In so ruling, the Court held that the borrowers had no standing to challenge supposed defects in the assignment of a security deed, and could not sustain a claim for wrongful foreclosure absent evidence that the supposed wrongful conduct actually caused the borrowers’ injuries.
A copy of the opinion is available at: Link to Opinion.
The case arose out of the servicer’s foreclosure of the borrowers’ residence. Based on this foreclosure, the borrowers brought a number of claims against the servicer and its counsel: (1) wrongful foreclosure; (2) civil conspiracy; (3) fraud; and (4) violations of RESPA, the FDCPA, and the federal RICO act.
In this case, the borrowers raised the following issues: (1) there was not an official witness to the assignment of the security deed, (2) signatures on the assignment of the security deed where forged, and (3) the servicer did not properly identify the party with authority to modify the loan in the foreclosure notice as required by law.
The trial court granted summary judgment in favor of the servicer and its counsel, and the borrowers appealed. The Eleventh Circuit addressed only the FDCPA and wrongful foreclosure claims.
Court: Damages Caused By Borrowers’ Default, Not Servicer Error
The Eleventh Circuit began by rejecting the borrowers’ argument that the trial court failed to consider their objections to the magistrate’s report and recommendation. The Court found there was nothing in the record to support the borrowers’ argument and no requirement for a trial court to address every objection to the report.
Additionally, the Eleventh Circuit found the trial court properly denied the borrowers’ request to file a third amended complaint.
The Court held that, although leave to amend is freely granted, the record demonstrated that the borrowers had unduly delayed their request to amend. The Court noted that the borrowers had the information on which the amendment was based in 2011, yet they waited until 2013 — after the close of discovery and the defendants moved for summary judgment — to attempt to amend. Under these circumstances, the Appellate Court found leave to amend was properly denied.
Next, the Eleventh Circuit affirmed the grant of summary judgment on the FDCPA claim, without discussing the factual basis for that claim. The Court found that the borrowers did not make any substantive argument about the claim in their opening brief and, therefore, had abandoned the claim on appeal.
Lastly, the Appellate Court addressed the wrongful foreclosure claim.
The first two bases for the wrongful foreclosure claim were that the assignment of the security deed suffered from technical deficiencies and contained forged signatures. As such, the borrowers claimed the foreclosure based on that assignment was wrongful.
The Eleventh Circuit disagreed. It found that, because the borrowers were not a party to the assignment, they had no standing to challenge any problem with the assignment. In rejecting the borrowers’ argument, the Appellate Court stated “[The borrowers] were simply not parties to the assignment and have demonstrated no other right to challenge it.”
Part of the borrowers’ argument was that the assignment of the security deed could not be recorded because of its defect. But, again, the Eleventh Circuit found that the borrowers were making an argument that did not apply to them. The Court noted that recording protects subsequent purchasers, not the borrowers.
As the final purported basis for their wrongful foreclosure claim, the borrowers alleged that the servicer had incorrectly listed itself — and not the owner of the loan — as the entity with authority to modify the loan.
First, the Eleventh Circuit found that, even if the servicer wrongly listed itself in the foreclosure notice, it had still substantially complied with the Georgia requirement for listing the party with authority to modify the loan. The servicer directed the borrowers to the owner of the loan after the borrowers contacted the servicer. This “substantial compliance” was sufficient under Georgia law.
The Court did not stop there. It dug deeper into the wrongful foreclosure claim, stating that a party can bring that claim only if the defendant allegedly at fault caused the injury at issue.
Here, the Eleventh Circuit noted that the borrowers had defaulted on their loan, which obviously had nothing to do with the loan modification information. As such, any purported mistake by the servicer did not cause the borrowers’ injury.
The Eleventh Circuit stated: “The undisputed record reveals that [the borrowers] failed to make two payments on the loan and thereafter made only partial payments. . . . Thus, any injury [the borrowers] suffered is the direct result of their own default on the loan and failure to successfully negotiate and abide by more favorable terms.”