After paying on their refinance mortgage loan for the better part of 10 years, the borrowers defaulted. As a result, the loan servicer filed a foreclosure action and alleged that it was the holder of the note and the mortgagee of record. After the foreclosure case was dismissed without prejudice, the borrowers initiated a lawsuit in the United States District Court for the Northern District of Ohio, alleging that the servicer violated the Fair Debt Collection Practices Act (“FDCPA”), as well as related state law claims, by bringing the foreclosure action. The borrowers argued that because the mortgage was fraudulently obtained, the servicer had no right to collect the debt.
After the court dismissed the FDCPA and related claims without prejudice, the borrowers took a second bite of the apple. In the amended complaint, the borrowers alleged that the servicer lacked standing to enforce the note because Freddie Mac was the owner of the loan when the foreclosure case was initiated. The borrowers further argued that the servicer therefore violated the FDCPA by bringing a foreclosure claim without standing. The court rejected the FDCPA claim and confirmed that ownership is not required to enforce a Note: “Under Ohio law, the holder of a promissory note is a person who is entitled to enforce repayment of the note. Ownership is not required.” Richey v. CitiMortgage, Inc., Case No. 1:13-cv-01452 (N.D. Ohio Feb. 13, 2014) (Opinion & Order, Doc. 73).
While that seems like a well-known tenant, borrowers and foreclosure defense counsel often try to conflate the issue of ownership and the ability to enforce. The Richey decision persuasively and concisely demonstrates that an FDCPA claim cannot lie just because the party seeking to enforce the note is not the owner, provided the party is entitled to enforce under the Uniform Commercial Code.