The U.S. Court of Appeals for the Seventh Circuit recently held that a mortgage loan servicer violated the federal Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. (RESPA) by failing to properly respond to the borrowers' request for information, but because the borrowers failed to provide evidence of damages stemming from the violation, the servicer was entitled to summary judgment.
In so ruling, the Court held that the borrowers sufficiently alleged a concrete injury in fact that was fairly traceable to servicer's alleged violation of RESPA in order to have standing under Spokeo, but that "[w]hether the allegations are sufficient to overcome a motion for summary judgment is a different matter entirely."
A copy of the opinion is available at: Link to Opinion
As you may recall, RESPA imposes a duty on mortgage loan servicers to respond promptly to a borrower's written request for information. See 12 U.S.C. § 2605(e).
The borrowers sent the mortgage loan servicer a borrower information request, asking for information about their loan account, payments made, and the interest rates applied to their account. The servicer informed the borrowers that it could not identify a problem with their account, and that they needed to identify more information or else it would not be able to respond to their request.
The borrowers then filed an action against the servicer under RESPA and Wisconsin law for allegedly failing to properly respond to their request for information regarding their escrow account.
The borrowers subsequently moved for summary judgment on their RESPA claim and on their Wis. Stat. § 224.77(1) claims. The servicer filed a cross motion for summary judgment on all of the borrowers' claims. The U.S. District Court for the Eastern District of Wisconsin granted the servicer's motion for summary judgment based on the borrowers' failure to demonstrate any resulting damages, and the borrowers appealed.
The Seventh Circuit first addressed whether the borrowers had standing to sue. In order to have standing, "[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). The Supreme Court of the United States clarified the requirements for standing and noted that the injury must be concrete and not just a "bare procedural violation divorced from any concrete harm." Spokeo, 136 S. Ct. 1540.
Thus, the Seventh Circuit looked to see whether the borrowers pled sufficient factual allegations supporting their assertion that they suffered an injury in fact that was fairly traceable to loan servicer's alleged violation of RESPA.
The Court noted the borrowers' allegations that they suffered damage to their credit, and that the servicer forced them to pay greater payments and a higher interest rate than that negotiated in their loan modification.
Based on these allegations, the Seventh Circuit held that the borrowers "sufficiently alleged an injury for purposes of standing, even if those allegations are not sufficient to survive summary judgment."
The Seventh Circuit further noted that "[a]lleging injury for purposes of standing is not the same as submitting adequate evidence of injury under the statute to survive a motion for summary judgment," and "[w]hether the allegations are sufficient to overcome a motion for summary judgment is a different matter entirely."
After examining the borrowers' evidence submitted at summary judgment, the Court found that even taking all of the borrowers' facts as true, "they simply have not alleged any causal connection between the injury they allege, including the claim for emotional damages, and [the servicer's] failure to respond to the qualified written request for information, as opposed to the foreclosure on their loan, the loan modification process, or the litigation in general."
The Seventh Circuit held that the borrowers failed to provide evidence sufficient to support an award of actual damages to pursue their RESPA claims, noting that the borrowers failed to allege any causal connection between their injuries and the servicer's failure to respond to their qualified written request for information.
In so ruling, the Court also held that "simply having to file suit, however, does not suffice as a harm warranting actual damages."
The borrowers argued that their claims of emotional distress, which allegedly stemmed from the servicer's actions, were sufficient to survive a motion for summary judgment. However, the Seventh Circuit disagreed, holding that the borrowers failed provide sufficient evidence to demonstrate that their injuries arose from the servicer's inadequate response to a request for information under RESPA.
The Court also held that for the same reasons that borrowers' claims were insufficient under RESPA, the borrowers had not set forth sufficient evidence to overcome the servicer's motion for summary judgment on the Wisconsin state law claim. The Court held that the borrowers failed to meet their burden of setting forth sufficient evidence to demonstrate an injury under Wisconsin law.
Accordingly, the Seventh Circuit affirmed the district court's award of summary judgment in favor of the servicer as to both the RESPA and the Wisconsin state law claims.
Ralph T. Wutscher
Maurice Wutscher LLP
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