Last month, in Landau v. RoundPoint Mortgage Servicing Corp., the Eleventh Circuit held that a mortgage loan servicer may move to reschedule a previously ordered foreclosure sale after a borrower submits a completed loss mitigation application. 925 F.3d 1365 (11th Cir. June 11, 2019). The court rejected the plaintiff’s argument that moving to reschedule a foreclosure sale violates Regulation X, a regulation issued under the Real Estate Settlement Procedures Act (RESPA) that prohibits loan servicers from moving for a “foreclosure judgment or order of sale” after a borrower has submitted a completed loss mitigation application. 12 C.F.R. § 1024.41(g).
Regulation X sets forth procedures by which a borrower whose home is under threat of foreclosure can submit a “loss mitigation application” to the loan servicer. The completion of a loss mitigation plan triggers various obligations under Regulation X on the part of the loan servicer to work with the borrower to avoid a foreclosure. One of these obligations is to refrain from “mov[ing] for [a] foreclosure judgment or order of sale, or conduct[ing] a foreclosure sale” during the loss mitigation process (i.e., until the process has ended without agreement or the borrower fails to perform under an agreement reached under the process). 12 C.F.R. § 1024.41(g).
The case on appeal had its genesis in a prior foreclosure proceeding. In that proceeding, after a foreclosure sale had been ordered, the loan servicer and the borrower reached agreement on a trial loan-modification plan as part of the loss mitigation process. At this point, the loan servicer moved to “cancel . . . and reschedule” the foreclosure sale for a date after the end of the trial loan-modification plan. The borrower successfully moved the foreclosure court to cancel the foreclosure sale based on the loan-modification plan. The borrower then brought this separate suit in federal court, alleging that the servicer’s motion to reschedule the foreclosure sale constituted a motion for foreclosure sale in violation of Regulation X and RESPA. She also claimed that the same action violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. The district court granted the loan servicer’s motion to dismiss for failure to state a claim.
The Eleventh Circuit had no difficulty in affirming the dismissal. Writing for the court, Judge Robin Rosenbaum reasoned that a motion to reschedule a previously ordered foreclosure sale was not a motion for “order of sale” under the plain text of Regulation X. Judge Rosenbaum continued that other factors supported this reading. Regulation X’s context made clear that it was written to prevent substantive or dispositive motions for foreclosure, but the motion to reschedule the foreclosure sale was neither. Additionally, a holding that Regulation X forbids the rescheduling of a foreclosure order would frustrate RESPA’s purpose of avoiding unnecessary foreclosures because it would act as a disincentive for loan servicers to enter into modification plans with borrowers. Finally, a statement from the regulation’s issuing agency, the Consumer Financial Protection Bureau, that it was appropriate to “suspend” a foreclosure sale during a loss mitigation plan, was consistent with the plain meaning of the regulation: The meaning of “suspension” can include rescheduling as well as cancellation.