481 B.R. 22
Bankr. W.D. Mo.2012Background
- Debtor Shelton alleges Wells Fargo violated HUD loss-mitigation duties in FHA-insured loan; foreclosure occurred Jan 11, 2012 after denial of loss mitigation.
- Shelton’s loan: $71,932 from PNC; insured by HUD; foreclosure triggered after default; Wells Fargo as servicer/owner since 2007.
- Shelton alleges HUD loss-mitigation options were not properly explored or offered; letters in Oct 2011 allegedly denied loss mitigation without opportunity to submit documents.
- She contends HUD regulations required loss-mitigation steps and face-to-face contact; alleges improper notice and missed loss-mitigation opportunities.
- After foreclosure, Shelton seeks relief in bankruptcy adversary proceeding; Wells Fargo moves to dismiss Counts III, IV, V, VII; remaining counts are at issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract/good faith viability | Shelton asserts Deed of Trust incorporated HUD regs. | NHAct/regulations create no private action against mortgagor. | Counts survive; breach/good-faith pled adequately. |
| MMPA claim viability | MMPA applies due to ongoing relationship and loss from foreclosure. | MMPA lacks basis for private action for HUD regulations. | MMPA claim survives the motion to dismiss. |
| Quiet title viability | Foreclosure wrongful; Shelton should hold/title be quieted. | Foreclosure valid under contract; ownership not clearly superior. | Quiet title claim survives; court may determine rights if foreclosure bad. |
| Court's authority to enter final judgment | Not explicitly required; consent may be unnecessary for final judgment. | Stern v. Marshall and core-not-core issues require consent. | Not resolved; parties to file statements on core status and consent. |
Key Cases Cited
- Cedar-Riverside Assocs., Inc. v. City of Minneapolis, 606 F.2d 254 (8th Cir.1979) (HUD-related considerations and private rights under contracts)
- Kersey v. PHH Mortg. Corp., 2010 WL 3222262 (E.D.Va.2010) (court contemplated contract incorporating HUD regs; later questioned jurisdiction)
- 682 F.Supp.2d 588, 682 F.Supp.2d 588 (E.D.Va.2010) (example of comparable breach-of-contract/ HUD-regs claim against mortgagee)
- 398 Md. 705, 922 A.2d 538 (Md.2007) (HUD regs may shield from improper foreclosure but not authorize damages)
- 351 S.W.3d 668, 351 S.W.3d 668 (Mo.Ct.App.2011) (Mo. courts recognizing HUD-regs as contract terms for breach damages)