The borrower obtained a home equity loan from the bank and executed a note and a security instrument which secured the repayment of the note. The loan documents were assigned to a third party, but the bank remained the mortgage servicer on the loan. The borrower filed for bankruptcy, and during the bankruptcy case, the bank permitted two different loan modification agreements. However, the borrower stopped making payments on the loan in 2012. For the next almost nine years, the bank attempted to foreclose on the mortgage, but the borrower continually avoided foreclosure by filing bankruptcies and lawsuits. Eventually, in 2018, the bank obtained a Rule 736 order in state court permitting it to foreclose. However, the bank was again slowed in its efforts due to investor-requested delays as a result of COVID-19. Finally, in 2021, the bank notified the borrower that the property would be sold in a foreclosure sale in January 2022. At the sale, the property was sold to a third party for $321,000 after being appraised for $405,000. The borrower filed a lawsuit against the bank and the third party for injunctive relief, removal of the foreclosure from public records, and $6 million in damages, claiming wrongful foreclosure, violations of the Texas Debt Collection Act (TDCA), violation of the Real Estate Settlement Procedures Act (RESPA), and violation of the Coronavirus Aid, Relief and Economic Securities Act (CARES). The bank sought summary judgment on all the borrower’s claims.
In Reese v. Wells Fargo Bank, NA, No. 3:23-cv-524-N-BN, 2024 WL 3927808, 2024 U.S. Dist. LEXIS 152775 (N.D. Tex. Aug. 5, 2024) (unpublished opinion), the district court held that all of the borrower’s claims should be dismissed and the bank’s motion for summary judgment granted. The court first addressed the wrongful foreclosure claim. Such claims require a showing of “(1) a defect in the foreclosure sale proceedings, (2) a grossly inadequate selling price, and (3) a causal connection between the two.” Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 259 (5th Cir. 2013). The court found neither a defect in the foreclosure proceedings nor a grossly inadequate sale price. Section 51.002(d)-(e) of the Texas Property Code requires that plaintiffs be provided with a notice of default via certified mail and that the plaintiff must be given 20 days to cure the default before notice of a foreclosure sale. The court found that the bank properly mailed this notice to the borrower on March 23, 2018, and further, the borrower stated he received it (although a showing of actual receipt is not a requirement under the code). The bank then sent its notice of the foreclosure sale on November 24, 2021, more than twenty days after the initial default notice. The borrower argued that the notices of default were voided by subsequent proceedings – namely, their filing for bankruptcy in 2018. The court found that their argument was incorrect because Tex. R. Civ. P. 736.10 provides that a Rule 736 proceeding must be stayed if the borrower provided proof of their bankruptcy filing before the Rule 736 order was signed and that a bankruptcy stay remained in effect. Here, not only was the order signed before the bankruptcy filing, but the bankruptcy court lifted its stay to permit the foreclosure. Additionally, the sale price was almost 80% of the appraised value of the property, which the Fifth Circuit and Texas courts have held is not grossly inadequate. A grossly inadequate price is a price so low that it would “shock a correct mind,” Martins, 722 F.3d at 256; generally, a foreclosure price above 50% of the appraised value is not grossly inadequate. Water Dynamics, Ltd. v. HSBC Bank USA, Nat’l Assoc., 509 F. App’x 367, 369 (5th Cir. 2013). Therefore, the district court held that the wrongful foreclosure claim should be dismissed as there was neither a defect in the foreclosure proceedings nor a grossly inadequate sale price. Next, the court addressed the remaining three claims (violations of TDCA, RESPA, and CARES), finding they should also be dismissed. “When a plaintiff fails to defend a claim in response to a motion to dismiss or summary judgment motion, the claim is deemed abandoned.” Windsor v. Olsen, No. 3:16-cv-934-L, 2019 WL 2080021, 2019 U.S. Dist. LEXIS 79755 (N.D. Tex. May 10, 2019). The borrower did not address the bank’s arguments regarding any of these three claims, so they were deemed abandoned by the court and dismissed.
By Kristin Meurer: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]