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Ninth Circuit Gives Good News on Ho v ReconTrust and Mixed Results in Dowers v Nationstar Mortg. LLC.

Ninth Circuit Gives Good News on Ho v ReconTrust and Mixed Results in Dowers v Nationstar Mortg. LLC.[1]
By Martin T. McGuinn, UTA General Counsel, Kirby & McGuinn

On May 22nd the Ninth Circuit issued its amended Ruling in Ho v ReconTrust 2016 WL 9019610 (9th Cir.) confirming its prior ruling that a trustee under a California deed of trust does not, by following statutory foreclosure procedures, become a “debt collector” subject to all of the requirements of the Fair Debt Collection Practices Act (FDCPA).  Ho contended that because ReconTrust included in the Notice of Default and the Notice of Sale the incorrect amount owing on the debt it made a “false, deceptive or misleading representation” prohibited by the FDCPA.

UTA joined four other trade association in jointly filing an amicus brief with the Court.  This joint effort enabled UTA to have its voice heard on this critical issue and UTA’s brief was cited in the ruling.

Two other Circuit Courts had ruled that mortgage foreclosure is debt collection, subjecting parties conducting foreclosures to a host of technical requirements, including providing repeated “mini-Miranda” warnings, mailing of verification notices and the requirement that all activity cease pending verification of the debt by the lender or servicer.  Liability under the FDCPA is strict meaning that if a violation is proven the debt collector is liable for statutory penalty, damages and mandatory attorney fees.  The Ho opinion emphasizes that a trustee “might become a ‘debt collector’ under the general definition if he does something in addition to the actions required to enforce a security interest.”

By the same 2-1 margin, the original opinion was upheld and the Court denied a hearing in front of a full panel of 11 Ninth Circuit Judges.  However, the Court granted Ho’s request that the remand of the case to the District Court be stayed until it was determined whether a petition for review by the United States Supreme Court would be accepted.  Four of the nine U.S. Supreme Court justices would have to grant the request for review.  We will update this report when the results of the petition for review are known.

Dowers involved a Nevada case where the servicer proceeded with a foreclosure after it allegedly failed to obtain a Certificate of Foreclosure from the Nevada mediation program because the original note was not produced.  The borrower argued that the servicer threatened to take an action to without the legal ability to do so.  This threatening to take an action without power to do so may allow borrowers making Yvanova[2] claims to plead around the Ho ruling by claiming the party initiating the foreclosure is not the holder or there is a break in the chain of assignments and the trustee is proceeding with a void sale.

Watch this summer for a detailed article in UTA Quarterly from Dean Kirby of Kirby & McGuinn explaining in depth the impact of these rulings on trustees performing work in California.

[1] 852 F.3d 964 (9th Cir.2017).
[2] Yvanova v New Century Mortgage Corporation (2016) 62 Cal. 4th 919

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