In July 2020, a homeowner obtained a mortgage loan from a bank, secured by a deed of trust on the property. In June 2023, the loan's servicing rights were transferred when the original lender assigned the deed of trust to the current lender. The homeowner later conducted a self-initiated audit of the loan and raised concerns about discrepancies in the loan account numbers over time. Additionally, the homeowner alleged that the lender’s credit reporting practices violated the Real Estate Settlement Procedures Act. Seeking to challenge the lender’s authority over the mortgage, the homeowner filed a lawsuit, asserting that the lender lacked standing to enforce the loan or foreclose on the property. As part of the lawsuit, the homeowner sought a declaratory judgment to clear title to the property, monetary damages, and injunctive relief. The homeowner also alleged fraud, violations of the Uniform Commercial Code (UCC), and other misconduct related to the administration of the loan. In turn, the lender moved for judgment on the pleadings.
In Sells v. Flagstar Bancorp Inc., No. 1:24-CV-705-RP, 2025 WL 284224, 2025 U.S. Dist. LEXIS 2903 (W.D. Tex. Jan. 7, 2025) (opinion not yet released for publication), the court found the lender did have the right to foreclose, denied the homeowner’s motion for declaratory judgment, and ruled that the homeowner’s various other claims failed to be plead sufficiently. The court upheld the lender’s right to foreclose, ruling that the homeowner lacked standing to challenge the assignment of the deed of trust and rejecting the claim that the lender needed to hold both the promissory note and the deed of trust. The homeowner’s UCC claims also were dismissed, as foreclosure under Texas law is governed by property statutes, not by the UCC. The court also dismissed the quiet title claim, finding that the homeowner had not demonstrated superior title over the lender. The fraud claims failed under the economic loss doctrine and because they were not pled with the specificity required by Federal Rules of Civil Procedure Rule 9(b). Additionally, the court found no legal basis for claims related to changes in the loan number or the lender’s credit reporting practices. Ultimately, the court granted the lender’s motion for judgment on the pleadings, dismissing the homeowner’s claims with prejudice.
By Maycee Redfearn: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]