proceeded and they were later told they were ineligible for HAMP because the property had been foreclosed.
- Plaintiffs filed a state-court “wrongful foreclosure” complaint after the redemption period expired; defendants removed and moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- The McGhees claimed the servicer’s failure to follow RESPA-regulation procedures for loss-mitigation constituted an “irregularity” that should set aside the foreclosure; they also sought relief under RESPA.
- The district court found the complaint failed to plead a viable Michigan-law claim to set aside the sale and failed to state a RESPA claim because plaintiffs sought equitable relief and alleged no actual damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs can set aside a foreclosure sale after the statutory redemption period | McGhee: Servicer’s failure to follow loss-mitigation procedures (12 C.F.R. §1024.41) is an "irregularity" in the foreclosure process that warrants setting aside the sale | Defendants: Redemption expired; plaintiffs have not pleaded fraud or an irregularity in the foreclosure procedure itself sufficient to set aside the sale | Denied — plaintiffs cannot set aside the sale based on loss-mitigation irregularities; redemption expired and no foreclosure-procedure fraud shown |
| Whether RESPA/its implementing regulation provides a basis for equitable relief to undo the foreclosure | McGhee: Violation of RESPA/regulation prevented a valid foreclosure; entitles them to relief (i.e., set aside sale) | Defendants: RESPA provides monetary remedies, not equitable relief; plaintiffs allege no actual damages | Denied — RESPA does not authorize equitable relief to set aside a foreclosure and plaintiffs failed to allege actual damages |
Key Cases Cited
- Conlin v. Mortgage Electronic Registration Sys., Inc., 714 F.3d 355 (6th Cir. 2013) (Michigan law limits setting aside foreclosure sales to fraud or irregularity in the foreclosure process)
- Campbell v. Nationstar Mortgage, [citation="611 F. App'x 288"] (6th Cir. 2015) (procedural errors in loan modification evaluation do not constitute foreclosure irregularity to set aside sale)
- Kim v. JPMorgan Chase Bank, N.A., 493 Mich. 98 (Mich. 2012) (plaintiff must show prejudice from alleged misconduct to set aside foreclosure)
- Piotrowski v. State Land Office Bd., 302 Mich. 179 (Mich. 1942) (statutory redemption extinguishes mortgagor's title after expiration)