On Friday, December 5, 2014, the United States Court of Appeals for the Sixth Circuit recently issued its decision inThompson v. Bank of America, et al., --- F.3d ---, No. 14-5561, 2014 WL 6844931, a case involving various statutory, tort, and contractual challenges to the securitization of a mortgage loan and the denial of a loan modification under the Home Affordable Modification Program (“HAMP”). In an opinion designated for publication, the Sixth Circuit affirmed the district court’s dismissal of the lawsuit, holding that the borrower did not state any claim for relief.
The Sixth Circuit used its comprehensive opinion in Thompson to address and reject so-called “securitization” and HAMP claims that borrowers have increasingly asserted in the past few years. The Sixth Circuit addressed the theories “in detail” to “assist the district courts in addressing this wave of creative litigation.”
Here are a few key aspects of the Court’s ruling:
First , the Sixth Circuit rejected the borrower’s “argument that the securitization of her mortgage note altered her obligations under the note.” The court emphasized that “Federal law provides for the creation of mortgage-related securities” and “[t]he pooling of mortgages into investment trusts is not some sort of illicit scheme that taints the underlying debt.” It also unequivocally held that the “[s]ecuritization of a note does not alter the borrower’s obligation to repay the loan” because “[s]ecuritization is a separate contract, distinct from the borrower’s debt obligations under note.” The court further reaffirmed the propriety of using Mortgage Electronic Registration Systems, Inc. (“MERS”) in the transfer of mortgage notes.
Second, the Court rejected the borrower’s various claims that Bank of America made misrepresentations to her during the loan modification process under HAMP. Although the court “sympathize[d] with” the borrower’s alleged “inability to procure a payment modification,” the Court rejected her fraud/misrepresentation claims. Even “accepting as true Thompson’s allegations that [Bank of America] stonewalled her during the modification application process,” the Court held that this alleged “conduct does not support a claim for negligent or intentional misrepresentation.”
Finally , the Sixth Circuit rejected the borrower’s claim under the Equal Credit Opportunity Act (“ECOA”), holding as a matter of first impression in the Sixth Circuit that an alleged refusal to modify the borrower’s loan under HAMP does not constitute an “adverse action” under the ECOA.