Monday, February 10, 2014
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Panel Allows Marine Colonel to Sue Over Foreclosure
By MICHAEL J. PEIL, Staff Writer
A military member can sue a mortgage company for failing to remove fees arising from the previous loan servicer’s rescinded notice of default, since such fees come within a foreclosure protection statute, the Ninth U.S. Circuit Court of Appeals has ruled.
The panel on Friday, in an opinion by Judge Ronald M. Gould, reversed a court’s dismissal of Christopher Brewster’s suit for failure to state a claim under the Federal Rules of Civil Procedure 12(b)(6).
Gould explained that Brewster stated a claim under §533 of the Servicemembers Civil Relief Act by asserting that Nationstar Mortgage’s failure to remove fees on his account was a continuation of the foreclosure proceedings that originally gave rise to the fees in the first place.
The statute protects active duty military members from foreclosures by placing limits on the proceedings that can take place while they are serving.
Brewster, a lieutenant colonel in the U.S. Marine Corps Reserve, took out a mortgage in 2007. He was called up to active duty three times between 2008 and 2011, including one overseas deployment in 2010.
Sun Trust Mortgage initially serviced his loan in 2007. Brewster, while on active duty, became delinquent on the loan and the company initiated foreclosure proceedings in 2009 by filing a notice of default.
This filing was accompanied by various fees. Sun Trust Mortgage rescinded the notice of default in August 2010, but did not remove the foreclosure fees from Brewster’s account.
In November 2010, Sun Trust Mortgage transferred the servicing rights of Brewster’s mortgage to Nationstar Mortgage. After taking over these rights, Nationstar Mortgage attempted to recover the fees from Brewster.
Nationstar Mortgage did not remove the fees that had been imposed by Sun Trust Mortgage’s attempted foreclosure proceedings.
On appeal, Nationstar Mortgage contended that the protections of §533 only extend to the foreclosure proceedings initiated by Sun Trust Mortgage, and not to its company since the proceedings had already terminated upon its becoming the loan servicer.
Gould said, however, that the term foreclosure includes more than when a property is being taken for sale. He explained that the statute refers to foreclosure proceedings, which means “a process rather than a single act.”
He then explained this process as it appears in California’s Civil Code §2924, which defines the steps that make up a foreclosure proceeding.
He said:
“Because the state-law statutory definition of foreclosure contemplates the inclusion of specified fees as a part of the foreclosure proceeding….we hold that the attempted collection of fees related to a Notice of Default on a California property constitutes a violation of § 533 of the Servicemembers Civil Relief Act.”
In making this determination, Gould noted, a broad construction of this statute should be used, since Congress’ purpose for passing the statute was to help active duty military members in dealing with “the trials and tribulations of civilian life.”
Gould concluded:
“Brewster alleges that [Nationstar] attempted to collect fees from him. Even though Nationstar did not issue the Notice of Default that began the foreclosure proceedings, Brewster has pled facts sufficient to allege that Nationstar’s continuing failure to remove the fees…was a continuation of that foreclosure proceeding.”
The case is Brewster v. Sun Trust Mortgage, Inc., 12-56560.
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